TAX GURU: 'What is the tax implication of Covid death money?'

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

Sima Khan: I am having income from FD and Equity. What ITR should I file?

Anil Rego: ITR 2 should be filed for income from FD and Equity

Ganesh Joshi: I have following queries:

1) I want to sell Bonus Shares received prior to January 31, 2018. What will be their acquisition cost? Will grandfathering provisions be available?

Anil Rego: LTCG of these Bonus shares shall be calculated by considering FMV (Fair Market Value) on 31/01/2018. Grandfathering provision is available here.

2) Which is better option: to Gift shares by transferring or sale

Anil Rego: Gifting of shares is preferred as there is no tax incidence on the gifting to relatives (as defined in the IT Act). Only when these shares are sold will the tax be applicable. The purchase consideration for calculation of capital gains will be the purchase price of the person who gifted the shares.

Satjit Dhillon: What is tax implication of money received from Delhi government on death of family member due to Covid? Thanks

Anil Rego: The compensation received from Employer is tax free without any limit.

If the compensation is received by any person other than employer, then there is exemption up to a limit of Rs 10,00,000.

Praveen Godbole: On Dec 10, 2021, in reply to a question by an NRI on claiming refund of TDS on capital gains, you have relied "Unlike residents, an NRI does not have the option to adjust capital gains against the basic exemption limit of Rs 2.5 lakh. Hence, you cannot claim the TDS.” 

While your reply (on basic exemption limit) is correct, I believe NRIs can still claim LTCG exemption up to Rs.1 lakh on sale of shares/equity Mutual funds. Please confirm.

Anil Rego: Yes, this is on the long-term units of mutual funds the exemption of Rs 1 lakh can be claimed. That is, 10% tax is applicable on long term equity capital gains above 1 lakh

Adhir Gogoi: After dividends became taxable, I changed option in my debt mutual fund investment from 'Dividend' to "Growth". My AIS for 2020-21 shows such change as encashment of (and reinvestment in) debt mutual fund and shows resultant "Capital Gains". Is such treatment correct?

Anil Rego: Switching your investments from one option to another (from dividend to growth) within the same scheme or AMC is considered as a sale (redemption). Hence, the switch will attract exit load and capital gains tax, as applicable.

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.