[binand]

Originally Posted by sunilch

How do you ofset LTCG tax?

As far as I know you can offset current year's capital gains only with either (a) current year's capital losses, or (b) previous years' capital losses that were carried forward. In particular, you cannot offset it with expected capital losses in future years.

Even then, there are several rules and constraints that require serious understanding.

I'd love to be proven wrong here. That there is some way for me to plan investments in such a way starting now so that my previously realised capital gains aren't taxed.

[SatJordan]

Originally Posted by sunilch

Question for Old hands:: How do you ofset LTCG tax? I had to clear my portfolio for personal reasons and now face a substantial LTCG tax in coming AY. How can I ofset it? Any investment vehicle that can help? (Similar to what we have for property based LTCG)

By coming AY, I am assuming it is AY 2021-22. LTCG can be set off only against any previous AY's long-term capital losses carried forward to the next assessment year. Sadly, there is no carry backward unlike foreign regulations. If you have any long-term capital loss that has been carried forward or you have incurred or expect to incur any long-term capital loss during the relevant AY, setting off is very much an important resort.

Having said that, LTCG arising on sale of any long-term capital asset other than residential house can be reduced, or even avoided, by investing the said gains in a residential house (either by way of purchase within one year before or two years after the date of transfer of your portfolio or by way of construction within a period of three years from the date of transfer of your portfolio) subject to a lock-in period of three years from the date of purchase or construction of the new residential house. Relevant provisions can be found in Section 54F of the Income Tax Act, 1961.

Claiming exemption under this section can reduce your gains up to the cost of investment (if the cost of investment in the new asset is higher than the net sale consideration of your portfolio) or as per the below calculation (if the cost of investment is lower than the net sale consideration of your portfolio).

Where the amount of sale consideration is X and the LTCG is Y and the cost of the new asset is Z, the exemption, say E, would be

E = [Y*(Z/X)]

However, this comes with conditions as below.

1. You should not have owned more than one house property (other than the new asset) as on the date of transfer of your portfolio, neither purchase, within one year from the date of transfer of your portfolio, nor construct, within three years from the date of transfer of your portfolio, a residential house and have rental income in respect of the same.

2. If you either purchase, within one year from the date of transfer of your portfolio, or construct, within three years from the date of transfer of your portfolio, a residential house, then the amount of exemption claimed shall be charged to Tax as LTCG in the year of such purchase or construction, as the case may be.

If unable to purchase or construct the new asset within the above period, you can approach a bank and deposit the amount in the relevant scheme (subject to its utilization within the above period) and file a proof of such deposit at the time of furnishing your return of income. If failed to utilize within the period as mentioned above, the amount of exemption so claimed as exceeds the amount which is utilized shall be treated as LTCG and offered to tax in the year in which the three years’ time expires.

Nevertheless, if you have not yet withdrawn your portfolio (assuming it to be equity shares or units of an equity-oriented fund or a unit of business trust where STT is paid on both purchase and sale of equity share and paid only at the time of sale of units or unit as mentioned here), plan it accordingly so that the LTCG does not exceed Rs. 100,000 during the year as it would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, subject to Basic Exemption Limit. The relevant provision is given under section 112A of the Act.

Note - No deductions can be claimed under Chapter VI A on capital gains.

I had to go in-depth for giving a comprehensive understanding. Hope this helps. Lastly, as the saying goes, a penny saved is a penny earned.

[sunilch]

Sorry by query was not detailed enough.

Originally Posted by SatJordan

By coming AY, I am assuming it is AY 2021-22.
...............
Nevertheless, if you have not yet withdrawn your portfolio (assuming it to be equity shares or units of an equity-oriented fund or a unit of business trust where STT is paid on both purchase and sale of equity share and paid only at the time of sale of units or unit as mentioned here), plan it accordingly so that the LTCG does not exceed Rs. 100,000 during the year as it would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, subject to Basic Exemption Limit. The relevant provision is given under section 112A of the Act.

I mean AY 2022-23. I was forced to empty my entire portfolio of equity shares due to personal reasons and it had to be done in this year itself. Moreover, doing it partially so as to limit my LTCG to 1L per year would have taken many many years. And no, I don't have any LTCL from past years that I can carry forward.

I have STCL for this FY and previous FY and that has got adjusted against my STCG for respective years. But nothing for LTCL :(

Having said that, LTCG arising on sale of any long-term capital asset other than residential house can be reduced, or even avoided, by investing the said gains in a residential house (either by way of purchase within one year before or two years after the date of transfer of your portfolio or by way of construction within a period of three years from the date of transfer of your portfolio) subject to a lock-in period of three years from the date of purchase or construction of the new residential house. Relevant provisions can be found in Section 54F of the Income Tax Act, 1961.

So this is what I wanted to know. Can I offset my LTCG Tax from equity by making investments Section 54F? I know this is mainly used for property related LTCG but nowhere I was able to find a strict rule/guideline stating that it can't be used to offset LTCG from equity. Reading your response, it seems perhaps I can make investments in REC bonds to offset my LTCG tax?

However, this comes with conditions as below.
1. You should not have owned more than one house property (other than the new asset) as on the date of transfer of your portfolio, neither purchase, within one year from the date of transfer of your portfolio, nor construct, within three years from the date of transfer of your portfolio, a residential house and have rental income in respect of the same.

This is a bummer :(

Note - No deductions can be claimed under Chapter VI A on capital gains.

I hope this is only for that particular FY in which I am claiming the tax deduction for investing in say REC bonds or purchase a property to offset my LTCG?

[SatJordan]

Originally Posted by sunilch

Sorry by query was not detailed enough.

I mean AY 2022-23.

The provisions for AY 2022-23 have not been announced yet, though the capital gains provision remains majorly unchanged Y-o-Y. So, you may consider the existing provisions to apply without any major changes for the next AY.

Originally Posted by sunilch

So this is what I wanted to know. Can I offset my LTCG Tax from equity by making investments Section 54F? I know this is mainly used for property related LTCG but nowhere I was able to find a strict rule/guideline stating that it can't be used to offset LTCG from equity. Reading your response, it seems perhaps I can make investments in REC bonds to offset my LTCG tax?

I think you got me wrong. For claiming exemption by investing in REC bonds, the asset sold should be either land or building or both. In your case, it is your portfolio of equity shares. So, I am afraid REC bonds don't come into the picture.

Originally Posted by sunilch

I hope this is only for that particular FY in which I am claiming the tax deduction for investing in say REC bonds or purchase a property to offset my LTCG?

Please note that for claiming exemption by making an investment in REC bonds, the capital asset sold should be either land or building or both which is not the case here. The relevant provision is given under Section 54EC of the Act. Also, a deduction is different than an exemption. When I refer to deduction, it usually includes your LIC premiums, donations, PF contributions, health insurance and so on which are reduced from the taxable income. Exemption is when the income is not offered to tax at all, that is to say, part or whole of that income is not added to your taxable income at all at the time of IT Computation.

Hope this clarifies.

[Fx14]

Originally Posted by SatJordan

plan it accordingly so that the LTCG does not exceed Rs. 100,000 during the year as it would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, subject to Basic Exemption Limit. The relevant provision is given under section 112A of the Act.

Is there a maximum cap on the LTCG amount that would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, or is it a flat rate of 10% irrespective of the amount of LTCG?

For Eg. If a person has only LTCG of say Rs. 14 Lakh, what would be the correct rate of tax for computation ? :
a. 10% on Rs. 13 Lakhs (14 Lakh minus 1 Lakh).
b. 10% on Rs. 10.5 Lakhs (14 Lakh minus 1 Lakh minus 2.5 Lakh Basic Exemption).
c. Upto 30% basis the IT slabs since the total LTCG exceeds 10 Lakhs.

[sunilch]

Originally Posted by Fx14

Is there a maximum cap on the LTCG amount that would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, or is it a flat rate of 10% irrespective of the amount of LTCG?

For Eg. If a person has only LTCG of say Rs. 14 Lakh, what would be the correct rate of tax for computation ? :
a. 10% on Rs. 13 Lakhs (14 Lakh minus 1 Lakh).
b. 10% on Rs. 10.5 Lakhs (14 Lakh minus 1 Lakh minus 2.5 Lakh Basic Exemption).
c. Upto 30% basis the IT slabs since the total LTCG exceeds 10 Lakhs.

Its flat at 10% currently. No tiering and no indexation.

[SatJordan]

Originally Posted by Fx14

Is there a maximum cap on the LTCG amount that would attract tax at the rate of 10% on the amount in excess of Rs. 1,00,000, or is it a flat rate of 10% irrespective of the amount of LTCG?

For Eg. If a person has only LTCG of say Rs. 14 Lakh, what would be the correct rate of tax for computation ? :
a. 10% on Rs. 13 Lakhs (14 Lakh minus 1 Lakh).
b. 10% on Rs. 10.5 Lakhs (14 Lakh minus 1 Lakh minus 2.5 Lakh Basic Exemption).
c. Upto 30% basis the IT slabs since the total LTCG exceeds 10 Lakhs.

It will be a flat 10% without any ceiling limit after giving effect to the Basic Exemption Limit. That is if a person has only LTCG income of Rs. 14 lakhs, the tax would be 10% on Rs. 10.5 lakhs (b in your case)

[concorde24]

Wanted to check if anyone has successfully used the ITR Desktop utility for filling Sec 112A?

For those people who did multiple transacation (especially with dividend reinvestment), it is really a pain to fill every transaction/ISIN level. I did generate the CG statements from CAMS (excel) and Karvy (PDF). The desktop utility has an option to upload the csv, but every time it is parsed with errors.

Please do share any tips/shortcuts for processing multiple LTCG entries to Desktop utility

[dailydriver]

Query: For an individual with Income from Salary and Short Term Capital Gains, would ITR2 be the right option?

Rant: What is it with the new income tax e filing website? Such brouhaha over a completely unnecessary template change that is sure to distance the individual tax filer from the process. Tax professionals will be happy though.

[SatJordan]

Originally Posted by dailydriver

Query: For an individual with Income from Salary and Short Term Capital Gains, would ITR2 be the right option?

Rant: What is it with the new income tax e filing website? Such brouhaha over a completely unnecessary template change that is sure to distance the individual tax filer from the process. Tax professionals will be happy though.

Yes, you are right. ITR-2 would be the right option for individuals having income from salary and capital gains, as ITR-2 is for individuals and HUFs not having income from profits and gains of business or profession. Therefore, ITR-2 would be applicable as the incomes mentioned neither meets the criteria for the applicability of any other ITR nor for the non-applicability of ITR-2.

[CosmicWizard]

Have a couple of questions, any idea:

• I have carry forward LTCL losses from 2018 on debt fund losses. This year, I have LTCG on both equity (taxed at 10%) and debt funds (taxed at 20% post indexation) that I want to offset against. How can I choose which LTCG to offset against? Given that tax on LTCG of debt funds is 20%, it makes sense to offset against that but cleartax seems to have no option to select.

• Can a carry forward LTCL on equity (taxed at 10%) be used to offset LTCG on debt funds (taxed at 20%)? If yes then that seems like a loophole, no?

• Thanks to my systematic withdrawal plan, I have huge number of transactions to enter. Cleartax seems to indicate that I can lump them together into 2 STCG, LTCG buckets but what should be the date of sale for that bucket? How will section 234c interest be calculated for this lumped together trade?

[saket77]

Anyone filed individual- salaried ITR for FY 20-21 on the new portal? I tried so many times using ITR2(?) but every time ended up with an error like page not found, page hanging up etc. Also the website is feeling too clumsy, unorganised and confusing. The previous portal feels like pinnacle of programming compared to this one.
Bottom line, even after trying so many times, I’m not yet able to file the tax return.

[whitewing]

Got a unexpected bonus from the IT Dept. An incorrect IT demand from 2008-09 which I'd been contesting since 10 years seems to have been processed and a refund initiated. I say "seems" to be processed because, I have received no communication on this from IT dept. In the new portal, I'm unable to download the closure order for the grievance raised - I get a "server error".
The bank account however is credited with - the transaction remark is like "ACH/<PAN NUM>-AY2008-09/CE<nnnn>". The amount as well is in excess of amount what I'd paid- I suppose they have paid some interest on this as well.

Originally Posted by saket77

Anyone filed individual- salaried ITR for FY 20-21 on the new portal? I tried so many times using ITR2(?) but every time ended up with an error like page not found, page hanging up etc.
...

I have been trying, in vain, to download the offline utility since days - this simply does not proceed - no error, no feedback.
You seem to be one step ahead, you have managed to fill the ITR2 :-)
How did you manage to download the utility ?

[BRV]

Originally Posted by saket77

Anyone filed individual- salaried ITR for FY 20-21 on the new portal? I tried so many times using ITR2(?) but every time ended up with an error like page not found, page hanging up etc. Also the website is feeling too clumsy, unorganised and confusing. The previous portal feels like pinnacle of programming compared to this one.
Bottom line, even after trying so many times, I’m not yet able to file the tax return.

Managed to file the returns successfully in the new portal on 25th June. No hiccups navigating the site and its almost similar to previous version except for change in UI

PS: ITR1 filed. Am salaried.

[GreyNomad]

Hi, I’m a noob at personal financial management. Hence I have always used a CA for the same. But one of the fallout’s of covid has been that he has had to wind up his practice and joking a job that is quite demanding. Ergo, I’m on the lookout for a new CA.
Does anyone here provide/use CA services for filing of IT returns? If yes, any suggestions for a mumbai based CA?