By Chirag Nangia

I have received a motor vehicle accidental tribunal (MACT) award and also interest on such award. Is interest on MACT award taxable? – Harpreet Singh

Taxability of interest on compensation received from Motor Accidents Claim Tribunal has been a litigious issue. Section 2 of Income Tax Act defines ‘interest’ as a sum payable in respect of any money borrowed or debt incurred and includes any service fee or other charge in respect of moneys borrowed. Interest on compensation is a part of compensation itself and must thus not be taxable. Various High Court judgements support this stand, holding that compensation as well as interest awarded are not in the nature of income and should thus not be charged to tax.

I have inherited shares from my father by demat transfer from his account after he expired. Some of these were inherited by him from his grandfather in physical mode and dematted later. However, we have no clear records of date of purchase or purchase price. If we now sell these shares how would the long term gains be calculated? — Nikhil S. Gokhale

We understand that the shares were acquired by your grandfather before April 1, 2001, hence, Fair Market Value (FMV) of the shares on April 1, 2001 date may be taken as cost of acquisition. Thereafter, for computation of capital gains under Section 112A, you will compare the lower of FMV of the shares as on January 31, 2018 and the sale consideration with the actual cost of acquisition (FMV as on April 1, 2001) and take the higher of the two. The resultant amount must be subtracted from the sale consideration to compute the gain/ loss.

I had invested in DHFL’s NCD issue in 2018 as a retail investor. While I did get the interest (after TDS) in June 2019 as scheduled, given that the NBFC is going bust, and return of NCD principal looks unlikely, is there any possibility of writing it off as a loss in income tax returns, this year or subsequent years?

Capital loss arising only from transfer (sale, exchange or relinquishment) of an asset is allowed to be set off from taxable income while offering the same to tax. Thus, you shall not be entitled to write off the principal amount upon anticipation of loss. Capital loss shall be allowed to be set off only on sale/ redemption of the NCDs.

(The writer is director, Nangia Andersen Consulting. Send your queries to fepersonalfinance@expressindia.com)