I have a short-term loss of Rs30,000 this year. I can show this as a loss for the current year. Next year, if I get a short-term capital gain of Rs40,000, can I subtract the loss from the gain and pay the remaining amount as tax for the next year? If yes, which parts of the forms do I need to update?
According to the provisions of the Income-tax Act, a short-term capital loss can be set off against both long-term and short-term gain, but the long-term loss can be set off only against long-term gain. Further capital loss cannot be set off from income under any other head. So, in case a capital loss is not fully set off in the same financial year, it can be carried forward to be set off against future gains. The loss can be carried forward for a maximum of eight assessment years immediately succeeding the assessment year for which the loss was first computed. Next year you can set off the current year’s loss from the gains under the head “capital gains” and pay tax on the remaining profit.
What is the tax status of single-premium insurance policies? I have taken a policy for Rs2 lakh and paid Rs35,000 single-premium policy premium.
Premium paid on single premium insurance policies does not per se qualify for deduction for the purpose of calculating income tax. Only 20% of the premium amount paid will qualify for deduction under section 80C of the Income-tax Act. In your case, only Rs7,000 will qualify for deduction from taxable income.
I teach at home and earn about Rs18,000 a month. Besides, I also earn from interest, capital gains and rental income. Please tell me (i) which income-tax form I should use, (ii) under which head the income from tuitions should be shown, and (iii) whether I need to submit any documents regarding income from tuitions with my tax returns.
You have to file your return of income in form No. ITR-2. The income from tuitions will be taxed under the head “income from business or profession”. While arriving at the net income under this head, you can also claim deduction for the expenses directly related to coaching, such as printing and photocopy of notes and stationery expenses. For this, you must keep a proper record of the receipts and expenses, although they are not required to be submitted with your income-tax returns. You will, however, have to attach a summary of your income and expenses in the form of profit and loss account with your returns.
MUTUAL FUND QUERIES
I want an SIP of Rs1 lakh per month in mutual funds. Please advise fund allocation for a 3-5-year period, taking into account an above-average risk appetite and an aggressive portfolio.
We suggest that you consider Birla Midcap, JM Emerging Equities, DSP Tiger and Birla Sun Life Equity Fund. While the first two are mid-cap funds, DSP ML Tiger is a thematic fund that invests in companies dealing in infrastructure. Birla Sun Life Equity Fund is a diversified equity fund that invests in companies across market capitalization. It’s the least risky among the four. Comparatively, it’s the most consistent fund.
Which is cheaper and simpler: buying mutual fund units from agents or directly from asset management companies?
Buying mutual fund (MF) units directly from the company is cheaper as direct MF investments exempt you from paying the 2.25% entry load that you would have to pay if you go through agents. This load of 2.25% is the commission that MFs pay to agents for procuring customers. However, investing directly in a MF may not be simpler. You need to visit the MF’s offices to procure forms, fill them up by yourself, and then go back to their offices to deposit them with your cheques. A good agent gives you sound advice consistently, desists from advising you to churn regularly, is prompt with service such as filling up forms, delivering them to you, and also getting them picked up, well in time to get them deposited at the fund’s offices. Going through such an agent makes things simpler and you wouldn’t mind paying the 2.25% entry load.
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