Financial Daily from THE HINDU group of publications
Sunday, Sep 26, 2004
Financial Daily from THE HINDU group of publications Sunday, Sep 26, 2004 |
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Investment World
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Taxation Columns - Tax Talk A load of questions from a code developer T. Banusekar
Ponnuchamy Reply If you are a resident and ordinarily resident in India in accordance with Section 6 of the Income-Tax Act, the income will be taxable in India. It would be better to keep a record of your expenses along with proof thereof rather than estimate your income. Query In the first year in which a firm is to be assessed, the law requires that a certified true copy of the instrument of partnership must be filed along with the return of income. For this purpose, is it necessary that the deed of partnership should be on a stamp paper or would it suffice if it were on a plain paper? Sanjay K. Rasotra Reply The deed of partnership would have to be in a stamp paper and the value of the stamp paper would depend on the place where the deed is executed. Query I work as an executive in a private research organisation. I opened a demat account with ICICI, six months back when I was a student. I now hold about Rs 1.56 lakh worth of shares in this account. My annual salary is around Rs 1.4 lakh. Most of the shares held in this account were bought out of my own savings except a few shares, which I bought from my father. How do I bring this shareholding into my account? Balaji Dhanasekar Reply It is not clear from your query as to how the present holding of shares was generated. It is also not clear whether there were any sale of shares made by you and as to whether the holding of Rs 1.56 lakh worth of shares is the net of your purchases and sales. If there has been a sale, you should have accounted for the gain in the respective years in which the gain was realised. One further aspect, which is not clear, is as to how you had a saving of over a lakh of rupees when you are a student. It is assumed that during this period you would not have had any income. If you did, this would not be an issue. The question of bringing this shareholding into your account is also not an issue, which is very clear. I presume that you would like to keep this as accounted for tax purposes. So far as tax is concerned what you would need to do is only to prove the source for the investment and account for the gain or loss in the years in which they are earned or incurred. Query I am a retired PSU executive. I am now actively engaged in online share trading of shares on my own account. Such online trading involves the extensive use of the Internet for which I use dial-up service. Can I claim the telephone expenses and the charges of the Internet service provider as a deduction against the income derived from online trading in shares? Apart from the income from share dealing, I also have interest from bank deposits and pension income. Narayanan Reply The income from dealing in shares may be treated as capital gains or business income. The head of taxability may depend on several factors such as periodicity of transactions, and so on. However, if the purchase and sale are non-delivery based, the same will be treated as business income. If the income from share dealing is treated as capital gains, it may be a long-term or short-term gain and the expenses on purchase can be added to actual cost while that on sale can de claimed as a deduction by way of one incurred wholly and exclusively in connection with the transfer. In your case, this will, probably, have to be done on some reasonable basis. If it is treated as business income you can claim the expense as one incurred wholly and exclusively in connection with the business. Once the securities transaction tax is notified, the transactions will attract the levy if the sale is through a recognised stock exchange. In such a case, long-term capital gains will be exempt and short-term capital gains will suffer a tax at 10 per cent. No rebate can be claimed against the capital gains tax in respect of the tax paid by way of securities transactions tax. No deduction under Chapter VI-A can be claimed in respect of such short-term capital gains. Rebate under Section 88 can also not be claimed against such tax on short-term capital gains. If it is to be treated as business income you can claim rebate under Section 88E. The rebate that can be claimed is the securities transaction tax in respect of such transactions against the income-tax on dealing in shares that is chargeable under the head `Profits and gains of business or profession'. This will be allowed only if proof of payment of securities transaction tax is furnished in the prescribed form. The rebate will be allowable to the extent of the lower of the securities transaction tax or the income-tax leviable on such transactions in securities. The income-tax leviable on such transactions in securities is to be computed by applying the average rate of income-tax on such income. This would mean that if the assessee has a loss from such transactions, no rebate would be available. The income by way of interest from bank deposits will be assessable as `Income from other sources' while the pension will be assessable as income under the head `Salaries'.
Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.
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