Are you a businessman or self employed person??

If you are a businessman or a self employed person then you should aware of the income which is chargeable to tax as per Income tax act, 1961

Following are the incomes which are chargeable to income tax

1.  the profits or gains of any business or profession which was carried on at any time during the previous year

2.  profit on sale of license granted under import (control) order under scheme of exports

3.  cash assistance received or receivable against exports under any scheme of government

4.  duty draw back against exports under scheme of the government

5.  the value of any benefit or perquisite, whether convertible into money or not, arising from any business or profession

6.  any interest, salary, bonus, commission or remuneration by whatever name received by a partner of firm from such firm

7.  any sum received under a key man insurance policy including the sum allocated by way of bonus on such policy

8.  any sum, whether received or receivable in cash or in kind, on account of nay capital asset being demolished, destroyed, discarded or transferred, if whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD

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ARE YOU A NON RESIDENT AND EARN ANY INCOME BY WAY INVESTMENT IN SHARES????

If you are an non resident and earn any income by way of sale of shares in Indian companies then you are come under the tax bracket under the head capital gain.

In case an assessee i.e. a non resident, earn any income by way of transfer of shares or debentures in an Indian company, shall be computed by converting

1.  The cost of acquisition of the assets

2.  The expenditure incurred wholly and exclusively in connection with such transfer

3.  Sale consideration received or accruing as a result of transfer of  capital asset

into the same foreign currency as was initially utilized in the purchase of such shares or debentures. The capital gain so computed in the foreign currency then thereafter converted into Indian currency.

The above said manner of computation of capital gain shall apply to capital gain arising from every reinvestment.

The key advantage of this computation is that the government is giving benefits to non residents with regards to loss that may arise due foreign exchange.

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GET FAMILIAR WITH THE TERM CAPITAL GAINS

What is capital gain?

Capital gains are any profits and gains i.e. any income arising from the transfer of capital assets effected in the previous year shall be chargeable to income tax under the head capital gains in the previous year in which transfer took place.

Now, the question comes in the mind what is the capital asset?

Capital asset means property of any kind held by assessee whether or not connected with his business or profession but it excludes:-

1.  Stock in trade meant for assessee’s business or profession

2.  Personal effects, that is to say, movable property held for personal use by the assessee or by nay of his family member but again it excludes jewellery, archaeological collections, drawings, paintings, sculptures or any art of work

3.  Agricultural land in India situated in rural areas.

4.  Gold deposit bonds issued under the gold deposit scheme, 1999 notified by the central government

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SAVE INCOME TAX ON THE INCOME ARISING FROM SALE OF SHARES

If you have earned any income by way of sale of shares, you can save yourself from the tax implications. The income earned by way of sale of securities like shares, are subject to income tax but if you fulfill the conditions laid down in the section 10(38) of income tax act, 1965 you can save tax which ,may arise from the sale of shares

The conditions are as follows:

1.  The shares must be hold for more than 12 months

2.  Shares must be equity shares or unit of equity oriented fund

3.  Such transaction of sale must be entered into or after 01.04.2004

4.  Such transaction is chargeable to securities transaction tax

ANALYSIS

1.  This exemption is available to all assessee including foreign institutional investors and non residents

2.  Such shares must be held by assessee as capital assets not as stock in trade

3.  This exemption is available to equity shares or equity oriented units only

4.  It doesn’t cover securities like preference shares, debentures etc

If an assessee fulfills all the conditions as specified above, he can save his income so earned by way of sale of the above specified securities

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SALE SILVER AND STILL DOES NOT ATTRACT CAPITAL GAIN

If you have silver in any form and want to sell it but scared of attracting capital gain, you can save capital gain by selling silver in the form of silver utensils

With reference to the case of CIT Vs BENARSHILAL KATARIKA, the assessee sold the silver utensil and assessing officer was in the opinion that the selling of silver utensils are capital asset and hence capital gain would be attracted.

However, the high court held that silver utensils consisted of thalis, katoris, tumblers etc. which are meant for the personal use although they are not be used daily. Whether silver utensils constitute personal effects depend on the financial status of the assessee.

Therefore, silver utensil constitute personal affect and doesn’t constitute capital assets and hence it is not liable for capital gain

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GOLD DEPOSIT BONDS MAY BECOME YOUR KEY TAX SAVING INSTRUMENT

If you have gold idly lying with you and it is unable to generate any income except its incremental price, then you may opt for gold deposit bond.

Gold deposit bonds issued under gold deposit scheme, 1999 notified by central government is also an hot investment option for those investor who have investment in the form gold like in the form jewellery , gold bars, sovereigns etc

The key highlights of this scheme are as follows

1.  It provide annual interest of 2% p.a

2.  Interest earned on the bonds and capital gain arising from the transfer or redemption would be exempt from income tax

3.  Wealth is also not get attracted on these bonds

4.  It is easily redeemable at any point of time and more over redemption is on the fair market value prevailing in the market at the time of redemption

This option is opt by many users and they are taking the advantages of this scheme

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