INCOME TAX ON SALE OF SHARES & MUTUAL FUNDS

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MUTUAL FUNDS

Query 1]

I had purchased some shares and Mutual fund a few years back (exact date can not be determined). I have sold these in the previous year 2010-11. Will it attract long- term capital gain tax? Will it be taxable or tax free? Please clarify. [jyti_mhjn@rediffmail.com]

Opinion:

  1. INCOME ON SALE OF SHARES: –
    a) For sale within a period of one year from the date of its purchase, the difference between sale price & cost of acquisition would be treated as Short Term Capital Gain in the hands of Investor & would be taxable @ 15% u/s 111A of the I.T. Act-1961.
    b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be treated as Long Term Capital Gain in the hands of Investor & would be exempt from tax u/s 10(38).
  2. INCOME ON SALE OF MUTUAL FUNDS: –
    The tax treatment of income arising from sale of mutual funds is different for debt funds vis a vis equity fund, as under:
    i) Debt Fund:
    a] For sale within one year from the date of its purchase, the difference between sale price & cost of acquisition would be taxable as Short Term Capital Gain in the hands of Investor. It will be taxable like other regular income of the assessee.
    b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be taxable as Long Term Capital Gain in the hands of Investor & would be taxed at a rate which is lower of the following two:
    – 10% without indexation or
    – 20% with indexation benefit
  3. ii) Equity Fund:
    a] For sale within one year from the date of its purchase, the difference between sale price & cost of acquisition would be treated as Short Term Capital Gain in the hands of Investor & would be taxable @ 15% u/s 111A of the I.T. Act-1961.
    b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be treated as Long Term Capital Gain in the hands of Investor & would be exempt from tax u/s 10(38).

 

Query 2]

Sir, I need the following clarification in my case.

I had purchased a plot of land in March-1994 & have sold it in December-2010. In January-2011, I have booked a flat for my self for Rs. 43 Lacs & I fulfill the conditions as enumerated for section 54F. I am investing entire Rs. 16 Lacs being the sale proceeds of my land by July -2011. I am a Government servant. also want to know the following:

  1. I should seek exemption u/r sec 54 or 54F? Is residential plot included in the definition of residential house property?
  2. I should file my return in the new notified (as and when) form ITR-1 or ITR-2 ? 
  3. If exemption is under 54F then is it necessary to show calculations for indexation in the return, since I have to invest and investing entire sale proceed? [roysoumo@yahoo.co.in]

Opinion:

  1. You can claim an exemption u/s 54F as you have transferred plot. Exemption u/s 54 is available when the residential house property is transferred. What you are selling is a plot which is a long term capital asset. It doesn’t matter whether it is a commercial plot or a residential plot. You will be eligible for exemption u/s 54F.
  2. The new income tax returns forms are recently notified by the Government for the F.Y. 2010-11 (i.e., A.Y. 2011-12). You would be required to file the Income Tax Return in ITR-2.
  3. Even though you are investing the entire amount of sale proceeds for purchase of a residential house property & claiming an exemption u/s 54F for the entire amount of long term capital gain, still you are required to show the same in the Income Tax Return.

 

Query 3]
I have purchased a Flat on home loan from bank (Rs. 5 Lacs) & a non-refundable advance from my provident Fund (Rs. 2.15 Lacs) in the year 2010. Kindly inform
  1. Under which section I can claim tax exemption for the interest which I am loosing by withdrawing the amount from my provident fund?
  2. If so, how it is to be calculated? [dhanukakailash50@gmail.com]

Opinion: –

  1. Deduction towards interest on housing loan is available u/s 24(b) of the Income Tax Act -1961. The same is available only if the interest is payable. In your case, no interest is payable as such on the amount withdrawn from your provident fund A/c. As such, no deduction shall be available on the basis of notional interest amount.
  2. Only deduction towards the housing loan availed by you shall be available to you.

MUTUAL FUNDS

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