Any income/loss arising from intra-day trade in stocks without taking actual delivery of the stocks is treated as “speculative business income”, after deducting eligible expenses (including securities transaction tax) incurred in connection with such trading. Photo: Pradeep Gaur/Mint
My gross receipts from a specified profession are ₹10 lakh and I have short-term capital gains of ₹20,000. If I want to avail Section 44ADA benefits under the Income Tax Act, will I have to fill ITR-3 instead of ITR-4? In which column should I show 50% of gross receipts? Should I show balance sheet data in ITR-3?
—Vijay Chhabria
Since you have both income from specified profession (as per Section 44ADA read with Section 44AA of the Income Tax Act, 1961) and capital gain, you will need to use ITR-3 for filing your tax return for the financial year 2017-18. It is presumed that you satisfy all the specified conditions prescribed in Section 44ADA. As you propose to avail benefits as per sub-section 1 of Section 44ADA, you should specify the deemed income from profession under Section 44ADA in Item 36(ii) of Schedule BP (of ITR-3), as well as update details of your profession in the Profit and Loss and Balance Sheet schedules that are earmarked for taxpayers who do not need to maintain books of accounts.
Other than the salaried class, which is the ITR form which can be used for reporting intraday gains and losses?
—S. Sriram
Any income/loss arising from intra-day trade in stocks without taking actual delivery of the stocks is treated as “speculative business income”, after deducting eligible expenses (including securities transaction tax) incurred in connection with such trading. You will need to use ITR-3 to report such speculative income/loss, irrespective of whether you have salary income or not.
Appropriate documentation and books of accounts would need to be maintained to support the income and expense claims. The requirement to maintain specified books of accounts and having a tax audit completed would depend on various factors like the quantum of net profit loss, gross turnover, and volume of trades, etc.
I bought a land of 1,137 sq. ft in 2012 and now I wish to sell it. What will be the tax implication on the deal? I am a salaried person and I am already paying tax and filing returns for my income.
—Deepak Kumar
Gains from the sale of non-agricultural land are taxable as “capital gains”. As this property was held by you for more than 24 months from the date of acquisition, the gains are taxable as long-term capital gains (LTCG), which is computed as the difference between the net sale proceeds and the indexed cost of acquisition. Indexation refers to using the Cost Inflation index (CII) notified by the tax authority in the years of purchase/improvement and sale, to determine the impact of inflation on costs. The LTCG from this sale will be subject to tax at the rate of 20% (plus applicable surcharge and cess), unless you are eligible to claim exemption.
You can claim exemption from tax under Section 54F of the Income-tax Act, 1961, if you invest the net sale proceeds from the sale in purchasing/constructing a residential house property in India, subject to the conditions specified in respect of the timelines to re-invest, the ownership of other house properties during such timelines, etc.
Alternatively, you could claim an exemption under Section 54EC of the Act by re-investing the LTCG, capped to ₹50 lakh, in specified bonds notified by the Central government (for example, bonds under schemes of Rural Electrification Corporation (REC) and National Highways Authority of India (NHAI)) within six months from the sale of the property. Under the current law, the notified bonds are redeemable after five years from the date of investment.
If you are unable to reinvest the sales proceeds/LTCG into the new asset before the due date of filing your return for the year in which you sell the property, the unutilised balance should be deposited into Capital Gains Account Scheme (CGAS) in order to claim tax exemption prior to filing the tax return. The amount deposited into the CGAS scheme can then be utilised to reinvest in the new asset within the aforesaid timelines. In case the amounts deposited are not utilised, you will be liable to pay tax on such unutilised amount.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at mintmoney@livemint.com
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