Income Tax| Your Queries: Loss arising in F&O is treated as business loss, not speculation loss

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Published: May 17, 2016 7:02:27 AM

Only those individuals/HUFs whose total income exceeds Rs 50 lakh are required to provide the details of assets and liabilities

I wish to make a cash gift to my daughter who is a minor. Is there any tax implication?
— H S Iyer

A gift received from close relatives (in this case, gift received from one’s father) is not taxable in the hands of the recipient even if the aggregate amount of gifts received in a year exceeds R50,000. However, the provisions regarding clubbing of income of a minor child get attracted. Thus, all such income that arises or accrues to his minor child shall be included in computing the total income of an individual. For example, if the cash gift received by the minor is utilised for making an investment in shares, or depositing with a bank etc, the income arising therefrom (capital gain, bank interest etc) to the minor child, shall be taxable in the hands of the parent whose total income (excluding the income of the minor) is greater. In such a case, an exemption up to R1,500 in respect of each minor child is allowed.

Recently, I traded in futures and options and suffered some losses. Will this loss be classified as speculation loss? If not, will I be able to set off this loss against rental income from letting the out of a residential house property?
— Gaurav Shetty

Under Section 43(5)(d) of the Income Tax Act, derivative transaction in shares is not speculation transaction where the transaction has taken place in a recognised stock exchange. Therefore, the loss arising in futures and options shall be treated as business loss and not as speculation loss. Further, you will be allowed to set off this loss against your current year’s house property income.

I am holding shares of certain unlisted companies. My understanding is that one has to hold the unlisted shares for more than three years to claim the indexation benefit. Has the recent budget lowered the period to two years?
— Parag Mehta

The finance minister, in Budget 2016, had proposed that the period for getting benefit of long-term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years. However, no such amendment was proposed in this regard in the Finance Bill, 2016.

I had purchased a plot of land near Pune in 2009, which I am planning to sell and utilise the sale proceeds for purchasing a flat in Mumbai. I already own one flat in Pune. I wish to know whether I can claim capital gain exemption under section 54F.
— Neeraj Kumar Prabhu

Section 54F of the Income Tax Act provides capital gain exemption benefit to a taxpayer being an individual or HUF earning long-term capital gains from the transfer of any long-term capital asset if the net sale consideration is invested in a residential house property within the specified period. The exemption is subject to certain conditions. One of the conditions is that as on the date of transfer of the old asset (i.e. plot of land in your case), an individual should not own more than one residential house (other than the new house property). As you own only one house property as on the date of transfer, you will be eligible for capital gain exemption under Section 54F subject to fulfillment of other conditions.

I have heard that details of assets have to be disclosed in the new tax return for AY 2016-17. Who is required to make the disclosure? Will all kinds of assets have to be disclosed? Does the fair market value of an asset need to be disclosed? Please clarify.
— S M Padmanabhan

Recently, the CBDT has notified new ITR forms for AY 2016-17. The new schedule requiring disclosure of assets and liabilities has been introduced in ITR 1, 2, 2A, 3, 4 and 4S. Only those individuals/HUFs whose total income exceeds R50 lakh are required to provide the details of assets and liabilities.
The assets to be reported will include land, building (immovable assets) and cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft, etc. The amount in respect of assets to be reported will be the cost price of such assets to the assessee and not the fair market value. In case the asset became the property of the assessee under a gift, will etc, the cost of such an asset to be reported will be the cost for which the previous owner of the asset acquired it, as increased by the cost of any improvement of the asset incurred by the previous owner or the assessee, as the case may be.
The writer is founder of RSM Astute Consulting Group

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