Capital gain, Advance taxes & TDS

By –

Shweta

Shreeya

Bisahu

Bhuneshwari

Tax on Capital Gains

• Existence of a capital asset

• Transfer of such asset during the Previous Year.

• Profit and Gain must arise from such transfer

What is a Capital Asset ?

• Capital asset means property of every description.

• It may be ;

– Movable or immovable

– Tangible or intangible

What is not a Capital Asset?Section 2(14)

• Any stock-in-trade, consumable stores or raw materials held for the purpose of business or profession.

• Personal effects (except jewellery & immovable property) held for personal use of the tax payer or any member of his family.

• Agricultural land in India subject to exception.

Computation of STCG

• Full value of consideration received or accruing • Less

– Expenditure incurred wholly and exclusively in connection with such transfer

– Cost of acquisition

– Cost of improvement is

• Gross short term capital Gain• Less : Exemption u/s 54B/54D/54G is Net Short Term

Capital Gain which is taxable..

Computation of LTCG

• Full value of consideration received or accruing • Less :

– Expenditure incurred wholly and exclusively in connection with such transfer

– Indexed cost of acquisition

– Indexed cost of improvement is

• Gross Long Term Capital Gain• Less: Exemption available u/s

54/54B/54D/54EA/54EB/ 54EC/54F/54G is Net Long Term Capital Gain which to be taxed.

Cost of Acquisition in various circumstances

• The cost of acquisition of any propertyacquired prior to 01-04-1981 will be the fairmarket value of that property as on 01-04-1981 at the option of the assessee .

• The same rule applies to capital assetsacquired by any of the modes specified inSection 49(1), if the capital asset is acquiredby the previous owner prior to 01-04-1981.

Cost of Acquisition to previous owner

• Cost of acquisition & improvement to previous owner will be deemed to be cost of acquisition and improvement if the asset is acquired by the following mode of transfer:

– By succession, inheritance etc.

– By distribution of an asset by liquidation

– Under a gift/will

– On partial/total partition of HUF

Conclusion

• any profits or gains arising from the transfer of a capital asset effected in the previous year

• capital gain is the difference between the cost of acquisition and the fair market value on the date of sale or transfer of asset.

• If it is a short term loss so it can be adjusted from long term gain.

• If it is a long term loss so it can not be adjusted from short term gain.

Advance Tax

• it refers to paying a part of your yearly taxes in advance.

• Advance tax is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year.

• Advance tax should be paid in the year in which the income is received.

• Hence, it is also known as the 'pay-as-you-earn' scheme.

Cont…• Advance tax is applicable when an individual

has sources of income other than his/her salary.

• For instance, if one is earning through capital gains, interest on investments, lottery, house property or business, the concept becomes relevant.

Advance Tax installments and due dates

For corporate tax-payers

• 15th June – 15% of estimated taxes

• 15th September – 45% of estimated taxes

• 15th December – 75% of estimated taxes

• 15th March – 100% of estimated taxes.

For non-corporate tax-payers

• 15th September – 30% of estimated taxes

• 15th December – 30% of estimated taxes

• 15th March – 40% of estimated taxes.

How to pay Advance Tax

• All tax-payers are required to get their accounts audited u/s 44AB (Tax audit) and all companies (irrespective of the turnover) are mandatorily required to make electronic payment of taxes through internet banking facility or through credit or debit cards.

• Other tax-payers can make either online tax payment or through normal banking (by way of cheque/cash)

Consequences of Non-Payment of Taxes

• Under Section 243C, the tax-payer will have to pay a simple interest on the amount of short payment (or non-payment) @ 1% per month for 3 months.

• Interest u/s 234C shall not be payable if the advance tax payable is less than Rs.10000

Cont…• Even one day delay attracts Interest u/s 234C

• Apart from interest as explained above, if entire tax liability has not been paid before 31st March, tax payer will have to pay interest @ 1% for every month or part of the month from April 1 to the date of actual payment.

What happens if you pay more taxes?

Conclusion

• The taxpayer is also saved from the burden of making a lump sum payment at the time of filing the return.

• It is advisable to pay advance tax as per the due dates on the estimated income

• It is advisable to pay the taxes online through net banking or through cards. Those who don’t have net banking facility may get one soon

Cont…• Pay taxes through your own account. It will be

easy to track or trace the payment from your bank account

• Check 26AS and confirm that the taxes paid by you are credited to your account at income tax department

• Don’t wait for the last day to pay the taxes. Pay it off at the earliest possible date.

Introduction

• Two broad head of levy of tax are– Direct levy and

– Tax deduction at source

• Deduction of tax at source is a convenient method of tax collection

• is less painful to the person from whose income such tax is deducted

• saves time on the part of the income-tax department

Cont…• Tax deduction is the responsibility of the person

making the payment i.e.

– Employer in the case of salary paid to employee

– payer of interest i.e. borrower

– In the case of winnings from lottery, crossword puzzles, horse races, as the person who makes the payment

– In all other cases too the payer of the income

Incomes subject to TDS

• Salary income (s.192)

• Interest on securities (s.193)

• Dividends (s. 194)

• Interest other than interest on securities (s.194A)

• Winnings from lottery or crossword puzzles (s.194B)

Cont…

• Winnings from horse races (s. 194BB)

• Payments to contractors or sub-contractors (s.194C)

• Insurance commission (s.194D)

• Payments to non-resident sportsmen or sportsassociations (s.194E)

• Payments in respect of deposits under nationalsavings scheme etc. (s.194EE)

Slide 5.1

Cont…

• Payments in respect of repurchase of units bymutual fund or unit trust of India (s.194F)

• Commission on sale of lottery tickets (s.194G)

• Commission, brokerage etc. (s.194H)

• Rent (s.194I)

• Fees for profession-al or technical services [Sec.194J]

Slide 5.1

Cont…

• Income in respect of units [Sec. 194K]

• Payment to non-resident [Sec. 195]

• Units held by an Off-shore Fund [Sec. 196B],

• Income from foreign currency bonds [Sec.196C]

• Income of Foreign Institutional Investors fromsecurities [Sec. 196D]

Slide 5.1

Conclusion

• TDS is one of the modes of collection of taxes

• It is similar to "pay as you earn" scheme

• It facilitates sharing of responsibility of tax collection between the deductor and the tax administration

• It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.

Thank

You