Sunday April 15, 03:37 AM
No STT on debt-based schemes
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By AN Shanbhag & Sandeep Shanbhag
I am a government employee and so is my wife. There is an LIC policy in my wife's name. I have paid its yearly premium/installment from my bank account by cheque. Can I take a rebate in income tax for this LIC policy from my department?
-Purba
Yes, you can. Contributions in the name of the spouse and children, major or minor, married or otherwise, (including married daughters) to I) any life insurance company for life cover II) LIC deferred annuity III) PPF IV) ULIP and Dhanaraksha are eligible for the deduction u/s 80C.
I am an NRI and I made a redemption for one unit of a mutual fund. The NAV was Rs 11.17. The purchased unit's NAV was Rs 10.61. Therefore, the total gain is (11.17-10.61) = 0.46 paise. The ax deducted is Re 1. How come? The redemption resulted in a net loss for me. The tax deducted is almost 2.2 times the gain. Have they forgotten that tax is calculated on gain and not on the full amount?
-Sunil
We find that the mutual fund has deducted only one rupee because of the rounding off. Otherwise, any NRI investor can redeem one unit per day and escape TDS altogether. Incidentally, the cost to the mutual fund in redeeming one unit could have been over the value of check. In any case, this is a matter, which should be taken up with the mutual fund directly.
I own an apartment in Bangalore. However, I intend to sell it and buy a bigger place. For this purpose, I have applied for a housing loan and the same has been sanctioned. I understand that I will have to pay long-term capital gains tax on the sale of my old apartment. I also understand that were I to invest the capital gains in the new property, I would be exempted from paying the capital gains tax. However, my problem is that the sale of the old property has not come through and the new property is being purchased by way of the housing loan. Under these circumstances, the best I can do is to first purchase the new apartment from the loan amount and then part pay the loan by disposing off my existing apartment. It amounts to the same thing; however, will I still be eligible for tax exemption?
-Mandrekar
Yes, you will get exemption on capital gains tax. You have not mentioned the dates of the transactions, therefore, please be guided by the following rules.
The law does say that capital gains from the sale of one house, if invested in another, are tax exempted. But it does not say that the particular capital gain (that gets released from the sale) has to be invested. It merely says an amount equal to the capital gains has to be invested. Moreover, there are time limits. You can buy the new house either within one year before or within two years after the date of sale of the old house. In your particular case, you have purchased the new house within one year of selling the old house. So yes, you will be entitled to the capital gains tax exemption.
Could you please provide details about STT applicability for mutual funds? If I invest in STT applicable schemes, what are the benefits I can avail and the amount of STT to be deducted, if I invest Rs10,000 in a mutual fund?
-Chinmay
With effect from October 1, 2004, STT is levied on all sales of equity-based units of mutual funds. The rate is 0.25%. There is no STT on debt-based schemes. Equity-based mutual fund schemes (65% or more exposure to equities) are governed differently from debt-based schemes. In both the cases, the dividend is tax-free in the hands of the investor. However, there is a dividend distribution tax at 14.025% payable by the mutual fund directly to the exchequer in the case of debt-based whereas, the equity-based are exempt from this tax. Equity-based schemes are also exempt from long-term capital gains tax. The short-term capital gains are taxed at 10.2% only.
-The authors may be contacted at wonderlandconsultants@yahoo.com
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