'Withdrew entire PF. Which ITR to file?'

Anil Rego, CEO, Right Horizons (external link), answers your personal income tax queries.

Srinivas Murthy: My wife and I have booked a flat costing Rs 150 lakh. I am retiring in July 22 and my wife on dec 26; both are salaried and are in 30% income tax bracket. We plan to take a home loan of Rs40 lakh payable in the maximum limit allowed by sbi/hdfc /bank of india /axis bank (from whom we are planning to take home loan) we have made our daughter as the third owner but she is not contributing anything. My income tax for 20-21 was Rs 3.27 lakh and of my wife around Rs2 lakh. 

Please let me know whether we have to show % of our share of investment in the sale deed or agreement or can we simply leave it without mentioning anything.

In both cases how much can we pay towards interest and principal on home loan to get maximum income tax benefit?

Do you suggest to include our (unmarried working) daughter also for contribution so that she can also get income tax exemption? Expecting detailed reply from your end at the earliest. 

Anil Rego: To claim the tax benefit on the property for you and your spouse or you, your spouse and your daughter, you need to fulfill certain criteria:

1. The person who wants to claim tax benefit (be it spouse or daughter) must be an owner of the property. Hence, there should be joint ownership of the property

2. The joint owner should also be an applicant for the loan. Owners who are not borrowers and do not contribute to the EMI shall be devoid of the tax benefits.

So, under section 80C, each co-borrower can claim a tax deduction on the principal component of the EMI. Also, each co-owner who is a loan co-applicant can claim a maximum tax deduction of Rs 2 Lakh for interest on the loan.

This will be based on the owner’s proportion of their stake in the property. You can choose to define the percentage in the sale deed or leave it without mentioning anything.

If you have not mentioned, you need to be consistent in the split across the years. The most common practice is to assume it as 50%.

Ramesh: It's very informative to read your column in Rediff. I have some queries I hope you can help me with:

I have not worked since 2017, and there is no income. But I have some investments in equities and equity MFs long term.

Hope to hear your valuable answers on these questions.

My questions are:

1. If I redeem my MF how is the capital gain tax computed? I know that 10% is the tax on the gains. But since I have no income and as there is no tax for earning till 2.5 Lakh, and additionally 1 lakh (or is it 1.5lakh) on equity MF redemptions, can I deduct 3.5 lakh from the amount received through gains and apply 10% tax on remaining?

Anil Rego:The basic exemption can also be claimed additionally.

2. Also, what is the difference in terms LTCG on long term equities, long term equity MFs and long term balanced MFs?

Anil Rego:Balanced MFs with equity holding above 65% and equity MFs, both are treated as equity funds and will be taxed as equity fund. Balanced funds with equity less than 65% will be treated similar to debt funds (non-equity).

3. Can long term loss in equity sale be adjusted with long term gain of equity MF or only with similar equity gains? Please advise.

Anil Rego: Yes, Long Term Capital Loss can be set off only against Long Term Capital Gains.

4. In case I withdraw my PF after the age of 58, is the amount not subject to tax?

Anil Rego: It is not clear if you plan to start working again. Your EPF withdrawals post-retirement will be tax-free for up to 3 years after the account is inactive.

SURESH BABU: Which ITR should I file for the subsequent year (AY 2021-22)? I have withdrawn the entire PF where should I show the same?

Anil Rego: ITR-1 should be filed for the (AY 2021-22). The PF withdrawn should be shown as part of exempt income under Section 10(12) of the income tax return in case of recognised provident fund (assuming that you have been in employment for over 5 years).

Commodore (Retd) Om Prakash Verma: I am Super Senior VETERAN, DOR 01 SEPT 1998. I have been filing my ITR regularly. 

2) I shall appreciate your help to calculate Profit/Loss on Share/M.F Txt.

3) I have redeemed Tata Infrastructure Fund Folio No. 142726 , Qty 1496 units, Amt Rs.38473/ Dt 23/11/2020.

4) My Purchase was a) 489.939 units at Rs 10000/- Dt.01/03/2007b) Units 1069.68 at Rs 30000/- @28.05 Dt.23/01/2008

5) PLZ Calculate LTCG/LOSS. Also let me know if Purchase NAV will be based on NAV 31ST JAN 2018.

6) For Share Txt of VEDANTA QTY 210 Sell & L&T QTY 5 Sell, I will give details on receipt of your comment on Tata M.F. Redemption. 

Anil Rego: Grandfathering would be applicable for you while computing the capital gains for Tata Infrastructure Fund. The Cost of Acquisition to be considered would be the higher of:

(i) Cost of Acquisition of the asset and

(ii) Lower of:

1. Fair market value of the asset as on January 31, 2018 and
2. Full value of consideration received / receivable on transfer of the capital asset.

The computation for the same is tabulated below. I had assumed it is under dividend mode based on the NAVs provided:

Do you have any personal income tax query? Please mail us at getahead@rediff.co.in with the subject line 'Ask Anil' and Anil Rego will answer all your tax queries.

Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.

You can find more of Mr Rego's answers here.