Tax Column



Jayesh Dadhia 


I have made a public appeal for contribution/donation for medical treatment of my son as I cannot afford his medical treatment. There was a good response and I am likely to receive around Rs.10 lakh. The cheque will come in my name or my son’s name. The issue for your consideration is whether such money collected and spent for medical treatment is chargeable to tax under the Income Tax Act? 

If you receive contribution/donation in your name or in the name of your son, then the same would be chargeable to tax under section 56(2)(x) of the Income Tax Act, irrespective of the purpose for which the same is collected and spent. However, if you collect the amount directly in the name of the hospital providing medical treatment to your son, then the entire amount is not taxable. Further, if the entire collection of money from the public is rotated through public charitable trust, then the same will not be taxable in your hand as the amount received from charitable trust having approval under section 12A/12AA of the Income Tax Act is not taxable in the hands of recipient. 

I have made a long term capital gain (LTCG) of Rs.2 crore in assessment year 2017-18. The entire capital gain was invested in a new residential house and, therefore, claimed as exempt under section 54F of the Income Tax Act. Now I am finding very uncomfortable residing in the new residential house which I have bought out of LTCG. Accordingly, I have decided to sell the same. On the sale of the new residential house, I may incur loss. Can you explain me what would be the tax implications in my hand particularly in respect of previous LTCG which was claimed as exempt? 

The LTCG, which you have claimed exempt in the assessment year 2017-18, would be taxable in the current financial year 2019-20, i.e. assessment year 2019-20, as the new residential house would be sold within three years from the date of its purchase. Under Section 54F(3) of the Income Tax Act, if the new residential house is transferred within a period of three years from the date of its purchase, then in the year of transfer, the LTCG which was claimed as exempt, shall be deemed to be capital gain for the current financial year. Accordingly, the entire Rs2 crore, being the LTCG of assessment year 2017-18, would be deemed capital gain for assessment year 2019-20. 

The loss which you are likely to incur on sale of new residential house would be short term capital loss which would be available for set-off against LTCG. 

I am an individual working with an MNC. I am staying in a house belonging to my mother. I have decided to pay a rent of Rs.20,000 per month to her. On the basis of such rent, can I claim deduction of HRA while computing the amount of TDS on my salary income? If yes, what documents do I have to submit? 

Yes, you can claim HRA deduction while computing your salary income if you pay rent for your accommodation, even if it is paid to your mother. However, you have to enter into a rent agreement or Memorandum of Understanding with your mother, a copy of which, along with PAN of your mother and the address of your residential house, must be filed with your employer, which is an MNC in your case. Kindly ensure that your mother offers the entire rent received from you as income in her return of income. The amount of HRA which you are entitled for deduction would depend on your gross salary which the company would compute in accordance with Section 10(13A), read with Rule 2A, of the Income Tax Act. 

Moreover, you are not liable to deduct TDS while making payment of rent to your mother as the rent amount is less than Rs.50,000 per month in view of Section 194IB of the Act. 

I have filed my return of income for assessment year 2018-19 and paid taxes payable as per the return. The return is also processed by CPC. However, I noticed that I forgot to offer certain interest income as well as miscellaneous income earned by me in the return of income. I was told that after March 31, 2019, I cannot file any revised return for assessment year 2018-19. Can you throw some light and suggest me what action I should take now? 

It is correct that you cannot file revised return for assessment year 2018-19 now. Under Section 139(4) read with section 139(5) of the Income Tax Act, the deadline for filing the revised return as well as belated return is March 31, 2019. Therefore, you cannot file revised return now. However, I would suggest you to prepare a revised computation of income by considering interest and miscellaneous income and calculate tax liabilitythereon and pay the same with interest up to date. In case you receive any notice in future under section 148 of the Income Tax Act, then you can file a revised return and inform the IT department that you have already paid taxes thereon. By doing this, you will certainly avoid penalty and prosecution under the Act. 

I am an individual and my major source of income is salary and interest. I also do some business as proprietor and also invest in shares, mutual funds, etc. During financial year 2018-19, I have incurred business loss of Rs.2 lakh and also incurred short term capital loss of Rs.3 lakh. Can both these losses be set-off against my salary income and interest income? 

Salary income cannot be set-off against business loss or against the short term capital loss in view of specific provisions of Section 71 of the Income Tax Act. However, interest income can be set-off against business loss of the same financial year. The short term capital loss can be set-off onlyagainst any other capital gains, and if you do not have any capital gain, then the same can be set-off against future capital gain.

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