I have shares that have been making loss for three years now. How can I reduce my tax liability by selling them off?

Nobody likes to lose money when investing, more so after holding it for more than a year. The one-year holding period is important in case of shares, because, when sold after a year from the date of purchase, they are exempt from long-term capital gains (LTCG) tax, subject to securities transaction tax (STT). In your case, you foresee a loss from the sale of shares you hold. The tax laws do not allow you to set off long-term loss against other taxable income in a fiscal. But, if the shares are not sold by reason of being an off-market transaction, or, where the shares are of an unlisted firm and held for at least three years, the loss from their sale will be treated as long-term capital loss and can be set off against the taxable LTCG you will have as proceeds from the sale of real estate that was held for at least three years. This loss can be adjusted in the same year or in the subsequent eight years. Here’s how:

Calculating gain/loss

Profit from sale of stocks

X and Y: Rs.10, 000

Loss from sale of stock Z: Rs.15, 000

Set-off loss: Rs. 5, 000

Here, the balance loss of Rs. 5,000 can be carried forward to the next eight assessment years for set-off against future LTCG.

If a person makes some transaction in the commodity F&O segment and his other source of income is only as dividends from shares, interest from fixed deposits and post office monthly income scheme (MIS), which ITR form should he submit? Also, should the income from the transaction be treated as capital gain or business income?

A commodity F&O transaction carried out in a recognised association and subject to commodities transaction tax, is not considered speculative. A single transaction of such a kind is treated as capital gains. This would, however, depend on factors, such as holding period, motive, volume, frequency, source of funds, proportion of income and the overall time devoted for the activity. Assuming it is capital gains, the tax return form applicable to you would be ITR-2.

My daughter is getting married in December 2014. I have investments in gold exchange-traded funds (ETFs). If I convert these to coins, do I have to pay any capital gains tax?

How would this be different from holding physical gold? There is no difference between physical gold and gold ETFs in terms of capital gains tax levied. Also, gold ETF is easier to hold than physical gold. Besides, physical gold attracts wealth tax, something gold ETFs are exempt from. Most gold ETFs allow conversion to physical gold only when it is a minimum of one kg. Few allow conversion for as low as 10g.

OLMdesk@outlookindia.com