The Hindu Business Line : Trading or speculating?

I am a day trader. I purchase shares normally with the intention of taking delivery. However, if I get a price which is more than the purchase price, I sell the share without taking delivery and book a profit. I also sell and re-purchase shares of the same companies if the prices fall. Are these transactions speculative in nature? Please note that I never sell shares that I do not hold or have purchased to square off. I only take advantage of the price fluctuations but sometimes do the transactions without delivery to take advantage of the fluctuation. — Utpal Banerjee

Section 43(5) deems a transaction to be speculative in nature if the buying and selling of goods or commodities, including shares and scrips, is without delivery. The Section provides for certain exceptions. It can be seen that this provision creates a deeming fiction whereby if there is no delivery, the transaction is treated as speculative.

Therefore, the shares that are purchased and sold by you without delivery will have to be treated as speculative. Transactions where there is delivery will, however, not be treated as speculative.

I get Rs 8,000 per month as pension. I have been paying a rent of Rs 2,400 per month for the last two years. I do not own a house. I am not in receipt of a house rent allowance. Will I get any tax benefit for the rent paid? For the assessment year 2004-05, I had filed a return and certain additions were made in the assessment.

I filed an appeal after paying the tax. As a result of the appellate order, I got a refund of Rs 20,000 but no interest. Am I entitled to any interest? If so, what is my remedy? — B. Dattatreya

In respect of the rent paid, you can claim a deduction under Section 80GG subject to satisfying the conditions in the Section and within the limits stipulated therein. You are entitled to an interest on the refund in accordance with Section 244A. If the Assessing Officer refuses to pay you the interest, you may approach the higher authorities, such as the Joint Commissioner or Commissioner of Income-Tax, who may instruct the Assessing Officer to do so. If even this remedy is of no avail, the only recourse may be to approach the High Court for a direction.

I work in a government-aided college as a clerk. My salary is less than Rs 1,00,000 per annum. I, therefore, do not file an income-tax return. Out of my savings I have invested around Rs 1,25,000 in shares. I generally sell the shares within one year of buying them, through a recognised stock exchange. Do I need to file a return of income and pay income-tax? If so at what rate is tax chargeable? — Ajaz Hamed

You would have to file a return of income if your total income exceeds Rs 1 lakh, including your salary and the gains from the sale of shares. The gains from the sale of shares should normally be treated as short-term capital gains in your hands as you are hold them for less than 12 months. Short-term capital gains will be chargeable to tax at 10 per cent, in accordance with Section 111A. Therefore, if your salary is less than Rs 1 lakh and if the income, including the short-term capital gains, exceeds Rs1 lakh, the excess over Rs1 lakh will be charged to tax at 10 per cent.

My son, a private sector employee, earns a salary of Rs 20,000 a month, as a flat sum. My son pays a rent of Rs 3,750 per month and also incurs electricity expenses of Rs 500-600 every month. He has no other income. Is he eligible for any tax benefit? — V. S. Mudgandi

Since your son is not in receipt of house rent allowance, he will be able to claim a deduction under Section 80GG in respect of the rent paid. The deduction can be claimed under Section 80GG, which will be the least of the following:

Rs 2,000 per month,

25 per cent of the adjusted total income, or

The rent paid less 10 per cent of the adjusted total income.

`Adjusted total income' for this purpose means the income after all deductions under Chapter VI-A (Sections 80C to 80U) but before deduction under this Section. The deduction under Section 80GG can be claimed only where the assessee or spouse or minor child does not own a residential accommodation. No tax benefits can be claimed in respect of the electricity charges paid by your son.

I am a housewife and do not have any income. If I receive gifts from my husband and parents and if these gifts exceed Rs 1.50 lakh in a financial year will I be liable to pay tax? — Meena Rao

Under Section 56(v) of the Act any sum of money exceeding Rs 50,000 per annum received without consideration by an individual or HUF from any person is to be treated as income chargeable under the head `income from other sources'. The proviso to the Section, however, among others provides that the sum received without consideration will not be treated as income if received from a relative. The term relative is defined also to include the spouse and parents of an individual. The gifts received from your husband and parents will, therefore, not be treated as your income and hence will not be taxable in your hands.

(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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