Concessional Rate Of 15% Tax On STCG Only Available On Shares, Equity Mutual Funds

I have recently sold a flat which I had bought last year. Can I pay short-term capital gains (STCG) tax at 15 per cent on the profits made on the sale instead of adding it to my yearly income? Can I calculate gain after deducting the indexed cost using cost inflation index (CII)?

Answer: The benefit of concessional rate of tax at 15 per cent on STCG is only available for listed equity shares and units of equity-oriented schemes of mutual funds on which securities transaction tax (STT) has been paid. For all other capital assets, the STCG will be treated like your regular income and will be clubbed with your regular income and taxed at the rates applicable on your total income.

In your case, since the capital gains arose on the sale of an asset other than the equity products mentioned above, you will have to pay the tax at the rate applicable to your income slab.

The benefit of indexation is available only on sale of long-term capital assets other than listed equity shares and schemes of equity mutual fund. Since you have sold your house before the completion of 24 months’ period required to make it a long-term capital asset, you are not entitled to avail of the benefit of indexation either.

In addition to the regular equated monthly instalment (EMI) on my home loan, I have also prepaid an extra sum of Rs 50,000 to the builder against the outstanding home loan. Can I avail of Section 80C benefit for this extra payment of Rs. 50,000?

Answer: Section 80C of the Income-tax Act, 1961 allows deduction for repayment of principal amount of home loan taken for buying a residential house. However, it does not differentiate between payment through regular EMI and lump sum payment. So, you are entitled to claim the extra payment of Rs. 50,000 made against your outstanding home loan within the overall limit of Rs. 1.50 lakh prescribed under Section 80C along with other eligible items.

Do note that in case you opt for the new tax regime, you will not be able to claim any deduction under Chapter VIA, including those under Section 80C.

I am a retired person and stay in a rented house for which I pay a rent of Rs 4,000 per month. Can I avail of any tax deduction on the rent paid like any other salaried employee?

Answer: All individuals who are paying rent but are not in receipt of house rent allowance (HRA) claim deduction under Section 80 GG of the Income-tax Act, 1961. This deduction is available to any person who is paying rent whether working or retired.

You can claim deduction in respect of the rent paid by you in excess of 10 per cent of your total income subject to a maximum of 25 per cent of your total income.

However, in no case the deduction so calculated should exceed Rs. 5,000 per month. Also, deduction under Section 80GGA can be claimed only if you, your spouse and any minor children, and the Hindu Undivided Family (HUF) of which you are member does not own a house at the place where you are paying rent or has any house kept for your own occupation at any other place.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)