Currently, long-term capital gains of over ₹1 lakh on sale of listed equities/redemption of mutual funds are taxable at 10 per cent.

Kindly let me know whether these gains are still taxable if the income including these gains is below the taxable limit. Also, will switching from one scheme to another within the same mutual fund be treated as capital gains?

Are dividends of over ₹10 lakh received on shares of listed companies independently taxable at 10 per cent or only if the taxable income including the dividend exceeds the overall exemption limit?

Madan Mohan

As per the newly inserted Section 112A by The Finance Act 2018 (applicable for FY 2018-19), Long-term capital gains (LTCG) arising from sale of listed equity shares or equity-oriented funds (STT (Securities Transaction Tax) paid at specified times) is calculated at 10 per cent without giving the benefit for cost inflation index for amounts exceeding ₹1 lakh.

In the case of a resident individual, such LTCG is not taxable to the extent the total income (excluding such LTCG) falls short of the maximum amount that is not chargeable to income tax (₹2.5 lakh for FY 2018-19).

However, no deduction under Chapter VI-A is allowed from such LTCG.

Further, switching from one scheme to another of a mutual fund is to be treated as transfer and hence liable for capital gains tax.

Also, as per Section 115BBDA of the Income Tax Act, if a resident individual receives dividend income that is declared/distributed/paid by a domestic company/ companies, exceeding ₹10 lakh during a financial year, such excess dividend income shall be taxable at 10 per cent without giving the benefit of tax slab rates.

I reside in a property solely owned by my mother. I pay rent to her and have been claiming HRA deduction for the same for the past seven years.

We are planning to sell the house and buy a new one. The new house will be financed by the proceeds of the old house’s sale and my mother's other savings, which include the rent I have been paying her.

Now, considering that she is aged and because I don't want to go through the legal hassles of getting the name transferred to my name in case of her death, we wish to get my name included as a joint owner in the new property.

Since I will not be paying a single rupee towards the purchase price of the property, can I still continue paying rent to my mother after we move into the new house where I am a joint owner of the property?

Will I be eligible to claim HRA exemption on such rent payment?

Tapas

Section 10(13A) of the Income Tax Act provides for exemption in respect of the house rent allowance specifically granted to an employee by his/her employer to meet the expenditure actually incurred on payment of rent in respect of the residential accommodation occupied by the employee.

However, it specifically excludes such cases where rent is paid for a residential accommodation owned by such an employee.

Thus, if you become the joint owner of the new property, technically speaking, you may not be in a position to claim exemption of HRA for the same property of which you are a joint owner.

Having said that, as the funds invested in the property belong solely to your mother, from the authorities’ stand point, she might be considered the actual owner of the property for the purpose of paying tax on rental incomes derived (if any) from such property (you being a joint owner only on papers for administrative reasons).

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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