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- Capital Gains
- Tax Returns Filing without Form 16
- Family Medical Insurance Vs Individual Medical Insurance
| Posted: 29 Jul 2016 01:30 AM PDT Income tax returns are due to be filed by 31 July, and apart from what's in your Form 16 it also needs to have details about your capital gains and losses, if any. However, many people don't know which of their financial transactions qualify as capital asset transactions and therefore may attract tax. Indians buy gold, as a gift for themselves or others. They also sell it for cash or to buy new jewellery. Many also buy it purely as an investment, believing that its value will appreciate in future.
However, very few people know that a tax liability arises out of any gain made from sale of gold, be it jewellery, coins or bars. The same goes for other assets such as real estate. Many people tend to forget mentioning the tax implications that a simple transfer of property may give rise to in their tax return.
The rule of thumb with capital gains should be that irrespective of the amount of the capital transaction and regardless of whether you make a gain or a loss, you have to declare that transaction in your tax return. And if you made a profit, you also need to pay tax on it.
All assets are not taxed the same way. It varies as per the nature of the asset. Here is a look at how you need to calculate capital gains and the tax liability on transfer of various assets.
What are capital gains?
Capital gains are calculated by deducting the cost of acquisition of the asset from its sale consideration. The tax implications are different for each asset.
Real estate
To calculate capital gains, you first need to know the cost of acquisition. In case of property, apart from the basic cost of the house, the expenditure incurred wholly and exclusively in connection with the transfer has to be first deducted. So, any expense that was necessary to transfer the asset can be added to the cost of acquisition. For instance: stamp duty, registration fee, brokerage charges, legal fees, and advertisement costs. "Where property has been inherited, expenditure incurred with respect to procedures associated with the Will and inheritance, obtaining succession certificate, and costs of executor may also be allowed in some cases.
Besides that, while calculating LTCG from transfer of a residential property, the indexed cost of acquisition has to be ascertained. For that, the cost inflation index (CII) is used, which is not allowed in case of STCG.
Say, you are planning to sell a house bought in April 2013 for R50 lakh, and now you sell it for R70 lakh. To calculate the capital gain, you have to adjust the cost of acquisition for inflation. To do so, multiply the purchase price by the CII number of the current year (year of sale) and divide the resulting figure by the CII number for the year of purchase. By this formula, the inflation-adjusted cost of acquisition would be: R50 lakh*1125 (CII number for 2016-17)/939 (CII number for 2013-14).
This comes to R59,90,415. So your capital gain would be R70 lakh minus R59.90 lakh, which comes to about R10.10 lakh. Accordingly, your LTCG tax would be 20.6% of this amount, or about R2.08 lakh.
If the same property was bought in April 2014, and is being sold now, the holding period becomes less than three years. The seller's capital gain would be R20 lakh (R70 lakh minus R50 lakh), which will get added to her other incomes and get taxed according to the applicable slab. If she falls under the highest tax slab of 30.9%, the STCG tax would be R6.18 lakh.
Shares and mutual funds
However, there may also be a case of loss from equity investment. If it is short-term capital loss (STCL), you are allowed to set it off against other STCG. It can also be carry forwarded for up to eight subsequent financial years (FY) for set-off. However, long-term capital loss (LTCL) is not allowed to be set off or carried forward.
Like in real estate, expenses incurred on transacting in shares or mutual funds can also be claimed for deduction when calculating capital gains. "The broker's commission and demat account fee may be allowed to be deducted from sale proceeds. But Securities Transaction Tax (STT) is not allowed as a deductible expense.
The rules are different for debt-oriented mutual funds. Equity mutual funds are those where 65% of the corpus is invested in equity and equity-related instruments. Those holding less than 65% (in equity) are debt mutual funds. For debt funds, both holding period and tax implications are different. If the debt fund is held for 36 months or less, it is considered short term. STCG on debt funds is taxed at the slab rate applicable to the individual, whereas LTCG is taxed at 20% with indexation.
Gold and bonds
There are different rules for bonds, depending on the issuer and other features. For instance, listed corporate bonds are considered short term if sold before completion of one year from date of purchase, and are taxed as per the applicable slab rate.
If sold after a year, the gains will be considered LTCG and taxed at the rate of 10.3% without indexation. On the other hand, in case of capital-indexed bonds issued by the Government of India, LTCG is taxed at 20.6% with indexation or 10.3% without indexation, whichever is less. Apart from these, specified tax-free bonds (listed or unlisted) covered under section 10(15) of the Act are free from both short- and long-term capital gains tax.
How to reduce LTCG tax
According to the prevailing tax rules, LTCG arising from the sale of any capital asset is exempt from tax under section 54F of the Income-tax Act, 1961 if the sum is used to acquire a residential property, provided you meet certain conditions. To get the exemption, the assessee can set off capital gains against a residential property bought in the previous 1 year before the date of transfer of property, or two years after its transfer. In case of under-construction properties, the construction needs to be completed within 3 years from the date of transfer. If the construction is not completed within 3 years of date of transfer, you will lose the benefit and the LTCG will attract tax.
An assessee can also save tax on LTCG from sale of any capital asset by investing the capital gain in specified bonds under section 54EC of the Act. But one must remember that the total exemption is restricted to R50 lakh. Amounts in excess of that will attract LTCG tax if not reinvested in a residential property.
Also, LTCG from sale of a residential property will be tax-free if the sale proceeds are invested in a small or medium enterprise in the manufacturing sector. But the funds have to be used by the company to acquire new plant and machinery before the due date to furnish tax returns for the relevant FY. The equity holding or voting power of the assessee, after the investment, should be more than 50%.
Another scenario may be that you intend to use the sale proceeds after some time, but within the stated time limit to avoid tax. In such a case, you should deposit the amount in a bank under the Capital Gains Account Scheme (CGAS) with the intention of using the funds to buy a new house within 2 years or to construct one within 3 years.
Also remember that if the new property is sold or the bonds are redeemed within a period of 3 years, the exemption claimed with respect to the old property shall be revoked. Even if you take any loan or advance against the security of these bonds, they will be deemed to be converted into cash.
Things to remember
Claim all expenses incurred in connection with the transfer of capital assets and indexation benefits to calculate capital gains or losses. To avail exemption under section 54F of the Act, deposit the LTCG from property transfer in CGAS, if it's not immediately reinvested. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016Best 10 ELSS Mutual Funds in india for 2016
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. Birla Sun Life Tax Plan
Invest in Best Performing 2016 Tax Saver Mutual Funds Online For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 -----------------------------------------------             | |
| Tax Returns Filing without Form 16 Posted: 28 Jul 2016 11:03 PM PDT
With the tax-filing deadline closing in and no sign of Form 16 yet, it is best to gather all your documents, calculate your liability and file returns Two weeks to the tax filing deadline and still have not received your Form 16? Maybe it's time you tried filing your returns without one. The Income-Tax Act lays down that TDS certificate must be issued by the employer, once a year, on or before May 31 of the financial year immediately following the financial year in which tax is deducted. If an employer fails to provide you with a Form 16 after having deducted TDS the minimum penalty that the employer will pay is `100 for every day the default continues.
The reason for not issuing Form 16 could be many . The company might be in trouble and may not have deposited your taxes at all or the HR department may be just lazy . Whatever may be the case, there is no point running after your employer anymore since the deadline is close. You might start collecting the alternate documents that will help you calculate your tax liability and file returns. This will take some time especially if you are planning to file your returns yourself.
Start by familiarising yourself with the different ITR forms and the correct form for you. Most of the salaried class will be filing an ITR 1 , 2 or 2A. Form 3, 4 and 4A are for people with income from professional practice or business. If you are using the government filing site, you will have to choose and download the correct ITR.
The form-selection process is automated if you are filing through an online-filing platform. Next step is to get all the documents ready to calculate your taxable income.
Declaring your taxable income: In absence of Form 16, your payslip is the second-best resource to calculate your income from salary . Remember to deduct the non-taxable heads such as HRA, LTA and other reimbursements from total income. If you are filing ITR2A, ITR-2 and ITR-4, you will have to provide a detailed salary schedule with a break-up of allowances that are exempt from tax along with value of perquisites. Refer to your appointment letter that gives a break-up of your CTC for details.
Your income should include earnings from other sources too. Interest income can be easily retrieved from your TDS certificates from bank or Form 26AS. Do not forget to declare rental income, capital gains, income from savings bank account, cash gifts above `50,000 received from a non-relative and even income exempted from tax such as dividend income.
Match your TDS numbers: Form 26AS is the best source to cross-check 26AS is the best source to cross-check your entries. Your income from all the sources (including interest income where you had submitted a Form 15GH), tax deducted at source and any high-value transactions and sale of immovable property are all reflected in Form 26AS. An advance tax paid needs to be mentioned in the ITR as well. Verify your tax payment challan(s) numbers with the figures in Part D of Form 26AS.
Verifying all the details as per the Form 26AS is a must as many have been getting notices from the department recently where the ITR filed by the taxpayer does not match with the information available in the form. Recheck the TDS figures carefully , if your employer is in some financial trouble. Cross-check the TAN num bers to know verify the employer and the corresponding TDS. There have been cases where the employer had deducted TDS from your salary but the same was not deposited with the government. The onus of filing correct returns is on the taxpayer.
If the employer has deducted tax, it must show up in your Form 26AS. If it does not, either your PAN was not correctly mentioned or the employer did not deposit the TDS. If it is the latter and the employer refuses make corrections you may have to pay tax to the government on your income yourself and later on claim from your employer. Another solution can be approaching your jurisdictional TDS Commissioner.
We have seen examples wherein the company immediately deposited TDS and issued Form 16 upon receipt of notice from the tax department. Nondeposit of TDS is a serious offence and can result in prosecution and rigorous imprisonment.
Claim the correct deductions: If you were diligent in declaring your investments during January and February , you are perhaps well-organised already . Most of your deductions under Section 80C such as insurance premiums, mutual fund investments, PPF contribution, children's school tuition fee, are easily traceable.
Just get the investment proofs, add the numbers and you can fill the aggre the numbers and you can fill the aggregate as deduction under Section 80C.Remember to include your EPF contributions and investment made in NPS under Section 80C too. You can get your EPF contributions in your EPFO statement. If the employer has not provided one, just go online. All you need is account number and establishment code, which are usually mentioned at the top of your salary slip. You will also have to key-in the state where the employers' EPF trust is registered.
Your NPS contributions will be under two sections. Your contributions as an employee gets deduction under Section 80CCD(1), which comes under the overall `1.5 lakh limit under Section 80C. This year onwards, you can claim an additional 50,000 deduction under Section 80CCD(1b) for individual contribution, which includes any contribution made as an employee. If you contributed `50,000 or more towards NPS via salary deductions, maximise the tax benefits under both Section 80C and Section 80CCD(1b). Claim the full `50,000 under the new section first and then adjust the residual to achieve total tax deduction of `2 lakh. The contributions towards NPS by your employer is deductible under Section 80CCD(2). If you have a home loan, principal repayments will also be added under Section 80C. Consult the loan certificate to know the break-up between your principal and interest payments. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016Best 10 ELSS Mutual Funds in india for 2016
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan
Invest in Best Performing 2016 Tax Saver Mutual Funds Online For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 -----------------------------------------------     | |
| Family Medical Insurance Vs Individual Medical Insurance Posted: 28 Jul 2016 10:05 PM PDT Why Family Health Plan May Not Always Be GoodAccording to insurance experts, family healthcare plans are more recommended for young people whereas for people aged above 45 years should always buy individual health insurance considering their life style and health problems which might occur because of ageing. Family floaters have fixed insurance cover and in a year multiple members can claim the amount. However, these days insurance buyers prefer family plans since whole family is covered and premiums are very less as compared to individual plans and family coverage is more. Such types are commonly called as family floaters. But experts recommend taking cautious approach towards such decision, since policy holders are actually taking risks because they feel that – in a year chances of each and every member within a family getting hospitalized is very less. Experts On Family Vs Individual Policy:Let's understand this by taking an example of 4 member family. Suppose youngest member is aged 8 years and eldest with an age of 38 years. This family is planning to purchase insurance cover of INR 5 lac. Now this family will have to pay INR 19, 337 for individual coverage whereas they'll get INR 10, 000, 00 (ten lacs) by paying INR 700 extra. This is the reason for higher family floaters being popular among families than individual due to higher cover by paying lesser premium. Experts are also of opinion that bigger family floater for every member is much better than smaller one taken for each individual, since tracking for all can be done easily and you don't have to pay premiums individually and most importantly children can always be added in the floater very easily. Always Pay Attention to the Coverage: Insurance experts suggest family members to keep an eye on the coverage especially during an year when more than one family member getting hospitalized resulting in lesser coverage left for the other members in the family during that particular year. This scenario can occur especially in families with elder members suffering from any lifestyle diseases. In such cases, rest of the family will have to rely on lesser coverage for the remaining year. So in such conditions having an individual health insurance plan is much beneficial than the family floater since there is no reliability left on other members. So industry experts strongly suggest buying individual health cover for people aged greater than 45 years whereas people aged young, can opt for family floater health plans. Also, customers should prevent themselves from opting for products with restoration features in order to clear the cover. Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 or Best 10 ELSS Mutual Funds in india for 2016
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan
Invest in Best Performing 2016 Tax Saver Mutual Funds Online For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300      |
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