Ask Mint Money | You may be charged a penalty for non-filing of tax returns

Ask Mint Money | You may be charged a penalty for non-filing of tax returns

My parents gifted me some shares bought over 10 years ago. I plan to sell some of the shares to meet my short-term needs. Do I have to pay any capital gains tax? If yes, then tell me if it will be calculated on the original price of the shares or on the value after they were transferred to me?

—Swapnil Sharma

As per the provisions of section 2 (42A) of the Income-tax Act, the period of holding of a gifted capital asset includes the period for which the asset was held by the previous owner. Hence in your case owing to the 10-year holding period, the shares shall qualify as a long-term capital asset and if securities transaction tax (STT) is payable by you on their sale proceeds, then the gain arising from the sale of such shares shall be exempt. However, if STT is not payable on their sale (owing to the shares not being sold through a recognized stock exchange), then tax on long-term capital gain shall be applicable.

Also, as per section 49, while calculating the capital gain on such gifted capital asset, cost of acquisition of the asset shall be deemed to be the cost for which the same was acquired by the previous owner.

I don’t have any other income apart from my salary. I have Form 16 from my employer for the last four years but I have never filed returns. What will be the consequences and whether I will face any kind of problem in getting a loan in the future?

—Bhaskar Sen

It seems that your employer has been withholding taxes on your salary income for the past four years and in lieu, has been issuing you the Form 16.

As taxes were withheld from your salary income during all the four previous years, it appears that your total income in all these years exceeded the maximum exemption limit as prescribed under law. As per the provisions of section 139(1) of the Income-tax Act, every person whose total income exceeds the maximum amount not chargeable to tax is required to file tax returns with respect to that year.

Though you may not have defaulted in payment of any tax during these four fiscal years (owing to taxes being withheld by the employer), still you may be charged a penalty of 5,000 (for each fiscal year) for non-filing of income-tax return within one year from the end of the relevant fiscal year under section 271F.

However, you can still look forward to filing a belated tax return for FY09 (last due date being 31 March 2011) and FY10 and save the probable penalty consequence for these two fiscals. This would also aid you in procuring a loan as is normally urged by the bankers who feel comfortable in disbursing loan based on the acknowledgement of your previous year’s tax returns.

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