What will be your tax liability if you sell shares traded in the US stock market?
When the shares are allotted to an employee, it is taxed as a prerequisite. When the shares are sold by the employee, it is taxed as capital gains.
Rakesh Bhargava Director, Taxmann replies: Shares allotted under ESOPs are taxed in two ways. When the shares are allotted to an employee, it is taxed as a perquisite. When the shares are sold by the employee, it is taxed as capital gains. As the securities allotted to you are not listed in India, they shall be treated as long-term capital asset if they are transferred after holding for more than 24 months.
The resultant profit shall be treated as long term capital gain taxable at the rate of 20%. The FMV of such securities on the date of exercising of option shall be treated as cost of acquisition, which shall be further adjusted in accordance with applicable cost inflation index.
I earn in dollars, and hence do not have company-linked deductions such as HRA, LTA etc. How can I optimise my tax outgo, apart from availing of Section 80C, NPS and 80D deductions?
Amit Maheshwari Partner, Ashok Maheshwary and Associates replies: For rent, you can claim deduction under Section 80GG for rent paid up to Rs 5,000 per month or up to 25% of total income (income before allowing this deduction), whichever is less. However, this deduction can be claimed only if the person or his/her spouse or minor child do not own any property in their name. Further, you can claim deductions under Section 80E for the payment of interest on educational loan for pursuing higher education for self, spouse, children or a student whose legal guardian you are.
You can also claim deduction under Section 80G for donations made to certain funds or temples. Some of the notified funds are National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime Minister’s Drought Relief Fund, National Children’s Fund, etc. Alternatively, you can tell your employer to include these components in your pay structure and then you would be eligible for exemption of allowances like HRA/LTA, etc subject to satisfaction of necessary conditions.