On Saturday, Facebook become LIVE with noted Chartered Accountant (CA) Ameet Patel giving answers to most troubling tax queries asked on Moneylife Foundation’s Tax Helpline. The ‘Tax Adda’ moderated by Debashis Basu, a CA himself, and Editor & Publisher of Moneylife, was viewed by 518 people on Facebook. However, the sane advice, Mr Patel gave to all taxpayers was to avoid doing something (foolish) to fix the problem and then approaching a CA for help after receiving a notice from the tax authorities.
Responding a question on misunderstanding on form 15H or G, Mr Patel says, “Form 15G can be used by non-senior citizens only if their final tax on the total income is nil or if the aggregate of the interest and other income received by the assesse during the year before availing deduction under chapter VI A does not exceed the basic exemption limit. The form 15H can be used only by senior citizen only if the final tax liability on his total income is nil.”
Mr Patel, a partner at Manohar Chowdhry & Associates, demystified several issues related with taxation asked by people on the Tax Helpline. It ranged from capital gains tax, submission of Form15G or H by bank deposit holders to tax issues faced by non-resident Indians (NRIs).
One NRI wanted to know if she needs to pay tax on refund of loans given to their relatives or friends in India. Mr Patel, says, “First of all, you should not be giving loans in excess of Rs20,000 by cash. Secondly, if you claim that you have given a loan to someone, you need to ensure that you have a loan confirmation from that person. The confirmation must have the full name, address and permanent account number (PAN) of that person. It should be physically signed by that person. If a genuine loan is returned by the borrower, then that does not become a taxable receipt in the hands of the lender. The interest earned on non-resident ordinary rupee (NRO) Account is taxable whereas interest on non-resident rupee (NRE) account is not.”
Many queries were related with capital gains tax on sale of house property. One person wanted to know if he can used proceeds from sale of his flat bought in 2011 to repay housing loan for other flat bought in 2017.
Section 54 of the Income-tax Act permits a taxpayer to claim exemption from taxable long term capital gains on sale of residential house property if he has invested the capital gains in the construction of a new house within three years from the sale of the old house or in purchase of a new house one year before or two years after the sale of the old house.
“Thus,” Mr Patel, says, “if you have already bought a new house within one year before the sale of the old house then you can claim exemption even if you use the sale proceeds of the old house to repay the loan taken to buy the new house. However, if you have claimed tax benefits in respect of the housing loan then you could have a problem.”
Over the years, many investors have bought shares in joint names and are now facing issues. Mr Patel said, just because the asset is purchased in joint name, it does not mean that both the co-owners are beneficial owners. “From a tax perspective, what is relevant is who paid for the asset. Whoever paid for it will have to offer the income from that asset in his tax return. If the co-owners have both paid for it then the income has to be allocated proportionately between them.”
Mr Patel also replied to queries asked online from viewers on Facebook Live. Responding to a query on taxability on trading or dealing in virtual currencies, like bitcoin, he said, “If you have earned an income, then you will have to pay tax. The I-T Department does not get into legality of virtual coins and will only consider income earned by the assessee.”
Few months ago, many salaried people received notices from the I-T Department under Section 143(1). These were based on a circular issued by Central Board of Direct Taxes (CBDT) to check and verify exemption claimed by employee with that of what was declared by the employer. ‘However, after a hue and cry from taxpayers and tax professionals, these notices were withdrawn,” Mr Patel added.