No standard deduction for housewives

SC Vasudeva

Q.    Please let me know whether housewives who are senior citizens can claim standard deduction of Rs 40,000 while filing returns from 2019-2020. — Narendra Rath

A.    Standard deduction of Rs 40,000 can be claimed by a person who is having income under the head “Salaries”.  Pension is also taxable under the aforesaid head of income and therefore the standard deduction would be admissible from the pension income also. A housewife, who is not having any income under the head “Salaries”, is not eligible to claim the standard deduction of Rs 40,000. 

Q.    I had invested in Arbitrage Schemes of MFs earning me dividend every month at various dates in FY 2017-18.  All these units were redeemed on April 2, 2018. Summary of STCG/STCL occurring on April 2, 2018 is 

given below:

Date of purchase                 STCL

(A)  28.04.2017 46,192.36

       14.06.2017 42,231.14

88,423.50

(B)  10.10.2017 29,807.53

       30.10.2017 27,291.36

       14.12.2017 2,93,275.43

3,50,374.32

              STCG

       28.04.2017 16,664.38

       10.10.2017 286.31

       30.10.2017 11,202.60

       14.12.2017 1,77,148.76

                            2,05,302.05

I have read Section 94(7) and my understanding of three conditions stipulated there tells me that while I can set off STCG with STCL mentioned at (A) above as it satisfies all the three conditions stipulated in Section 94(7) and pay STCG tax of 15% on the remaining STCG of Rs 1,16,878.55 (2,05,302.05 – 88,423.50 = 1,16,878.55), I cannot set off STCL mentioned at (B) above as the same does not satisfy all three conditions stipulated in Section 94(7). It may not be out of place to mention here that I had earned much more dividend that STCL I suffered on redemption.

Whereas my consultant tells me that Section 94(7) will not apply to Arbitrage Scheme of MFs and I can set off STCL to the extent of STCG and carry forward the balance STCL (88,423.50 + 3,50,374.32 - 2,05,302.05 = 2,33,495.77). So, I need not pay any STCG tax and I should also keep/carry forward the remaining STCL of Rs 2,33,495.77 for setting off any STCG that accrue in the current FY or any time in future 7 or 8 years.  Please advise. — YK Rametra

A.    Sub-section (7) of Section 94 of the Act provides as under:

 “Where:

(a)   any person buys or acquires any securities or unit within a period of three months prior to the record date;

(b)   such person sells or transfers –

(i)    such securities within a period of three months after such date; or

(ii)   such unit within a period of nine months after such date;

(c)   the dividend or income on such securities or unit received or receivable by such person is exempt, and the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the extent such loss does not exceed the amount of dividend or income received or receivable on such securities or unit, shall be ignored for the purposes of computing his income chargeable to tax”.

A literal interpretation of the above section suggests that the provision is applicable to purchase and sale of units. Therefore, in case the purchase of units has been effected in your name and its sale has also been effected under your name, the sub-section (7) would become applicable. In case the deal has not been done in your name the provision of Section 94(7) would not apply to the transactions which have been indicated in your query. You may, therefore, ascertain this fact and take a decision accordingly. 

Q.    I am filling return for one of my parents. My parent has pension, FD interest and capital gain due to sale of inherited shared/joint property acquired from my grandparents. The property was sold. However, the amount received by my parent was one-quarter of the total amount.

I understand I need to fill ITR2 form, however, I am not sure what amount to show as capital gain. Please let me know how to calculate capital gain amount to be filled in the I-T form.

For example, the property was purchased in FY 1980 for Rs 35,000 and sold in FY 2017 for Rs 10,00,000. How much amount we need to declare and under which section? — Heena Sethi

A. You have been correctly informed that for the purpose of declaring income under head “capital gain” ITR-2 is required to be filed. The amount of capital gain is computed after taking into account the indexed cost of the capital asset. The same is deducted from the sale consideration to arrive at the amount of capital gain.  The index is notified by the government for each financial year. In the case of example cited by you, the property which was bought in 1980, you have to get the fair market value of the property determined from an approved valuer as on 1.4.2001. The amount so arrived at shall be the base for applying cost inflation index which has been notified by the government as 272 for the financial year 2017-18 being the year of sale. The amount of fair market value as on 1.4.2001 shall be multiplied by 272 and divided by 100 so as to arrive at the amount of indexed cost. The indexed cost and the expenditure, if any, incurred wholly and exclusively in connection with the sale shall be deducted from the sale consideration of Rs 10,00,000. The balance would be the amount of capital gain. The aforesaid treatment shall be accorded to the actual cost of the property and the amount so calculated shall be deducted from the actual sale consideration to arrive at the amount of capital gain.