Salaried Taxpayee can claim disability u/s. 80U upto Rs. 125000/- for A.Y. 2017-18

Deductions in respect of a person with disability (section 80U)

Under section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of Rs 75,000/-.  However, where such individual is a person with severe disability, a higher deduction of Rs 1,25,000/- shall be allowable.

DDOs should note that 80DD deduction is in case of the dependent of the employee whereas 80U deduction is in case of the employee himself. However, under both the sections, the employee shall furnish to the DDO the following:
1. A copy of the certificate issued by the medical authority as defined in Rule 11A(1) in the prescribed form as per Rule 11A(2) of the Rules. The DDO has to allow deduction only after seeing that the Certificate furnished is from the Medical Authority defined in this Rule and the same is in the form as mentioned therein.
2. Further in cases where the condition of disability is temporary and requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority as in 1 above and furnished before the DDO.
3. For the purposes of sections 80DD and 80 U some of the terms defined are as under:-
(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 ;
(b) “dependant” means—

• in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;
• in the case of a Hindu undivided family, a member of the Hindu undivided family, dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year;

(c) “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 and includes “autism”, “cerebral palsy” and “multiple disability” referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;
(d) “Life Insurance Corporation” shall have the same meaning as in clause (iii) of sub-section (8) of section 88;
(e) “medical authority” means the medical authority as referred to in clause (p) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or such other medical authority as may, by notification, be specified by the Central Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;
(f) “person with disability” means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;
(g) “person with severe disability” means—

• a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995; or
• a person with severe disability referred to in clause (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;

(h) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002.

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Download Taxation Laws (2nd Amendment) Bill-2016

Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill. 

Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs.1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India.

Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.

In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

An overview of the amendments proposed in the Bill are placed below;

Download 2nd Amendment Bill 2016 - Taxation Laws Click Here.

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Pay 50% Tax in Pradhan Mantri Yojana and escape from all explanation of Deposits

No need to explain source of deposits taxable at 50% under Pradhan Mantri Yojna

The Government has announced demonetization of existing currency of Rs. 500/1000 with effect from the 9th November, 2016. However, concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 ('Act') could possibly be used for concealing black money. So, the Government has introduced Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha to amend the provisions of Income-Tax Act.

The Government has announced Pradhan Mantri Garib Kalyan Yojana 2016 (PMGKY) in the Taxation Laws (Second Amendment) Bill, 2016. As per this PMGKY black money deposited in banks or held in cash can be offered for taxation at 49.9% (i.e., 30% tax, 9.9% surcharge and 10% penalty).

The Revenue Secretary, Hasmukh Adhia said that Income-tax department will not ask for the source of funds deposited in banks if the entire income is declared under PMGKY.

It would be the last chance to come clean for black money holders. Any detection of black money by AO thereafter (other than search cases) would attract 83.25% tax.

From bare reading of this statement of Revenue Secretary, doubts arise as to whether any corrupt official or corrupt member of political party or any criminal can also come clean by paying 49.90% tax under PMGKY.

No, any criminal or corrupt person cannot avail of benefit of this PMGKY as he is specifically excluded from purview of PMGKY.

Doubts also arise as to how Government will come to know that any corrupt person or any criminal is offering income under PMGKY as Income-Tax Act Dept. will not ask for source of funds deposited in banks?

Even if we assume that any corrupt person or any criminal has availed of benefit of this PMGKY, then also benefit of such PMGKY will be denied when such fact comes to notice of the dept. In that scenario, action will be taken under respective provision of IPC and Prevention of Corruption Act and that person will be liable to pay tax at 83.25%.

Source: TAXMANN

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Salaried Employee Know your Tax Liability for Asstt. Year 2017-18.

Are you Central Government, State Government or Public Sector Employee earn monthly salary but, not understand how to deduct tax as TDS from Salary each month.  To know Income Tax Basics for Salaried Individuals, which are as below:

• What Income you taxed for?
• How much tax do you have to pay?
• What is Form 16?
• What is Form 26AS?
• How can you bring down taxable income with deductions?
• Do you have to file an Income Tax Return?

Before, Tax Calculation Salaried Employee must know about Salary Component, monthly pay will show your Gross Salary and Deductions and then after Home Take Salary.  The major factor of Salary are as follows:

• Basic Salary (including Grade Pay or other)
• House Rent Allowances
• Conveyance Allowance
• Special Allowance
• Traveling Allowance
• City allowances
• Other Allowances etc.

Now the big Question is that, How much Tax do you have to pay?

Add you all Income from the above heads. This is your Gross Income and from them deduction under section 80 are allowed to be claimed for exemption.

Know you Tax Liability for Asstt. Year 2017-18 (Click Here)

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Calculate Advance Tax, Download Challan and Pay Tax of Last Quarter on or before 15th March-15

Just starts the month of March. All taxpayee known this month is financial year end month.  Therefore Taxpayee wants to pay all due taxes in this month.  An Advance Tax due date for last quarter is 15th March of  non-corporate cases (Non-Company) and Corporate Case (Company) paid Advance Tax today.

Do you Know what is Advance Tax?
Tax payers whose total income is likely to be chargeable to tax for the assessment year are required to pay tax in advance during the financial year (April 1 to March 31) on their estimated current income, which will be assessable to tax during the next following financial year called assessment year. The current income for this purpose means the total income which will be chargeable to tax in the relevant assessment year.

The advance tax payable is the tax on the current income minus the tax deductible at source or collectible out of any income included in the current income.

What are the Due Dates and How to Calculate Advance Tax ?
The following chart helps you to knowing the due dates to pay Advance Tax and its Calculation.

Example:
If the Tax payee pays Gross Total Tax in whole year for A.Y. 2015-16 i.e. Rs. 100000.00 then;

ADVANCE TAX CHART	Gross Income Tax	Rs. 100000.00
For Non Corporate Cases (Non-Company)	Rates	Amount of Tax (Rs.)
15th Sep	30%	30000
15th Dec	30%	30000
15th Mar	40%	40000
For Corporate Cases (Company)	Rates	Amount of Tax (Rs.)
15th June	15%	15000
15th Sep	30%	30000
15th Dec	30%	30000
15th Mar	25%	25000

Free Download Advance Tax Challan.

The Income Tax Challan payment through e-Payment facilitates and payment of direct taxes online by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account with any of the Authorized Banks.

Easy Procedure to pay Income Tax Payment by " e-payment " :

1. To pay taxes online the taxpayer will select the relevant challan i.e. ITNS 280, ITNS 281, ITNS 282 or ITNS 283, as applicable.

2. Enter its PAN / TAN as applicable. There will be an online check on the validity of the PAN / TAN entered.

3. If PAN/ TAN is valid the taxpayer will be allowed to fill up other challan details like accounting head under which payment is made, name and address of TAN and also select the bank through which payment is to be made, etc.

4. On submission of data entered a confirmation screen will be displayed. If the taxpayer confirms the data entered in the challan, it will be directed to the net-banking site of the bank.

5. The taxpayer will login to the net-banking site with the user id/ password provided by the bank for net-banking purpose and enter payment details at the bank site.

6. On successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.

Calculate Advance Income Tax Liability (Click Here)

SELECT APPLICABLE CHALLAN

CHALLAN NO./ITNS 281 (Tax Deducted at Source / Tax Collected at Source (TDS/TCS) from corporates or non-corporates)

CHALLAN NO./ITNS 280 (payment of Income tax & Corporation Tax)

CHALLAN NO./ITNS 282 (payment of Security Transaction Tax, Hotel Receipts Tax, Estate Duty, Interest Tax, Wealth Tax, Expenditure Tax /Other direct taxes & Gift tax)

CHALLAN NO./ITNS 283 (payment of Banking Cash Transaction Tax and Fringe Benefits Tax)

Know more about e-Tax Payment

For Bank Contact Details Click Here

Select your e-Tax Payment Authorised Banks Click Here

What is e-Tax Payment System ? Click Here

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No TDS liability of bank under sec. 194A on interest accrued on Fixed Deposit

IT: Where litigant deposit FD with the bank on directions of Court, he ceased to have any control or proprietary right over those funds. Although FD was drawn in the name of the Registrar General, he was neither the recipient of the amount credited to that account nor the interest accruing thereon. There was no assessee to whom interest income from the FD could be ascribed, thus, bank was not liable to deduct tax under section 194A on interest accrued on such FD.

Facts:
(a)           The petitioner ('UCO Bank') accepted a Fixed Deposit ('FD') made by litigant as per directives of the Court. The bank did not deduct tax on accrued interest on such FD as it was in name of Register General of Court as custodian and the actual beneficiaries were not known, as the matter was sub-judice.
 

(b)           Thus, the issue that arose for consideration of the High Court was:
          • Whether the bank would be liable to deduct tax under section 194A on interest accrued on such FD where the assessee was not ascertainable and the person in whose name the interest was credited was also not a person liable to pay tax under the income-tax Act ('the Act')?

The High Court held in favour of assessee as under:
(1)           The words "credit of such income to the account of the payee" occurring in section 194A of the Act necessarily imply that deduction of tax bears nexus with the income of an assessee. In absence of an assessee, the machinery provisions for deduction of tax to his credit were ineffective. The expression "payee" under section 194A of the Act would mean the recipient of income whose account was maintained by the person paying interest.
 

(2)           In the instant case, although FD was made in the name of the Registrar General, the account represented funds which were in custody of the Court and the Registrar General was neither the recipient of the amount credited to that account nor the interest accruing thereon. Thus, the Registrar General could not be considered as payee for the purpose of section 194A of the Act.
 

(3)           There was no assessee to whom interest income from the FD could be ascribed; no person could file return claiming the interest payable by bank as income. The machinery provisions of recovering tax by deduction of tax at source would not be applicable in absence of an ascertainable assessee.
 

(4)           The litigant who was asked to deposit the money in the court ceased to have any control or proprietary right over those funds. The amount deposited vested in the Court and the depositor ceased to exercise any dominion over those funds. It was also not necessary that the litigant who deposited the money would be the ultimate recipient of income. The person to whom funds would be granted was to be determined by orders passed subsequently. Thus, petitioner-bank was not required to deduct tax under section 194A on interest accrued on FD made by the litigant.

Source: www.taxmann.com

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Tax Liability on Retirement/Superannuation i.e. Leave Encashment & Other amount.

I would like to share important information regarding tax liability on amount received after retirement/superannuation i.e. leave encashment and other.   Let us have a look at the basic provision related to taxability of leave salary. Leave salary, also known as leave encashment, means that employee will receive the cash for leaves which are not taken by the employees. The leave encashment received during the service period is taxable for all the employees as per the income tax slab applicable to the employee. However, the tax treatment is different for the leave encashment received at the time of retirement/ superannuation. Further, the tax treatment is different for Government employee (Central or State) vis a vis  Non –Government employee as under:  

In the case of Central/ State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is fully exempt from tax u/s 10(10AA)(i). 

In the case of Non-Government employee (i.e., the employee other than an employee of the Central Government or a State Government) leave salary is exempt from the tax u/s 10(10AA) (ii) to the extent of the least of the following:

• Cash equivalent of the leave salary in respect of the period of earned leave to the credit of an employee only at the time of retirement whether on superannuation or otherwise (earned leave entitlement cannot exceed 30 days for every year of actual service rendered for the employer from whose service he has retired): or
• 10 month “Average Salary” or
• The amount not chargeable to tax as specified by the Government. (Presently, Rs. 3 Lacs has been specified).
• Leave encashment actually received at the time of retirement.
  
  

Average salary, as mentioned above, is to be calculated on the basis of average salary during the period of 10 months immediately preceding the retirement/ superannuation.

        ”Salary” here means basic salary & includes dearness allowances if term of employment so provided. It also includes commission based on a fixed percentage of turnover achieved by an employee as per term of contract of employment but excludes all other allowances & perquisites.

Now, with above basic brief up about taxability of leave salary, the opinions on the issue raised in your queries are as under:

1. Leave salary received at the time of retirement is exempt only in the hands of State or Central Government employee. It will not be exempt in the hands of the employee of PSU or Local Authorities. The definition of “Government Employee” is not specifically given in the Income Tax Act-1961. However, the Act has specifically incorporated the PSU employees, Government undertaking employee, Local Authorities employees etc in various other Sections / clauses in the Income Tax Act-1961 where the benefit is meant to be conferred to them. The same is not there in Section 10(10AA).
2. The Leave Salary is taxable under the head “Income from Salary”. The Salary Income is taxable in the year in which it has accrued or in the year in which it is received, whichever is earlier. Accordingly, the leave encasement is taxable as income of the FY 2012-13 and not FY 2013-14.

TAXABILITY OF LEAVE SALARY AT A GLANCE:

S.No.	Particulars	Tax Treatment
A]	Encasement of leave during service	It is charged to tax.
B]	Encasement of leave at the time of retirement
	1. If Central or State Government Employees	Fully exempt from tax u/s 10(10AA)(i)
	2. For any other employees	Lease of the following is exempt: 1. Earned leave months x Average salary 2. Avg. monthly salary x 10 3. Maximum amount Rs. 3,00,000/- 4. Actually received

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Tax Liability and Exmptions after retirement/superannuation.

On the matter of tax exemption or liability after retirement / superannuation let us have a look at the basic provision related to tax-ability of leave salary.  Leave salary, also known as leave encashment, means that employee will receive the cash for leaves which are not taken by the employees. The leave encashment received during the service period is taxable for all the employees as per the income tax slab applicable to the employee. However, the tax treatment is different for the leave encashment received at the time of retirement/ superannuation. Further, the tax treatment is different for Government employee (Central or State) vis a vis  Non –Government employee as under:  

·    In the case of Central/ State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is fully exempt from tax u/s 10(10AA)(i). 

·    In the case of Non-Government employee (i.e., the employee other than an employee of the Central Government or a State Government) leave salary is exempt from the tax u/s 10(10AA) (ii) to the extent of the least of the following:

1.      Cash equivalent of the leave salary in respect of the period of earned leave to the credit of an employee only at the time of retirement whether on superannuation or otherwise (earned leave entitlement cannot exceed 30 days for every year of actual service rendered for the employer from whose service he has retired): or 
2.       10 month “Average Salary” or
3.       The amount not chargeable to tax as specified by the Government. (Presently, Rs. 3 Lacs has been specified).
4.       Leave encashment actually received at the time of retirement.

Average salary, as mentioned above, is to be calculated on the basis of average salary during the period of 10 months immediately preceding the retirement/ superannuation.
”Salary” here means basic salary & includes dearness allowances if term of employment so provided. It also includes commission based on a fixed percentage of turnover achieved by an employee as per term of contract of employment but excludes all other allowances & perquisites.

Now, with above basic brief up about taxability of leave salary, the opinions on the issue raised in your queries are as under:

1.     Leave salary received at the time of retirement is exempt only in the hands of State or Central Government employee. It will not be exempt in the hands of the employee of PSU or Local Authorities. The definition of “Government Employee” is not specifically given in the Income Tax Act-1961. However, the Act has specifically incorporated the PSU employees, Government undertaking employee, Local Authorities employees etc in various other Sections / clauses in the Income Tax Act-1961 where the benefit is meant to be conferred to them. The same is not there in Section 10(10AA).

2.     The Leave Salary is taxable under the head “Income from Salary”. The Salary Income is taxable in the year in which it has accrued or in the year in which it is received, whichever is earlier. Accordingly, the leave encashment is taxable as income of the FY 2012-13 and not FY 2013-14.

TAXABILITY OF LEAVE SALARY AT A GLANCE:

S.No.	Particulars	Tax Treatment
A]	Encashment of leave during service	It is charged to tax.
B]	Encashment of leave at the time of retirement
	1. If Central or State Government Employees	Fully exempt from tax u/s 10(10AA)(i)
	2. For any other employees	Lease of the following is exempt: 1. Earned leave months x Average salary 2. Avg. monthly salary x 10 3. Maximum amount Rs. 3,00,000/- 4. Actually received

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Taxation of Leave Salary / Leave Encashment.

Leave salary, also known as leave encashment, means that employee will receive the cash for leaves which are not taken by the employees. The leave encashment received during the service period is taxable for all the employees as per the income tax slab applicable to the employee. However, the tax treatment is different for the leave encashment received at the time of retirement/ superannuation. Further, the tax treatment is different for Government employee (Central or State) vis a vis  Non –Government employee as under:  

·   In the case of Central/ State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is fully exempt from tax u/s 10(10AA)(i). 

·      In the case of Non-Government employee (i.e., the employee other than an employee of the Central Government or a State Government) leave salary is exempt from the tax u/s 10(10AA) (ii) to the extent of the least of the following:
i] Cash equivalent of the leave salary in respect of the period of earned leave to the credit of an employee only at the time of retirement whether on superannuation or otherwise (earned leave entitlement cannot exceed 30 days for every year of actual service rendered for the employer from whose service he has retired): or
ii] 10 month “Average Salary” or
iii] The amount not chargeable to tax as specified by the Government. (Presently, Rs. 3 Lacs has been specified).
iv] Leave encashment actually received at the time of retirement.
Average salary, as mentioned above, is to be calculated on the basis of average salary during the period of 10 months immediately preceding the retirement/ superannuation.
”Salary” here means basic salary & includes dearness allowances if term of employment so provided. It also includes commission based on a fixed percentage of turnover achieved by an employee as per term of contract of employment but excludes all other allowances & perquisites.

Now, with above basic brief up about taxability of leave salary, the opinions on the issue raised in your queries are as under:

1.      Leave salary received at the time of retirement is exempt only in the hands of State or Central Government employee. It will not be exempt in the hands of the employee of PSU or Local Authorities. The definition of “Government Employee” is not specifically given in the Income Tax Act-1961. However, the Act has specifically incorporated the PSU employees, Government undertaking employee, Local Authorities employees etc in various other Sections / clauses in the Income Tax Act-1961 where the benefit is meant to be conferred to them. The same is not there in Section 10(10AA).

2.      The Leave Salary is taxable under the head “Income from Salary”. The Salary Income is taxable in the year in which it has accrued or in the year in which it is received, whichever is earlier. Accordingly, the leave encashment is taxable as income of the FY 2012-13 and not FY 2013-14.

TAXABILITY OF LEAVE SALARY AT A GLANCE:

S.No.	Particulars	Tax Treatment
A]	Encashment of leave during service	It is charged to tax.
B]	Encashment of leave at the time of retirement
	1. If Central or State Government Employees	Fully exempt from tax u/s 10(10AA)(i)
	2. For any other employees	Lease of the following is exempt: 1. Earned leave months x Average salary 2. Avg. monthly salary x 10 3. Maximum amount Rs. 3,00,000/- 4. Actually received

Source: The Hitwada News Paper

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Do you Calculate TDS Liabilities for Asstt. Year 2014-15 ?

After declaration Budget and cleared the Income Tax Exemption Limit by Finance Minister for Asstt. Year 2014-15, there are many Income Tax Calculators are available on internet.  Some are available  condition of pay and some are on non-pay.  Free Income Tax calculators are calculate Tax on Taxable Income.  This Income Tax Calculator is for Salaried Employee for Assessment Year 2014-15 i.e. Financial Year 2013-14 along with Salary Statement Month-wise. All salaried Employee enjoying Dearness Allowance is 80% and from July-2013 may increase by 10%, thus I already cleared in our TDS/Income Tax Calculator. This calculator benefited you to calculator your Income Tax and Deduct the TDS Monthly from your Salary as per Income Tax Rules.

Income Tax Liability For Asstt. Year 2014-15

Download Tax Calculator For. A. Y. 2014-15  (Click Here)
Form 16 Utility (A.Y. 2013-14) Free Download (Click Here)

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All about Capital Losses and Tax Liabilities.

It's never fun to lose money in an investment, but declaring a capital loss on your tax return can be an effective consolation prize in many cases. Capital losses have limited impact on earned income in subsequent tax years, but they can be fully applied against future capital gains. Investors who understand the rules of capital losses can often generate useful deductions with a few simple strategies.

The Basics
Capital losses are, of course, the opposite of capital gains. When a security or investment is sold for less than its original purchase price, then the dollar amount of difference is considered a capital loss. For tax purposes, capital losses are only reported on items that are intended to increase in value. They do not apply to items used for personal use such as automobiles (although the sale of a car at a profit is still considered taxable income).

Tax Rules
Capital losses are reportable as deductions on the investor’s tax return, just as capital gains must be reported as income. Unlike capital gains, capital losses can be divided into three categories. Realized losses occur on the actual sale of the asset or investment, whereas unrealized losses are not reportable.

Example
An investor buys a stock at $50 a share in May. By August, the share price has dropped to $30. The investor has an unrealized loss of $20 per share. He holds on to the stock until the following year, and the price climbs to $45 per share. He sells the stock at that point and realizes a loss of $5 per share. He can only report that loss in the year of sale; he cannot report the unrealized loss from the previous year.

The third category is recognizable gains. Although all capital gains realized in a given year must be reported for that year, there are some limits on the amount of capital losses that may be declared in a given year in some cases. While any loss can ultimately be netted against any capital gain realized in the same tax year, only $3,000 of capital loss can be deducted against earned or other types of income in a given year.

Example
Frank realized a capital gain of $10,000 in 2013. He also realized a loss of $30,000. He will be able to net $10,000 of his loss against his gain, but can only deduct an additional $3,000 of loss against his other income for that year. He can deduct the remaining $17,000 of loss in $3,000 increments every year from then on until the entire amount has been deducted. However, if he realizes a capital gain in a future year before he has exhausted this amount, then he can deduct the remaining loss against the gain. Therefore, if he deducts $3,000 of loss for the next two years and then realizes a $20,000 gain, he can deduct the remaining $11,000 of loss against that gain, leaving a taxable gain of only $9,000.

The Long and Short of It
Capital losses do mirror capital gains in their holding periods. An asset or investment that is held for a year to the day or less, and sold at a loss, will generate a short-term capital loss. A sale of any asset held for more than a year to the day, and sold at a loss, will generate a long-term loss. When capital gains and losses are reported on the tax return, the taxpayer must first categorize all gains and losses between long and short term, and then aggregate the total amounts for each of the four categories. Then the long-term gains and losses are netted against each other, and the same is done for short-term gains and losses. Then the net long-term gain or loss is netted against the net short-term gain or loss. This final net number is then reported on Form 1040.

Example
Frank has the following gains and losses from his stock trading for the year:
Short-term gains - $6,000
Long-term gains - $4,000
Short-term losses - $2,000
Long-term losses - $5,000
Net short-term gain/loss - $4,000 ST gain ($6,000 ST gain - $2,000 ST loss)
Net long-term gain/loss - $1,000 LT loss ($4,000 LT gain - $5,000 LT loss)
Final net gain/loss - $3,000 short-term gain ($4,000 ST gain - $1,000 LT loss)

Again, Frank can only deduct $3,000 of final net short- or long-term losses against other types of income for that year and must carry forward any remaining balance.

Tax Reporting
A new tax form was recently introduced. This form provides more detailed information to the IRS, so that it can compare gain and loss information with that reported by brokerage firms and investment companies. Form 8949 is now used to report net gains and losses, and the final net number from that form is then transposed to the newly revised Schedule D and then to the 1040.

Capital Loss Strategies
Although novice investors often panic when their holdings decline substantially in value, experienced investors who understand the tax rules are quick to liquidate their losers, at least for a short time, to generate capital losses. Smart investors also know that capital losses can save them more money in some situations than others. Capital losses that are used to offset long-term capital gains will not save taxpayers as much money as losses that offset short-term gains or other ordinary income. Wealthy taxpayers will now find capital losses more valuable than ever because of the capital gains rate increase for those in the top two brackets.

Wash Sale Rules
Investors who liquidate their losing positions must wait at least 31 days after the sale date before buying the same security back if they want to deduct the loss on their tax returns. If they buy back in before that time, the loss will be disallowed under the IRS wash sale rule. This rule may make it impractical for holders of volatile securities to attempt this strategy, because the price of the security may rise again substantially before the time period has been satisfied.

But there are ways to circumvent the wash sale rule in some cases. Savvy investors will often replace losing securities with either very similar or more promising alternatives that still meet their investment objectives. For example, an investor who holds a biotech stock that has tanked could liquidate this holding and purchase an ETF that invests in this sector as a replacement. The fund provides diversification in the biotech sector with the same degree of liquidity as the stock. Furthermore, the investor can purchase the fund immediately, because it is a different security than the stock and has a different ticker symbol. This strategy is thus exempt from the wash sale rule, as it only applies to sales and purchases of identical securities.

The Bottom Line
Capital losses make it possible for investors to recoup at least part of their losses on their tax returns by offsetting capital gains and other forms of income. For more information on capital losses, download the Schedule D instructions from the IRS website at www.irs.gov or consult your financial advisor.

Source : Yahoo Finance

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Tax Liability if the Sale proceeds is utilized for purchase of a Residential House property.

Subject to various other terms / stipulations, Tax on Long Term Capital Gain (LTCG) arising from the transfer of plot or urban agricultural land can be saved u/s 54F if the sale consideration is used for purchase of a residential house property within a prescribed period. The time limit prescribed for the purpose is:
 

For purchase:
One year before or two years from the date of Transfer.

For Constructions:
Three years from the date of Transfer.

It may be noted that although section 54F offers the time period of 2 years for purchase & 3 years for construction, the return of income is required to be filed before the specified date which is much shorter than the time period granted by Section 54F. If investment for purchase/ construction is not done by the tax payer before the due date of return filing, the amount need to be isolated by depositing it in the Capital Gain Deposit Accounts Scheme-1988 (CGDAS). Readers who wish to claim an exemption u/s 54F may note that if the amount is not invested for purchase/construction before the DUE DATE of furnishing the return of income, then it should be deposited under the CGDAS, before the DUE DATE of furnishing the return. After Deposit, the amount already utilized by the tax payer for purchase/ constructions of the new house along with the amount so deposited, shall be eligible for exemption under section 54F in the year in which LTCG has arisen.

[Consequence where the amount deposited in the capital gain deposit account scheme is not utilized for the purchase or the construction of a residential house property within the specified period:
In this case, the amount not so utilized shall be charged as capital gain of the year in which the period of 3 years from the date of LTCG expires and it will be taxable as LTCG of that year. The assessee then shall be eligible to withdraw the amount from the scheme. As per scheme, he is required to submit an application in Form G after getting the approval of the Assessing Officer.]
With above basic idea, it may be noted that temporary parking of the funds in fixed deposits/ bonds / post office certificates after the due date of furnishing the return of income, may obstructs your exemption claim u/s 54F. If you have to claim an exemption u/s 54F, you have to choose CGDAS as an investment tool for temporary investments of the funds.

Source: The Hitwada

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Not expecting tax liabilities out of current assessments.

NEW DELHI: BPO firm WNS today said that it does not expect any material tax liabilities arising out of the current assessments.

"We do not expect any material tax liabilities to arise out of our current tax assessments," WNS Chief Financial Officer Deepak Sogani said in a statement.

Earlier in the first week of this month, the company in a filing before US securities regulator SEC had said that "we are subject to transfer pricing and other tax-related regulations and any determination that we have failed to comply with them could materially adversely affect our profitability".

The filing had further mentioned that the company had orders of assessment for fiscal 2003 to fiscal 2010 pending before various appellate authorities.

"These orders assess additional taxable income that could in the aggregate give rise to an estimated Rs 2,827.3 million (USD 52.1 million based on the exchange rate on March 31, 2013) in additional taxes, including interest of Rs 1,029.4 million ( USD 19.0 million based on the exchange rate on March 31, 2013)," the filing had said.

It had also added that "we may be required to pay additional taxes in connection with audits by the Indian tax authorities".

Source: The Economic Times

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Tax Liability on Sale of Agricultural Land or Plot.

In normal course, any income from transfer of agricultural land, which is being used for agricultural purpose, shall be tax free if the agricultural land is not situated in any area within the distance (measured aerially) of not more than:

• 2 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or
• 6 kms, from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or
• 8 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.

If the agricultural land is situated within the radius of 2 kms/ 6 kms / 8 kms as mentioned above, then depending upon the period of holding, the profit arising on sale of agricultural land will be taxable as Long Term or Short Term Capital Gain.

If the Agricultural Land is not covered in the situation mentioned in (1) above then the profit arising on sale of agricultural land would be taxable as Long term Capital Gain as the agricultural land is having a holding period of more than 36 months. In absence of the exact reference of the date/financial year of acquisition in the query, Stamp Duty valuation of the land at the time of sale & also the non availability of the Cost Inflation Index (CII) for the FY 2013-14, the amount of Long Term Capital Gain could not be worked out. The CII for the FY 2013-14 has not yet been notified by the CBDT & it is expected that the same may be notified in this month itself.

If the profit on sale of Plot would be a Long Term Capital Gain, it is sold after a holding period of more than 36 months. If the plot is sold within a period of 36 months, the profit would be treated as Short Term Capital Gain and for tax purpose, would be treated like your other regular income. It would be taxable as per the applicable tax slab to your income. Since you are ultimately planning to utilize sale proceeds for purchase of a residential house property, it is advisable to sell the plot after completing the holding period of 36 months so as to claim tax benefit conferred by section 54F.

In absence of the exact reference of the date/financial year of acquisition in the query, Stamp Duty valuation of the plot at the time of sale etc, the amount of Capital Gain could not be worked out.

Source: The Hitwada

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