Worried about LTCG tax on your MF investments?

Satyanarayana Chilukuri: I have purchased some units of an Equity MF in the year 2016-17. Now, I would like to redeem them, through which I may make a good profit.

I need clarification regarding calculation of long term capital gains, as long term capital gains tax was not in existence before 31st Jan, 2018.

(i) Should I take the NAV as on 31st Jan, 2018 as the cost price for calculation (as then FM declared during budget speech), or

(ii) the NAV price at the time of purchase?

First option is beneficial to me. Please advice.

Anil Rego: Equity mutual funds or stocks which are held more than 12 months are considered as long-term capital gains. The Govt. introduced LTCG TAX of 10% in 2018, if the gain exceeds Rs 100,000.

As per the 2018-19 budget, since there was no tax payable on long term capital gains earlier, it allowed for grandfathering. ie. The gains only after a cutoff date of 31st January 2018 will be considered. Thus, you need to take the NAV as on 31st Jan, 2018 as the cost of purchase.

Tarvinder Singh: I'm working in corporate industry and TDS is deducted based on the new slab in this financial year, can I change the slab to old slab at the time of filing IT return and get the refund?

Anil Rego: Yes. In case an employee does not choose the tax regime at the beginning of the financial year, the employer will deduct tax (TDS) under the existing tax regime. A salaried taxpayer can opt-in and opt-out every year. That means you can choose the new tax regime in one year and choose the regular tax regime in another year. They need not declare or intimate their choice to anyone at any time during the year.

You can always change between the new and old tax regime while filing your returns.

younus shad: I bought a land plot in July 2018 for Rs 15.00 lacs, then I constructed a house on it in the same year which cost me Rs 40.00 lacs. In March 2021 I sold the whole property for Rs 98.50 lacs and bought land consisting of apple orchards worth Rs 65.00 lacs in the name of my adult children. Kindly intimate whether I or any of my children is liable for any tax payment. If yes, is there any way of tax exemption.

Anil Rego: Since the plot+ house is sold in March 2021, it will be treated as Long Term Capital Gain as the period of holding of the property is over 2 years (24 months).

An exemption is not available if long-term capital gains (LTCG) from sale of residential property are re-invested in an agricultural land.

You can claim exemption on LTCG by reinvesting the capital gains in a new residential property (house, not just land) situated in India, within 1 year prior or 2 years after the sale date of the old property (if the house is acquired) or within 3 years (if house is constructed). You can also invest in 54EC bonds for a maximum amount of 50 lakhs subject to conditions.

In this case, since you have invested sale proceeds to agricultural land, the LTCG will be taxed at 20% with indexation.

upendra maiya: I am an NRI residing in a Gulf country for over 25 years. I have been investing in Indian mutual funds for the last 4 years.

I would like to know TDS deducted from capital gains (10% for equity funds, 30% for non-equity) can be claimed back.

Anil Rego: Yes, NRIs can claim refunds on the deducted TDS. For an NRI to claim a refund on the TDS deducted, he/she must compute their income and tax liability according to existing slab rates and file your IT Returns accordingly.

If there is a refund due as per the returns, it will be paid out to you after processing by the IT Department.

upendra maiya: I am not having any income in India other than NRE F.D. (about 10 lakhs), and I am not filing ITR. Please advise the procedure since they deducted about Rs. 3,000. Waiting for your clarification.

Anil Rego: As per section 195 of IT Act, Interest earned on Non Resident External (NRE) accounts and Foreign Currency Non Resident (FCNR) accounts are tax free in India. Hence, there would be no TDS. Please check with your bank and ask the reason for deduction. It is possible that you have an NRO deposit and hence the tax deduction.

MD ZAFAR ALAM: I am a salaried person and my monthly salary is around 1.5Lakhs - 1.80 Lakhs.

I want to save income tax by availing some deductions. Can you please help me in choosing the right investment? 

Anil Rego: There are different investment avenues which help you save tax under old tax regime. The main deductions are captured below:

You can invest Rs 1.5 lakh under Section 80C of the Income Tax Act

Public Provident Fund (PPF)

National Savings Certificate (NSC)

Equity-linked savings schemes (ELSS)

80CCD Additional 50,000 for National Pension Fund

80D helps to claim deduction of 25,000 for health insurance premium paid for self and family. You can claim upto 50,000 for senior citizen parents.

Under section 24, you can claim a deduction on interest on home loan up to a maximum of Rs 2 lakh per annum

Prabu J: I have few queries regarding IT.

1. Can you provide comparison of old regime or new regime for Min 20 lakh salary?

Anil Rego: The comparison of old and new tax regime with various options is shown below.

If you can claim various deductions mentioned above, old tax regime is a better option for tax saving.

Prabu J: I own few arch of agriculture land and it is in loss for few years, is there any way to add this into my IT? Pls suggest

Anil Rego: Your query is not very clear. If there is a loss arising out of cost of growing the crop (cost being higher than the income), this loss cannot be set off against other heads of income like Salary, business income since any loss arising out of a source which is exempt cannot be set off against income from other heads.

If you bought a property; and its value is now lower than your purchase price, then there is not even an incidence of capital loss. A capital loss only arises when there is a sale of the property. In such case, there is no benefit you can get out of the lower market value of the property.

Prabu J: Apart of 80C, Housing Loan, Medical insurance for parents and self, is there any way to reduce tax in our system.

Anil Rego: You can consider investing in NPS which helps to claim deduction upto 50,000 of the investment made. This is over and above 1.5 lakhs deduction under Section 80C.

Section 80G permits claiming deduction for any charity to notified institutions or funds.

Section 80E allows deduction on the interest paid to education loan.

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.