Readers' Corner: Taxation

Kuldip Kumar is a partner and leader personal tax, PwC India, answers your question

I did not claim some of the income tax deductions in the last two years. Can I claim them this year?
 
Income tax return is filed on a year-by-year basis. Hence, any deductions for any particular year are generally required to be claimed against income of that particular year. Income tax deductions are based on payments made, investments done, or expenditures incurred and hence are required to be claimed in that relevant year. Therefore, you will not be able to claim the income tax deductions which you missed during the past two years while filing this year’s return.
 

However, you have an option to revise the original return provided it was filed within the due date and assessment for that year is not completed. Further, the original return can be revised within two years.
 

For example, the tax return for the financial year 2014-15 can be revised latest by March 31, 2017 and for the year 2015-16 by March 31, 2018. However, if you did not file the past returns within the prescribed due date, you are not permitted to revise such belated returns to claim the deductions you failed to claim earlier. It may be noted that this year the Budget has proposed to restrict the revision of return to one year. This will apply to tax filings for the future years.

 
I am a salaried person. I invest regularly in the stock markets. How should I show the gains from selling stocks in my tax returns? I have made short-term gains in some of my investments.
 
Gains realised from sale of stocks are taxed under the head capital gain. Taxability depends on the holding period of shares. If shares are held for more than 12 months the resultant gain is long-term capital gain (LTCG) and is exempt from tax, provided Securities Transaction Tax (STT) was paid on it.
 
This year the Budget has proposed that LTCG exemption will not be available (subject to certain exceptions) if no

 
STT was paid at the time of purchase of listed shares acquired after October 1, 2004.
 
If the holding period is less than 12 months the resultant gain will be short-term capital gain (STCG) and will be subject to tax at 15 per cent. You are required to include the details of sale of shares in Schedule CG of the return form.
 
You may note that if you have sold many shares, you first need to segregate the gains under the two categories, that is, long-term and short-term. In this process, if on certain shares falling under any particular category (long-term or short-term) you made a loss, you can set off that loss against profits made on others shares falling in that particular category (long term or short term). In other words, you cannot adjust long-term capital loss against short-term capital gains.

 
Further, if there is a LTCG which is exempt from tax, it is still required to be included in the return and that also goes to the exempt income schedule. Though such long-term capital gains (LTCG) are not taxable, they need to be considered for determining the tax filing requirement threshold. So, one may end up filing a tax return even though the taxable income is below the taxable threshold limit of Rs 2.5 lakh, if after including the exempt LTCG income exceeds Rs 2.5 lakh. 

The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in