YOUR REQUESTS: INCOME TAX: You can adjust the basic exemption limit against LTCG / STCG

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You can discharge tax annually on accrued interest.

By Chirag Nangia

I am a B.Tech student and earn up to Rs 2 lakh on tuition fees and I have LTCG and STCG. Which RTI form should be filed? My income is less than Rs 2.5 lakh. Will I pay taxes on STCG if my LTCG is less than Rs 1 lakh?
—Nakul Dhal
Indian tax laws require individuals to necessarily provide income return only when their total gross income in a fiscal year exceeds the basic exemption limit. The exemption limit for the 2020-21 fiscal year for a person under the age of 60 is Rs 2.5 lakh. We assume that long-term capital gains (LTCG) / short-term capital gains (STCG) were generated from the sale of shares held as an investment.

Any LTCG on the transfer of listed shares, held for more than one year is taxed at a flat rate of 10%, if these gains are greater than Rs 1 lakh during a financial year and the tax on transactions on securities (STT) has been duly paid. On the other hand, STCGs are taxable at the slab rates applicable for individuals, however, the rate is 15%, if short-term capital gains result from the sale of shares listed on the stock exchange, on which STT has been paid. A resident individual has the right to adjust the basic exemption limit against LTCG / STCG, after making other income adjustments, if any.

The tax must be calculated separately under each heading and then aggregated to arrive at “total gross income”. If this gross total income (without requesting an exemption under section 80C / 80D, 54, etc.) does not exceed the basic exemption limit of Rs 2.5 lakh, you will not be required to file the tax return.

I retired in July 2019 at the age of 58, but I have not yet withdrawn the accumulated EPF corpus because it earns non-taxable interest. When will the tax on interest earned there start to be taxable so that I pay it accordingly as withholding tax for that year?
—MK Jain
According to a recent court ruling, interest on EPF up to the amount earned after retirement was considered taxable. This is because the exemption is only available to an employee. Once a person retires, they cease to be an employee; therefore, any interest earned attracts tax. Therefore, prudently, you can tax off the full amount of interest earned after retirement. You can discharge tax annually on accrued interest.

The writer is director, Nangia Andersen India. Send your questions to [email protected]

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