You Can Set-Off LTCL Against The LTCG Under Section 70

Jayesh Dadia, Chartered Accountant 

You Can Set-Off LTCL Against The LTCG Under Section 70 

I am an individual. I have sold some listed companies shares off market without paying STT. On these transactions, I have incurred long term capital loss (LTCL). I have also sold certain shares of unlisted companies during the same financial year and earned long term capital gain (LTCG). Can I set-off the LTCL of listed companies against the LTCG? 

Yes; you can set-off LTCL incurred by you on sale of listed companies shares, on which STT is not paid, against the LTCG earned by you on sale of unlisted company’s shares. Perusal of Section 10(38) of the Income Tax Act reflects that if transaction on sale of equity shares is chargeable to STT, then provisions of that section are attracted. However, in your case, although you have sold quoted shares of a company but sold in off-market without paying STT, then said transaction is outside the purview of Section 10(38) of the Income Tax Act. Therefore, you can set-off LTCL against the LTCG under Section 70, read with Section 74 of the Income Tax Act. 

For your information, if on sale of quoted shares STT was paid, then the loss incurred on such sale of quoted shares would not be available for set-off against any other capital gain since, in that case, your loss would come under Section 10(38) of the Income Tax Act, and since under the said section, income is exempt, then loss also need to be ignored. 

I have let out house property by entering into two separate agreements; one for letting out the premises and another for providing amenities like electricity supply, security services, parking facilities, club facilities, etc. Can I offer the amount received as rent for premises as 'income from house property' and amount received for providing amenities as 'business income'? 

An amount which would be received for providing amenities cannot be treated as 'business income' but would be taxed as 'income from house property'. 

Apparently, amenities provided are part and parcel of the premises which is let out and you are rendering no separate services. Once you leased out the premises, the tenant is automatically entitled to use these facilities. Therefore, mere splitting of rent into two parts do not mean that income from amenities charges is not from let out property. 

The assessing officer may hold that amenities provided is in the nature of inseparable facility attached with the premises which cannot be considered as separate activity of business. Hence, the entire rent as well as amount received for amenities provided is taxable as 'income from house property'. You will be entitled to get 30% notional amount as repairs, which will take care of your expenses. No separate expenses will be allowed as expenses against the amenities provided.

I am going to purchase a residential premises during the current financial year. I have been told that I have to deduct 1% tax while making payment to builder. Can you explain the law and the procedure ? 

Under Section 194IA of the Income Tax Act, any person who is a purchaser, while paying the sale consideration to a seller for transfer of any immovable property (other than the agriculture land), is under the obligation to deduct tax @1% of total consideration. Accordingly, if you are purchasing the residential premises forRs1,00,00,000, then while making the payment to builder, you are liable to deduct tax @1% i.e. Rs1,00,000. The balance Rs99,00,000 can be paid directly to the builder. 

However, no tax is to be deducted if the sale consideration is below Rs50 lakh. Further, if the seller is a non-resident, then the tax is to be deducted under Section 195 of the Income Tax Act, where the tax rate is substantially high, i.e. 20% or 30%, depending upon the nature of capital gain. 

After deducting tax of Rs1,00,000, the same need to be paid online by filing Form 26QB within 30 days from the date of payment. You do not need to obtain TDS number for this transaction. If you fail to deduct whole or any part of the tax as mentioned above, then you will be liable to pay by way of penalty a sum equal to the amount of tax which you failed to deduct or pay under Section 271C of the Income Tax Act.