Loss from tax-exempt source canít be set off against income from other heads

Jun 17 2014, 11:50 IST
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SummaryCan I set off the loss on sale of units of mutual fund against the profit on sale of shares?

During FY14, I incurred loss on sale of units of an equity oriented mutual fund that I had purchased 1.5 years ago and profits from sale of equity shares that I had purchased six months ago. Can I set off the loss on sale of units of mutual fund against the profit on sale of shares?

ó Anand Kumar

If any income from a particular source is altogether exempt from tax, loss from that source cannot be set off against income from a different source or income under a different head. Thus, where any gain arising on sale of units of equity-oriented mutual fund held for more than 12 months is exempt from tax under Section 10(38), the loss arising from such source shall not be available for set-off against any income. Accordingly, you will not be able to claim the set-off of loss on sale of units of equity-oriented MFs against the short-term capital gain on sale of shares (held for less than 12 months), which is taxable.

Recently, I sold a residential property that I purchased four years ago. I am planning to re-invest the sale consideration in purchase of a residential property in the UK. Will I be eligible to claim the capital gain exemption?

ó Gautam Sharma

Section 54 provides for capital gain exemption if the taxpayer purchases or constructs a residential house within the prescribed time limit from the date on which transfer took place. The said Section nowhere suggests the new residential house acquired should be situated in India. The words 'in India' is not mentioned in Section 54. Thus, you can claim the exemption under Section 54 by acquiring a property in the UK if all other conditions laid down in this Section are satisfied and subject to the foreign exchange control regulations in force.

During FY14, I spent money on medical treatment of my 80-year-old father who suffers from low vision. My father has a rental income and also interest on FD? Can I claim deduction under Section 80DD?

ó Bhupinder Singh

One of the conditions for claiming deduction under Section 80DD is that the person in respect of whom the taxpayer has incurred expenditure for the medical treatment should be dependent, wholly or mainly on such individual. In your case, your father has his own source of income in the form of rental income and interest income. Thus, if such income is sufficient for the maintenance of your father, then you will not get the deduction under Section 80DD.However, your father can claim deduction under Section 80U of R50,000 (R1 lakh in case of severe disability) provided it is certified by the medical authority to be a person with disability.

I have not filed income-tax return for assessment years 2010-11 and 2011-12 though I had taxable income in both years because tax was already deducted from my salary and paid to the tax department. There is no refundable amount of TDS. Can I file a belated return now without waiting for any notice from IT department? Is there any penalty?

ó Sujay Shetty

A belated tax return can be filed within a year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The time limit for filing a belated return for assessment year 2010-11 and 2011-12 has already lapsed ( it was March 31, 2012, for AY 2010-11 and March 31, 2013, for AY 2011-12). Therefore, you cannot file a belated return. A penalty of R5,000 may be levied by the tax authority for failure to file the return.

* The writer is founder of RSM Astute Consulting Group

* Send your queries at fepersonalfinance@expressindia.com

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