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Tax queries: I am a senior citizen with income from various sources. How will I be taxed?

Dilip Lakhani, Senior Chartered Accountant, answers queries from our readers on income tax and other levies.

Sep 26, 2018, 01.43 PM IST
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Every week, an expert selected by ET answers queries from our readers on income tax and other levies.
Dilip Lakhani, Senior Chartered Accountant, answers queries from our readers on income tax and other levies.

If I purchase Rs 1,000 a share and pay Rs 20 as brokerage, GST, and STT, can Rs 1,020 be considered as the buying price? On the other hand, if the said stock is sold at Rs 1,020, and Rs 21 is charged for brokerage, can the selling price be considered as Rs 999? —BEJOY ACHARYYA

Under Section 45 of the I-T Act, 1961, you will be liable to pay capital gains on transfer of your shares. Depending upon the holding period, the capital gains will be considered as short-term capital gains or long-term capital gains. Section 48 of the I-T Act provides the mechanism to compute the capital gains chargeable to tax. As per the said provision, the cost of acquisition and the expenditure incurred wholly and exclusively in connection with the transfer of capital asset is allowed as deduction. In computing, the cost of acquisition the actual cost of the shares, brokerage plus GST will be considered. But the STT paid by you at the time of purchase of shares will not form part of cost of acquisition. Similarly, while computing the sale consideration, from the gross sale consideration, you can reduce the brokerage. In your example the selling price will be considered as Rs 999.

In Form 16, deduction for medical premium is reflected at net amount of GST. Can I claim the gross amount (inclusive of GST amount) in my income-tax return? The amount of GST is substantial in family policy. Also, please note that as an employee, I can’t claim any benefits under the GST Acts for the GST amount so deducted. —DIPAK KAPADIA

As per section 80D(2) of the I-T Act 1961, whole of the amount paid to effect or to keep in force an insurance on health (i.e. medical premium) shall be allowed as deduction. Since, GST would be paid along with insurance premium amount to keep in force the health insurance policy, you will be eligible to claim deduction for the gross amount inclusive of GST. Even though the gross amount is not reflected in Form 16, you may include the same amount while filing Income tax return form and claim deduction. In future, you can request your employer to include the gross amount in Form 16.

I am 80, a central government pensioner. My total income is as follows: Pension receipts: Rs 3,73,572; interest on FDs and saving accounts with two different banks: Rs 2,64,000; (gross income: Rs 6,37,572). What is the income tax I am required to pay? Is there any rebate? —MOHAN SINGH

Since your age is 80 years, you will be eligible for basic tax exemption limit of Rs 500,000. Your gross total income after claiming deduction of basic tax exemption limit will be Rs 137,572, which will be chargeable to tax at 20% plus 4% cess. This calculation is based on an assumption that you have not made any investments which is eligible for deduction under Chapter VI-A. You can avail the deduction under Chapter VI-A provided you make the investments in terms of various sections covered under the said Chapter.

Please send your queries on Stocks to et.stocks@timesgroup.com; Mutual Funds to et.mfs@timesgroup.com Tax to et.tax@timesgroup.com Insurance to et.insurance@timesgroup.com Realty to et.realty@timesgroup.com

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