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Dividends from equities are tax-free for investors
May, 15th 2019

We sold a jointly-owned residential flat which was purchased in 1991. The sale agreement, signed March 30, 2019, was registered on April 1, 2019. The buyer has paid almost 80% of the amount in March 2019, before signing on the sale agreement. The balance would be paid this month. My queries are:

(a) In which year would the long term capital gain arise? (b) Since we plan to buy a property, we would deposit the amount received from sale in a Capital Gains Account Scheme to avail of Section 54 benefit. If the gain arises in FY20, we have time till July 31, 2020. We would like to deposit the entire capital gain under the scheme in June 2019 itself. Can we do that? (c) Can we deposit an amount higher than the actual capital gain in the Capital Gain Account Scheme? (d) How would the TDS deducted by the buyer be reflected in the IT return for FY2018-19 (AY2019-20)? (e) Can we claim the said TDS against our other tax liability for the said year or do we have to carry it forward to the next AY? — SURENDRA GANDHI

(a) From the facts of your case, I understand that the transfer of the residential flat has taken place on March 31, 2019. The registration of the document and deferral of the consideration has no relevance for determining the date of transfer. In your case the transfer will be complete in FY2018-19 corresponding to AY2019-20. You are obliged to deposit the amount in Capital Gain Accounts Scheme on or before your due date of filing the return for assessment year 2019-20.

(b) There is no maximum limit for investment in Capital Gain Accounts Scheme and hence you may at your option deposit an amount higher than the actual capital gain. However, the benefit will be available only to the extent of long term capital gains and the excess deposit amount will not have any additional advantage.

(c) As the capital gain is chargeable to tax in AY2019-20 you will be entitled to claim credit for TDS deducted by the buyer against the tax liability for AY2019-20. Buyer may deduct TDS upto 80% in FY2018-19 corresponding to AY2019-20 and 20% in FY2019-20 corresponding to AY2020-21, based on the payments made. You will still be entitled to claim credit for full TDS in AY2019-20 as the transfer is complete in FY2018-19 corresponding to AY2019-20.

Dividend earned from equity shares will be exempt in your hands. Interest from deposit will be chargeable to tax under the head ‘income from other sources’, however, as per newly inserted Section 80TTB any individual, aged 60 years and above can claim the deduction of up to Rs 50,000 of interest income from deposits. Therefore, you will be eligible to claim the deduction of Rs 12,000 under Section 80TTB of the Income Tax Act, 1961 for the interest income and no amount will be chargeable to tax. Long-term capital gains will be included in computing your total taxable income. You will not be eligible to claim deduction under Chapter VI-A for investment of Rs 1.5 lakh made in PPF against the said income. You will be able to take advantage of basic exemption limit of Rs 3 lakh. Hence, the chargeable longterm capital gains will be Rs 76,000. From the total tax payable you will be entitled to claim a rebate of Rs 5,000 under Section 87A of the Income Tax Act, 1961.

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