‘I have withdrawn my full EPF amount. Where on the ITR do I show the EPF amount withdrawn?’

Anil Rego, CEO, Right Horizons, answers your personal income tax queries:

G Anandkumar: I have taken an SBI loan of Rs 40 lakhs for purchasing a flat which is under construction.

I started paying EMI since May 2020.

I would like to know whether I can avail I-T benefit for the year 2020-21.

Some people told me that you can avail tax benefit only after the flat is completed and the builder hands over the keys.

Anil Rego: You can claim the tax benefit on your flat only once the flat is handed over to you by the builder, on completion of construction.

You can claim the deduction for the accumulated pre-EMI interest (while the property is under construction) in five equal installments by adding it to the normal interest of that year.

However, keep in mind that the total interest that you can claim in a year is restricted to Rs 2,00,000.

 

Wizzy Wiki: Hope you are well. I am a regular reader of your Rediff column.

I will appreciate if you can throw light on the following:

I sold my house on March 31, 2020, and plan to reinvest the gains in another house that I will purchase in FY 21.

While these gains will not be enough, I will have to liquidate some of my investments in shares and mutual funds to meet the obligation.

My doubts are:

1. If I sell shares and mutual funds to fund the house purchase, will the long term gains be exempt from LTCG (sec 54), meaning I would not have to pay tax on the long term gains that I would make on the shares/MF units.

2. Are the short term gains on MF units exempt from tax if utilised for house purchase?

3. I have made some long term losses (in shares) in 2020-2021 (previous FY). How do I adjust these while filing my I-T returns this year?

Can I carry these to the current FY and adjust with the house purchase somewhere?

Anil Rego: To answer your questions:

1. You cannot take benefit of both section 54 (arising out of the sale of a house) and 54F (arising out of the sale of any other asset) at the same time.

You can choose to use either of them, depending on which gives you a higher benefit.

2. No, you cannot reinvest short term capital gains into a house purchase to save tax. Set-off is only allowed for long term capital gains.

Thus, your short term gains on equities will be taxed at 15 per cent and debt short term gains will be taxed as per your tax slab. Surcharge will also be as applicable.

3. The long term capital loss can be set off against the long term capital gains in the previous year.

If you do not have sufficient long term gains in that year, then you can carry forward this capital loss up to eight years.

But there is no provision to adjust with the house purchase because that was in the previous financial year.

 

Vina Vin: I am 57 years old. I lost my job in March 2020, hence had no income in FY 20-21.

So I sold some of my long term mutual funds (for the first time in my investment tenure) in which I gained some LTCG amount after grandfathering, over and above the Rs 1 lakh exempted limit.

Also, I have withdrawn my full EPF amount. The following are my queries:

1. Which ITR form needs to be filled?

2. How to show taxable amount in ITR? Only the amount needs to be shown or complete calculation needs to be shown with grandfathering NAV?

3. Where to show EPF amount withdrawn?

4. Is taxable amount above Rs 1 lakh also to be shown as income from other sources?

Anil Rego:  To answer your questions:

1. ITR 2, since you have capital gains from mutual funds.

2. The ITR would have a separate schedule for capital gains in which the details would need to be filled.

3. The EPF withdrawn should be shown as part of exempt income under Section 10(12) of the income tax return in case of recognised provident fund.

4. Your question not clear. If you are asking about the gain on the sale of your equity shares, you need to show it under income chargeable under the head — capital gains. 

Do you have any personal income tax query? Please mail us at [email protected] 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.

Feature Presentation: Ashish Narsale/Rediff.com

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