A short-term loss can be set off against both short-term and long-term gain but a long-term loss can be set off against only a long term gain.
* I am buying a house at lower than the government rate. I have to pay income tax on the difference as “Income from other sources”. Can I add stamp duty, registration charges and brokerage that I pay so that cost of acquisition goes up and taxable amount reduces?
– V Chandar
The relevant provision, i.e., Section 56(2)(x) of Income-tax Act, refers to the scenario where consideration for purchase of the property is less than the stamp duty value of the property. Charges like stamp duty, registration charges, brokerage, etc., that you are referring to are in the nature of transaction charges which will form part of the cost of acquisition for the purpose of calculation of capital gain at the time of sale of the property but will not form part of the consideration for this provision.
* My mother plans to sell a house and distribute the proceeds among her four daughters. Please advise on capital gain tax.
Since your mother will sell off the house and instead of reinvesting the proceeds, will distribute it among the daughters, she can’t save any capital gains tax. If she has brought forward losses under the head capital gains, she can set it off from her current year capital gains. However, if your mother transfers a house to her daughters, then each daughter has option to save capital gain on their share by following ways:
A) As per Section 54 you can reinvest the capital gain to the extent of your share in one new residential property within a period of one year before or two years after the date on which transfer took place or within a period of three years in case of construction of house.
B) As per Section 54EC you can invest the capital gain in specified long term bonds within a period of six months from date of transfer, subject to threshold of `50 lakh. It should not be transferred within five years from its date of acquisition.
* I have lost `2 lakh in mutual fund investments in the last one year. Can I claim capital gains tax losses?
Assuming that the loss occurred due to sale of mutual fund investments, you can set off the loss against capital gains based upon the nature of capital gain. A short-term loss can be set off against both short-term and long-term gain but a long-term loss can be set off against only a long term gain. It can also be carried forward to the next financial year and set off against respective capital gains.
The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to email@example.com