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Capital gains is computed in the following manner; first limb will consist of selling price less brokerage

Q. My daughter-in-law, an NRI, bought a flat in Chennai two years ago. The flat was registered when she was working in the city, before she became an NRI. Now, she plans to sell it at about ₹35 lakh, much below the price paid by her, and repatriate the money. Kindly advise as to the rules applicable and the steps to be followed. Does the buyer need to deduct TDS, and if so, can it be avoided as the sale will be at a loss?

Jayalakshmi Narayan

A. Sale of residential property will be termed a “Capital Asset” and the ensuing gain/loss from the sale transaction is termed as “Capital Gain/Loss”. Period of holding above 24 months in case of immovable property will be treated as “Long Term Capital Asset” while period of holding lesser than 24 months will be treated as “Short Term Capital Asset”.

Capital gains is computed in the following manner; first limb will consist of selling price less brokerage. Also, if the selling price is lesser than the guideline value, then the guideline value is to be replaced with the selling price.

Kindly check with the Registrar’s office or visit the TN Reginet website in order to ascertain the guideline value of the UDS. Further, you will have to ascertain the value of the building depending on the characteristics-cum-amenities of the building on the basis of PWD rate.

Total of the value of the UDS as per guideline value and the PWD rate valuation of the building will have to be compared with the selling price.

Second limb will consist of purchase cost plus registration costs which is to be adjusted with inflation (indexation) in case of Long Term Capital Asset. This is to be done with the aid of Cost Inflation Index (CII) released by the I-T department every assessment year. If you have incurred any cost of improvement, then the same can also be added along with the purchase cost (adjusted with CII if applicable). Indexation will not be applicable for Short Term Capital Assets.

The difference of the first and second limbs, if positive, is Capital Gains and if negative, is Capital Loss. For properties held for more than 24 months, it is Long Term Capital Gains/Loss. Long Term Capital Gains attract 20% tax plus applicable surcharge and cess, while Short Term Capital Gains depend on slab rates plus applicable surcharge and cess.

TDS is required to be deducted by the buyer at the time of making payment to the seller. In your case, the seller being an NRI, the TDS rate for Long Term Capital Asset is 20% plus applicable surcharge plus cess and in case of Short Term Capital Asset it is at slab rates plus applicable surcharge and cess.

The TDS will have to be deducted on the sale price. However, the buyer can approach their jurisdictional Income Tax Officer and file Form 13 in order to obtain a lower/nil TDS deduction certificate which will be issued based on the actual capital gains/loss. The copy is to be shared with the seller who will deduct the TDS based on this certificate.

Post completion of the aforementioned formalities, the funds can be repatriated by approaching an authorised dealer and obtain a Form 15CA and 15CB, as applicable, along with other formalities as instructed by the authorised dealer.

Q. I am 37 and earn income from the share market. (In FY21), I encountered a loss of ₹1.25 lakh in trading. I had traded in segments such as equity, F&O and put call. Kindly guide me as to how I should file my income-tax returns.

Patel

A. You are to split your income into 3 parts. First, Capital Gains — short and long — based on the period of holding and for those equity instruments for which delivery was taken. Second, Speculative Income for intraday trading in equity instruments. Third, Income from Business and Profession for F&O. For the above sources of incomes, ITR-3 will be applicable for you.

You are to first compute the turnover of the F&O and intraday equity separately by adding the gains and absolute figures of the loss. Related expenses such as brokerage, Internet expenses, depreciation for the assets used, exchange charges, among others, is to be identified separately for F&O and intraday equity and can be claimed as deductions from the turnover and the profits/losses, respectively.

Loss from intraday equity will be treated as “Speculative Loss” and can be carried forward for four years and be set off against future “Speculative Gains”.

Loss from F&O will be treated as “Business Loss” and can be carried forward for eight years and be set off against future “Business Profits”.

Capital Gains is to be first split into short term and long term — short term for period of holding of less than 12 months and long term for above 12 months. When computing Long Term Capital Gains for which STT was paid both at the time of purchase and sale, grandfathering provisions will apply.

Short and Long Term Gains/Losses from such equity instruments are to be disclosed separately. Profits from short term will be charged at 15% while long term profits will be charged at 10% for gains above ₹1 Lakh.

Short Term Loss can be carried forward for eight years and be set off against future Short/Long Term Gains and Long Term Loss can be carried forward for eight years and be set off against Long Term Gains only. In the above cases, it is assumed that in case of losses, no gains are available to set off in the same assessment years.

(N. Sree Kanth is partner, GSS Associates, Chartered Accountants, Chennai)

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