SALE OF SHARES OF UNLISTED COMPANY & EXEMPTION U/S 54F

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SALE OF SHARES OF UNLISTED COMPANY & EXEMPTION U/S 54F

EXEMPTION U/S 54F

Query 1]

By oversight, we have recovered less Profession Tax (in M.P.) from employees in the F.Y.2009-10. We have deposited the amount in the State Treasury but the same is recovered from the employees in Apr-2010 (i.e., from Salary of F.Y.2010-11). My query is whether the employee will get deduction u/s 16(1) in Income Tax calculations in the F.Y.2010-11? [Aniruddha.Kolte@Raymond.in]

Opinion:

Deduction from Salary towards profession tax is available u/s 16(iii) of the I.T.Act-1961. The deduction is available on payment basis. The employee, in the given case, would be paying the profession tax in the F.Y.2010-11. Resultantly, the same shall be deductible u/s 16(iii) in the F.Y. 2010-11 only.

 

Query 3]

Can you kindly guide me on the following issues :

  1. If someone purchases equity shares of a private limited company in March-09 and then sale those shares in April-2010 then whether it is LTCG? If yes, whether one can claim exemption u\s 54F?

  2. Both sale and purchase of shares of the above private limited company are by way of purchase from existing shareholders and then sale to new shareholders directly. [AJ]

Opinion:

  1. Shares would be categorized as Long term capital gain if it is sold after a holding period of more than 12 months.
  2. There is no distinction between shares of private limited company or a public company or shares of a listed company vis a vis shares of unlisted companies while classifying the same as long term or short term assets.
  3. Individual / HUF assessee can claim exemption u/s 54F on LTCG arising on sale of shares.

Query 4]

  1. I am a senior citizen and retired Government servant.

  2. The Govt. of Maharashtra has decided to pay the arrears of pension of 39 months i.e. from 01.01.2006 to 31.03.2009, worked out as per 6th pay commission in five annual installments after deducting the amount given as advance in F.Y.2008-2009. Accordingly 1st installment was paid in F.Y.2009-2010 & 2nd installment will be paid in the current financial year.

  3. If the total amount (i.e., the amount of advance & two installments) is divided by 39, the break up of each financial year will be available. Even the amount so worked out is included in the total income of respective financial year, the amount is quite less than the exemption limit & hence no tax liability arises in my hands.

  4. I am of the opinion that while working out the tax liability of current financial year, the whole amount of second installment will be excluded from the total income. Kindly confirm & oblige.

  5. Kindly also intimate as to whether the return is to be filed even if the total income worked out as above is less than the exemption limit. If so, where this relief is to be shown in ITR?
    [M.Y.Khan, Amravati. -faraaz.fast@gmail.com]

Opinion:

  1. The arrears of salary, though pertaining to earlier years, if received in the current year shall be includible in the income of the current year for levy of income tax.
  1. To avoid the hardship caused by reason of taxability of income in the year of receipt vis a vis the year to which arrears pertains, relief is provided by section 89(1) read with Rule 21A(2). The adverse affect of income tax will almost (or significantly) be neutralized by availing the relief provided by section 89(1).
  2. For mass benefit, we are producing the mode of computing relief u/s 89 read with Rule 21A(2). The relief can be calculated by adhering to the point-wise steps as mentioned below:
    1. Calculate the tax payable on the total income, including the arrears of salary, of the relevant previous year in which the same is received.
    2. Calculate the tax payable on the total income, excluding the arrears of salary, of the relevant previous year in which the additional salary is received.
    3.  Find out the difference between the tax at (1) and (2).
    4.  Compute the tax on the total income after including the arrears of salary in the previous year to which such salary relates.
    5. Compute the tax on the total income after excluding the arrears of salary in the previous year to which such salary relates.
    6. Find out the difference between tax at (4) and (5).
    7. The excess of tax computed at (3) over tax computed at (6) is the amount of relief admissible under section 89. No relief is, however, admissible if tax computed at (3) is less than tax computed at (6).In such a case, the assessee-employee need not apply for relief.
    If the arrears of salary relates to more than one previous year, salary would be spread over the previous year to which it pertain in the manner explained above.
    8. The required particular for relief u/s 89 is required to be furnished in Form No. 10E.

  1. Whether filing the income tax return is compulsory:
    Filing the income tax return shall be mandatory if the income (before deduction under Chapter VIA i.e, deduction towards LIC, PPF, Mediclaim, Donation etc) exceeds the basic exemption limit. The return form for the F.Y. 2010-11 will be notified subsequently & the form shall have required columns to disclose tax relief admissible u/s 89.

Query 4]

Sir, kindly clarify my two confusions:

  1. Instead of “Tuition Fees”, it is written as “Education Fees” in my son’s school fees receipt. Can I claim deduction u/s 80C?
  2. My wife forgot to collect TDS certificate from the bank agent on FDR of F.Y. 2008-09. Her income, before deduction under section 80C to 80U, is below taxable limit. Can she file her IT return in the Year 2010-11 and claim the refund? Whether she will be penalized with fine of Rs. 5000/-? [ saju_sak@hotmail.com]

Opinion:

  1. Payment towards Development fees or donation or payments of similar nature are not eligible for deduction u/s 80C.
  2. Going by the liberal interpretation of the Statue. We are of the view that “Education Fees” is eligible for deduction u/s 80C.
  3. Yes, she can file her return for the F.Y. 2008-09 on or before 31.03.2011 without attracting any penalty of Rs. 5,000/-

EXEMPTION U/S 54F


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