When Mayur Shah, director of Ernst & Young, filed income tax returns for a client, even when the extended grace period of two years was over, the client asked him the logic for it. Typically, if you forget to file taxes for an assessment year, you have the next two years to do so (called the grace period). Say, you missed filing returns for 2008-09, you will get time till March 31, 2010, and, after that, another extension till March 31, 2011, where the grace period ends. Even after that, it’s not that you can't file returns .
Argues Shah,"I suggest such people file returns even after the two-year period, so at the time of scrutiny the department may grant you some grace if you could not file due to genuine reasons and did not escape it completely." If you've not filed returns, there are high chances of your case coming under scrutiny. These are small but important details that many, even chartered accountants, do not know about — they tell their clients that returns cannot be filed post the grace period.
Homi Mistry, partner at Deloitte, Haskins and Sells, points out, "When you rent out your apartment and charge a security deposit, there is a risk that if you charge a very high deposit and low rent, a part of the deposit will be treated as rental income levied on a notional gain." For instance, you ask for a rent of Rs 5,000 and the fair value of the property is Rs 40,000, but you have taken a deposit of Rs 1 crore, you will get pulled up for it.
Agrees Mumbai-based Mukund Thakkar, "These are important details for a taxpayer. I didn't know that capital borrowed for renovating your house could be claimed for deduction." Interest paid on the loan utilised for renovation is eligible for deduction of up to Rs 30,000 under the head income from the house property. You are entitled for the deduction if you prove the loan had been used for renovation. Here, the capital should be borrowed after April 1, 1999, but the construction should not be completed within three years from the end of the year in which the capital was borrowed. The deduction of interest repayment (of up to Rs 1.5 lakh) on the home loan is allowed if the acquisition/construction is completed in three years from the end of the financial year in which the loan was taken.
Naina Anand delayed her property sale, as she didn't want to buy another one. "One can invest the sale proceeds in bonds issued by National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC) within six months after the sale of the property. These come with a lock-in of three years and only up to Rs 50 lakh can be invested," chartered accountant Sandeep Shabbhag had earlier told Business Standard.
Then, many would know that proceeds from the sale of housing property get indexation benefit (but only at the rate of 20 per cent with indexation). Only gains from financial assets (mutual funds, shares) get the option of either 10 per cent without indexation or 20 per cent with it, whichever is lower.
Similarly, we know that long-term capital gains tax is zero in case of equities (provided Securites Transaction Tax (STT) is paid). Otherwise, long-term capital gains tax is indexed and taxed.
This is the case with short-term capital gains, too (taxed at flat 15 per cent only if STT is paid). This tax, in case of other assets, is added to the income and taxed according to slab.
Say you want to shift from one mutual fund scheme to another, it is deemed switching/transfer. Simply put, it is looked at as withdrawing money from one scheme and investing in another. The withdrawal attracts long-term capital gains or short-term capital gains, depending on the duration of the investment in the first option, as it is a financial transaction.
Typically, an employee is taxed according to the slab if he withdraws his Employee Provident Fund corpus before completing five years of service. But, in case the employer is shutting shop or has terminated the employee and the contribution is made to a recognised provident fund, withdrawal of the accumulated balance is not taxable, even if the employee has not rendered five years of service.
