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What is short-term capital gain?

September 07, 2007 16:35 IST

Do you know what short-term capital gains tax is? When do you have to pay this tax? Is it different for shares and other physical assets?

Are there any tax deductions/benefits available for physically challenged people?

In a chat with readers on September 5, Get Ahead tax expert Mahesh Padmanabhan and Narayanan discussed these and other tax-saving and investment issues affecting the taxpayers.

For those of you who missed the chat, here is the transcript.

Part I: How to save tax and make money 


siddiqi asked, Hello Sir My daughter is university student. Her tution fee is Rs 70,000/annum in self finance scheme but tuition fee for university staff children category is Rs 35,000 only, I therefore pay Rs. 35,000. In form 16A this tuition fee ie Rs.35,000 is included in my investment whose limit is Rs 100,000 under section 80C. The remaining Rs. 35,000 is added to my annual income/Gross salary and tax is charged. My question is that University does not pay the remaining amount Rs. 35,000 to me so why it is added to the annual salary and tax is charged. I pay Rs.35,000 tuition fee from my taxable income but there is further tax deduction on the same amount which I do not receive from the employer. I feel this is a case of double taxation.

Mahesh Padmanabhan answers, Dear Sir, the university (i.e. your employer) is providing you a relief of Rs. 35,000 which is not available to outsiders. Hence this is seen as a perquisite provided to its employee and accordingly be liable to be taxed. For you the benefit is that you get a reduction in the fees and the outgo is only on account of the tax on such perquisite which might be just 1/3 of Rs. 35000.


Mahesh Padmanabhan says, Dear friends, as its time for me to leave, i would need to sign off. However, as a token of our appreciation to your response to the chat session, we are extending the session by another half hour. My colleague Narayanan would take over the answering your queries hereon for the next half hour. Thank you. Mahesh.


Mahesh Padmanabhan says, Hi, Good Afternoon everyone.This is Narayanan


VICKY asked, I am a salaried person getting Rs.195000 p.a. I have admitted in MBA where I invested there Rs.25000/-, can I get some tax benefits on it? After taking all my savings lic,PF, hra, conveyance still I need some savings about Rs 24000. PL suggest what is the best way to save where I can get tax saving also? Best regards

Mahesh Padmanabhan answers, You cannot claim deduction for the amount paid for your MBA admission.


rtyu asked, Narayanan sir my querry is do i need to pay service tax if my retainership is Rs 4.2 lac pa?

Mahesh Padmanabhan answers, You would be liable for service tax if ur billing exceeds Rs.8,00,000 in any financial year. However, u will need to register if ur billing for any financial year exceeds Rs.7,00,000.


thiru asked, Explain me any tax benefits available for physically challenged persons?

Mahesh Padmanabhan answers, A physically challenged person is eligible to claim deduction under Section 80U which provides for a flat deduction of Rs.50,000 or Rs.70,000 depending upon the extent of disability.


sp asked, Sir, My elder brother needs around Rs 3 lakhs from me in connection with purchase of a residential flat. However, he wants to transfer a piece of land in lieu of this. To avoid tax, can I make a gift of Rs. 3 lakh to him by cheque now, and subsequently get the land transferred in my wife's name as gift from him at a subsequent date, say one year later. Your guidance is solicited with respect to tax implications and the way to avoid it. Regards sp.

Mahesh Padmanabhan answers, The gift of Rs. 3,00,000 would not attract any tax as it would be gift made by a relative in terms of Explanation to Section 56. No tax would be attracted when ur brother gifts the piece of land to ur wife, since the transaction would not qualify as transfer for attraction of capital gains tax. However the cost of acquisition of land for ur wife would be the the cost incurred by ur brother in acquiring the asset.


taxquestion asked, Hi Narayanan, As a pensioner, can i adjust my house rent for income tax deductions? Kindly Reply.

Mahesh Padmanabhan answers, You can claim deduction for rent paid by you under section 80GG. However,the amount of deduction is restricted to Rs. 2000 per month or rent paid less 10% of your Gross Total Income (before deduction under Sec 80GG) whichever lower.


bandhu asked, hello sir My NSC savings was not shown in Form 16 so excess TAX was deducted at source by my Dept. I have filed my return with copies of NSC atached, asking for refund. Will IT dept refund the amount and when?

Mahesh Padmanabhan answers, Yes ur claim would definitely be admitted.


ashokan asked, I have two houses in joint ownership with my wife. I am in the process of acquiring a 3rd flat. What are the tax implications in having these flats?

Mahesh Padmanabhan answers, If u acquire one more property, then you or ur wife (depending on whose name the new property is acquired) would have to pay tax on notional rent on one of the existing property or the new property you would acquire.


bhupander asked, what is the short term capital gain?

Mahesh Padmanabhan answers, Short term capital gain is gain arising out of transfer of a short term capital assets. Short Term capital assets as defined u/s 2(42A) is an asset held by an assessee for a period less than 36 months. However for specified assets like shares listed in recognised Indian stock exchanges, holding period is less than 12 months.


veerender asked, mahesh, I have last fin year moved from a company. I worked there for 3.5 years. Upon withdrawal of My PF they have deducted a TDS of Rs. 23,000. I thought PF withdrawal does not attract tax liability and have withdrawn it. I could not get the rules regarding TDS on PF withdrawal. Can u throw some light?

Mahesh Padmanabhan answers, Are u sure that the deduction is on account PF. Pls confirm if they have issued any TDS Certificate to you. No tax is liable to be deducted on account of PF. They might have deducetd tax on your salary income for the assessment year.


PRASHANT1 asked, My father purchased a house in 1973 for Rs 50K, now after his demise I'm going to sell it for Rs 13 Lacs. How to save Property Gain Tax?

Mahesh Padmanabhan answers, In this case you can claim the benefit of indexation from the year 1981 on the fair market value of the asset as on 01/04/ as your cost.


Mahesh Padmanabhan says, I am signing off Friends. Thanks


Part I: How to save tax and make money

Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.

Narayanan is manager, taxation, RelaxWithTax Consultants Pvt Ltd.

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