Tax

One Cannot Claim Loss On Delisted Shares As Long As They Appear On Demat Statement

If delisted shares are still reflecting in your demat account, you may transfer them at a nominal amount and claim the loss. One must take education loan from financial institution or approved charitable organisation to claim deduction under income tax laws. Presumptive scheme of taxation under Section 44ADA is valid for specified professions, even if tax is deducted under Section 194J

One Cannot Claim Loss On Delisted Shares
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Q

How can I book loss on shares of delisted companies? Can this loss be adjusted against the capital gains of the same year? For how many years can I carry forward the loss?

A

One earns capital gains or incurs capital loss only when the capital asset is transferred. The Income-tax Act, 1961 defines a “transfer” as one that includes extinguishment in addition to actual transfer. You cannot claim any loss just because the shares have been delisted, as delisting of shares does not amount to transfer, and the shares are still in existence. As long as the shares are reflecting in your dematerialised account you cannot claim the loss. In fact, you cannot claim any loss till the same are either extinguished or transferred.

In case the shares are not reflecting in your dematerialised statement, the same have already been extinguished and then you can claim the loss. If the shares are still reflecting in your dematerialised account, you may transfer them to any family member or friend at a nominal amount and claim the resulting loss. Do note that the benefit of indexing has been removed practically for all purposes except for computing the amount of tax payable by a resident individual and Hindu Undivided Family (HUF) in respect of long-term capital gains (LTCG) on land and building.

In case the capital loss is long term in nature, the same can only be adjusted against LTCG of any nature earned during the year, but not against short-term capital gains (STCG). In case of short-term capital loss (STCL), the same can be set off against both LTCG and STCG in the same year. Loss not so adjusted during the same year can be carried forward for eight subsequent years for set-off in the same manner.

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Q

I took a loan of Rs. 5 lakh from my father for doing my masters in microbiology. I am repaying the loan in instalments along with the interest to my father. Will I be able to avail of tax benefit on the repayment and get the deduction from my gross total income?

A

Under Section 80E of the Income-tax Act, 1961, any deduction of interest paid in respect of loan taken for higher studies is allowed subject to certain conditions under the old tax regime.

One of the primary conditions is that loan must be taken from an approved financial institutions or approved charitable institutions. Since you do not satisfy this basic condition about the lender, so the loan you have taken for your higher studies does not qualify for deduction under income tax laws.

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Q

If tax is deducted at source (TDS) under Section 194J of the Income-tax Act, 1961, can I opt for presumptive taxation? If yes, is it necessary to show expense up to 50 per cent or can I show expense at say, 20 per cent, too?

A

There is no bar on one opting for presumptive scheme of taxation under Section 44ADA of the Act, even if tax is deducted under Section 194J, as long as you are covered under the specified professions.

However, if your actual expenses are lower than 50 per cent, you have to offer such higher profits for taxation and cannot opt to pay tax on 50 per cent of receipt, as the law specifically provides that in case of higher profits, the taxpayer has to offer such higher profits for taxation.

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The author is a tax and investment expert and can be reached on jainbalwant@gmail.com

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)

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