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Shares held for less than 12 months will be taxable as short term capital gains

The tax rate applicable on such gain under section 111A of the Income-tax Act, 1961, is 15%

I bought and sold some shares in equity, within a year of buying them. I made a profit of about Rs5,000. As per my understanding, 15% of this would be short-term capital gain tax. I used a third-party website to file my return. When I entered Rs5,000 in the capital gains tax column, it deducted 20%—as per my income tax slab. How can I resolve this issue? If I file my income tax return directly on the income tax e-filing website, will this issue get resolved?

—Name withheld

Gains arising from the sale of shares listed on a recognized stock exchange (where Securities Transaction Tax (STT) has been paid) will be taxable as short term capital gains if such shares have been held for less than 12 months. The tax rate applicable on such gain under section 111A of the Income-tax Act, 1961, is 15% (plus applicable surcharge and cess).

You will have to use either ITR 2 or ITR 3 (if you run a business as a proprietor) to report the short-term capital gains. The gain will need to be reported in Schedule CG and Schedule SI appropriately. You will need to download the relevant forms from the income tax e-filing website (incometaxindia.gov.in), fill them and upload the tax return form on the e-filing website.

I got married last year. My father gave me Rs6 lakh in fixed deposits as marriage gift. My total income last year was Rs5.30 lakh. How should I show this gift in my return?

—Manju Dhankhar

The fixed deposits gifted to you by your father on the occasion of your marriage are not treated as taxable income in your hands. The interest accruing in respect of such fixed deposits will however be taxable in your hands.

If your total taxable income exceeds Rs50 lakh, the deposits will also need to be reported in the ‘Assets and Liabilities Schedule’ in the return form filed by you.

In 1965, I purchased a property in Patna in my father’s name. The purchase money was paid by me, which had been recorded in the sale deed. Subsequently, the said property was allocated to my share after following the due process of law by the court of circle officer. It was also mutated in my name in the records of the circle office and I have been paying annual rent to the Government of Bihar. I expect to sell the above property for Rs1 crore. How can this be indexed for capital gains tax?

—Name withheld

The long term capital gain arising from the sale of an asset on or after 1 April 2017, should be computed with reference to the indexation of costs between 1 April 2001 and the year of sale.

Since your property was originally purchased in 1965, you may opt to use the fair market value (FMV) of the property as on 1 April 2001 as the cost of the property to compute the taxable capital gains. You may therefore obtain a valuation of this asset as on 1 April 2001 and use either such FMV as on 1 April 2001 or the actual purchase cost paid by your father or you.

Once you have opted to either use the FMV (the actual purchase cost), such value is then indexed based on the Cost Inflation Index applicable in the year of sale to determine the indexed cost of acquisition. The difference between the sale price and the indexed cost of acquisition would then be taxable as ‘long-term capital gain’.

The indexation of financial year of purchase for such property will be considered as 100 (being a property acquired before 1 April 2001). The indexation for the financial year of sale (assuming property sold in FY 17-18) is 272.

Parizad Sirwalla is partner (tax), KPMG. Queries and views at mintmoney@livemint.com

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