Your Queries – Income Tax: Assessee can claim deduction of up to Rs 50 lakh under Section 54EC

As per the provisions of the Income Tax Act, long term capital loss can only be set off against long term capital gain.

I sold HDFC Hybrid Debt Fund and made Rs 1,50,000 capital gains. I have made capital loss on various listed shares. Can I adjust the gain on an unlisted fund with listed shares?
—Alexander James Moraes
For tax purposes, listed shares are required to be classified as either short-term or long-term based on the period of holding. Listed equity shares or units of equity-oriented funds are classified as long-term capital assets if they are held for a period more than 12 months, else they are categorised as short-term. Likewise, debt funds are classified as short term if held for a period less than 36 months, else the same are treated as long-term. As per the provisions of the Income Tax Act, long term capital loss can only be set off against long term capital gain. However, short term capital losses can be set-off against both short/ long term capital gain. Therefore, depending on the classification based on period of holding, you may set off losses accordingly.

l Can I claim Rs 50 lakh tax exemption under Section 54EC and Rs 50 lakh under Section 54EE both?
—Pankaj Gupta
An assessee can claim deduction of up to Rs 50 lakh under Section 54EC, by investing gains from sale of long-term asset in specified assets like bonds of RECL/NHAI, within a period of six months, in that financial year and the next. He can claim tax exemption on such capital gains if invested in specified funds under Section 54EE up to Rs 50 lakh in the financial year and the next year. As per the provisions of the law, Section 54EC and Section 54EE are not mutually exclusive. No restriction has been imposed in respect of claiming exemption under both the sections. Therefore, you may claim deduction under both sections for Rs 50 lakh each.

l My last EPF contribution was in August 2019. I have received EPF interest for FY 2019-20. My query is will the EPF interest be taxable for the entire FY 2019-20 or will the EPF interest be taxable for the period September 2019 to March 2020 only?
—Arup Majumdar
As per a recent judicial pronouncement, interest on EPF to the extent of the amount earned post retirement has been held to be taxable. Conservatively, you may offer the amount of interest earned post retirement to tax.

The writer is director, Nangia Andersen India. Send your queries to [email protected]