This week’s queries have been answered by B Gopkumar - Executive Director and Chief Executive Officer, Reliance Securities Ltd and Suresh Surana - Chartered Accountant and Founder RSM Astute Consulting Group and Company

1. I have five income tax files. Where can I invest to earn Rs 1 lakh a month with minimal tax liability?

We assume from your question that you are filing ITRs for five family members. As you have not put the amount you wish to invest to get a return of Rs 1 lakh a month after investment, you may invest approximately Rs 25 lakh each per family member in asset classes like mutual funds, hybrid and balanced funds, bonds and non convertible debentures (NCDs) through the secondary market. This will help you to achieve your goals as these investments are offering approximately 8-11 per cent returns per annum through monthly dividend, interest and SWP with indexation benefits, leading to minimum taxation in the long run.

If you are okay to start returns or pension on attending 60 years of age, the National Pension System (NPS) can be the best option. Various NPS fund options managed by known AMCs are currently offering 8-12 per cent returns per annum.

B Gopkumar

Executive Director and Chief Executive Officer

Reliance Securities Ltd

2. I’d like clarifications to the following queries.

First, if the shares were inherited or purchased years ago, and I do not have their purchase price, how do I work out long-term capital (LTC) gain or loss.

Second, whether short-term capital gains earned by sale of shares during FY 2018-19 can be set off against the following:

- Current year short-term capital loss

- Current year long-term capital loss

- Brought forward short-term capital loss

- Brought forward long-term capital loss

Third, whether long-term capital gains earned by sale of shares during FY 2018-19 can be set off against brought forward long-term capital loss.

Fourth, whether long-term capital gains earned by sale of shares during FY 2017-18 can be set off against long-term capital loss and/or brought forward long-term capital loss, irrespective of sales date, i.e. sale before 31 January 2018 or thereafter.

Fifth, whether long-term capital loss of earlier years (brought forward) and long-term capital loss incurred prior to 31 January 2018 has to be set off against long-term capital gains earned in FY 2017-18 but after 31 January 2018.

Sixth, whether long-term capital loss or short-term capital loss in FY 2017-18 after set-off can be carried forward to the next year.

If the shares were inherited or purchased where the purchase price is not available, the computation of LTCG is as follows:

The applicability of LTCG tax on shares inherited after 31 January 2018 is not clear. For instance, if X acquired shares in March 2002 and they were inherited by Y on 15 February 2018, it is not clear if Y will benefit from the grandfathering provision. The language of the LTCG tax Section states that to avail this benefit, the person should have held those shares as of 31 January 2018. In the absence of any clarification, the long-term capital gains will be calculated based on the purchase price in March 2002 since Y did not own the shares as of 31 January 2018.

If inheritance is before 31 January 2018, LTCG grandfathering provision shall be benefited.

Whether short-term capital gains earned by sale of shares during FY 2018-19 can be set off against the others, the answer is yes.

This provision is available in income tax.

B Gopkumar

Executive Director and Chief Executive Officer

Reliance Securities Ltd

3. I plan to sell a house property which I’ve held in my individual capacity for some 10 years. I want to invest the sales consideration in bonds. Please advice whether I am eligible for any exemption benefits on capital gains arising from sale of house property through investment in bonds. Please explain the taxability of interest received from such bonds?

Considering the facts of your case, you can avail exemption under Section 54EC of the Income-tax Act, 1961 (‘the Act’) by investing the capital gains on sale of house property. As per the provision of the Act, land or building shall be treated as Long Term Capital Asset (LTCA) only if they have been held for a period of more than 24 months. Further exemption under Section 54EC is available only if you invest in certain eligible bonds such as National Highway Authority of India and Rural Electrification Corporation within a period of six months from the date of LTCA transfer. Such bonds issued on or after 1 April 2018 shall be redeemable only after five years (earlier, the lock-in period was three years). The exemption under Section 54EC is restricted up to Rs 50,00,000.

With respect to the interest received from bonds, they are taxable under the head ‘Income From Other Sources’.

Dr Suresh Surana

Chartered Accountant & Founder

RSM Astute Consulting Group and Company

4. I had filed my income tax return for the financial year 2016-17 in March 2018. The due date for filing was 31 July 2017. I have discovered an error while filing my return and now wish to file a revised return. Will I be able to revise the return, and if yes, please let me know the last date for filing revised return.

A belated return for FY 2016-17 relevant to AY 2017-18 can be revised and the last date for filing the revised return is one year from the end of the relevant assessment year. Therefore, you can revise your belated return of FY 2016-17 on/or before 31 March 2019. However, it is pertinent to note that the period for filing the revised return has been reduced to one year and as such for FY 2017-18 (AY 2018-19), the reduced time limit for revising the return shall be 31 March 2019.

Dr Suresh Surana

Chartered Accountant & Founder

RSM Astute Consulting Group and Company

5. I am a resident salaried individual. I travel a lot and am afraid that my return filing for FY 2017-18 would get delayed. What are the consequences of late submission of income tax return for FY 2017-18?

The consequences of not filing the return of income for FY 2017-18 within the prescribed due date is that the assesse will be liable to pay late filing fee under Section 234F as under:

· Late filing fee will be Rs 5,000, if the return is furnished after the due date but on or before 31 December of the assessment year, or

· Rs 10,000, if the return is furnished after 31 December of the assessment year

However, it is pertinent to note that, where the total income of the assessee does not exceed Rs 5 lakh, the late filing fee shall not exceed Rs 1,000. The assesse shall not be eligible to carry forward losses for the year. However, loss under the head ‘House Property and Unabsorbed Depreciation’ can be carried forward even in the case of belated return.

Dr Suresh Surana

Chartered Accountant & Founder

RSM Astute Consulting Group and Company