LTCG on shares relevant to HUFs as effectively

I’m the karta of a Hindu Undivided Family (HUF). I’ve been submitting my tax returns usually. In FY20, the HUF made ₹18,000 in long-term capital positive aspects (LTCG) by promoting listed shares of an organization. The LTCG was calculated utilizing the honest market worth as on 31 January 2018 as per earnings tax guidelines. Do HUFs get the identical profit as a person, the place ₹1 lakh LTCG arising as a consequence of fairness doesn’t entice any tax?

—B.B. Deshmukh

The provisions of Section 112A of the Income Tax Act in relation to computation of tax legal responsibility on LTCG arising on sale of specified securities (together with shares listed on a acknowledged inventory alternate in India) are relevant to all taxpayers, together with HUFs. As per the availability, the resultant LTCG to the extent it exceeds the general restrict of ₹1 lakh each year is taxable within the arms of the assessee at 10% plus relevant surcharge and cess, i.e. the tax legal responsibility on LTCG as much as ₹1 lakh is nil.

Accordingly, in your case, assuming that there is no such thing as a different LTCG taxable as per the provisions of Section 112A of the Act, the tax legal responsibility on LTCG of ₹18,000 from the sale of listed shares shall be nil.

What is supposed by steady service of 5 years for availing tax-free provident fund (PF) withdrawal? My service with Company A was for six years, then with Company B for 5 months, adopted by Company C for 3 years. There was a niche of three months between my employment at Company B and C, and 27 days between Company A and B. All PF accounts have been transferred to the present employer. Will the PF withdrawal (principal) be tax-free within the above case?

—Name withheld on request

From a tax perspective, as per Section 10(12) learn with Rule 8 of Part A of Fourth Schedule of the Income Tax Act, the accrued PF stability due and payable to the worker, i.e. stability to his credit score on the date of cessation of his employment, is exempt from tax if he has rendered steady service for a interval of 5 years or extra. Where there are a number of PF accounts and the PF balances are transferred to the newest PF account, the cumulative interval of employment pertaining to all such PF accounts is required to be seen for the aim of evaluating whether or not the worker has rendered steady service for a interval of 5 years or extra.

In this case, because the PF balances have been transferred to the most recent employer, the cumulative interval of employment shall be thought-about as greater than 5 years (roughly 9 years and 5 months) and accordingly, the accrued stability to the extent payable to you on the time of ceasing employment shall be exempt from tax.

However, please observe that any accretions to the PF stability for the intervals that you simply had been on a break from employment and any accretions to the PF stability from the time that you simply had ceased employment (i.e. after final day of working with the earlier employer until date of withdrawal), can be taxable in your arms.

Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India.

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