Dalal Street Investment Journal

Laws Of Taxation

The Finance Bill presented during a particular year specifies the rates of tax that are proposed to be applicable for the income earned in the ensuing financial year. Also remember that w.e.f. AY 2013-14, the Alternate Minimum Tax has been extended to non-corporate assessees whose adjusted total income exceeds Rs 20 lakh.

KEY POINTS

For income tax returns to be filed in respect of the income earnedduring FY2012, the rates specified/proposed in the Finance Act, 2011 will be applicable.

Alternate Minimum Tax (AMT) is a tax which is payable in case a person has booked profit/adjusted total income, but does not have taxable income as per the normal provisions of the Income Tax Act, 1961.

Long Term Capital Gains on securities in respect of which Securities Transaction Tax is paid are exempt u/s 10 (38) of the Income Tax Act. An assessee can carry forward losses, but cannot carry forward/set off profits from one year to a subsequent year.

Q1: The Finance Bill, 2012 has received the assent of the President after its passage in both houses of Parliament. As regards the rates of tax specified therein, will the same be applicable for the returns of income being filed for the year ended March 31, 2012. Please clarify.

- Shivam Singh

A: The Finance Bill is presented by the Hon. Finance Minister, Government of India every year specifying the rates of tax that are proposed to be applicable for the income earned in the ensuing financial year. Thus, the Finance Bill, 2012 specifies the rates of tax that will be applicable for the income earned during the financial year from April 1, 2012 to March 2013. In fact, after knowing the various proposals, the assessee is free to plan his/her income to take advantage of the proposals or to avoid pitfalls.

For returns to be filed in respect of the income earned during the financial year ended March 31, 2012, the rates specified/ proposed in the Finance Act, 2011 will be applicable.

Q2: I have been told that the Alternate Minimum Tax (AMT) has been introduced for individuals. I am a salaried person, and my taxable income is approximately Rs 12 lakh. Do I have to pay AMT (at 18 per cent) in addition to my normal tax liability?

- Rohit Sharma

A: The Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) is a tax which is payable in case a person has booked profit/adjusted total income, (that is to say income as per the books of accounts. Both these terms have been defined in Chapter Xii-BA of the Income Tax Act, 1961) but does not have taxable income as per the normal provisions of the Income Tax Act, 1961. It is the minimum tax which an assessee has to pay in case he/she has availed benefits from certain exclusions and deductions under the said Act. Thus, a person has to calculate the tax liability as per the normal provisions of the said Act as well as the provisions of Chapter XII-BA of the said Act, and pay the tax liability, whichever is higher.

The provisions of Chapter XII-BA were hitherto applicable only to companies. The applicability of the provisions of the said chapter is now extended to non-corporate assessees with effect from AY 2013-14 (that is the financial year ended March 31, 2013). However, the provisions of the said chapter are not applicable to individuals, HUFs, association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if the adjusted total income of such a person does not exceed Rs 20 lakh.

Q3: In 2010-11, I had made Long Term Capital Gains (LTCG) by selling equity shares worth around Rs 2 lakh on the BSE/NSE. In 2011-12, I have incurred a Long Term Capital Loss (LTCL) by selling equity shares worth around Rs 3 lakh on the BSE/NSE. I have not filed my returns for both the years. Can I set off the previous year’s capital gains with the subsequent year’s capital loss as mentioned?

- Shivam Singh

A: Long Term Capital Gains on securities in respect of which Securities Transaction Tax (STT) is paid, are exempt u/s 10 (38) of the Income Tax Act, 1961. Furthermore, the said Act provides for a person to carry forward losses incurred in a particular financial year, but does not permit carrying forward and setting off profits from one year to a subsequent year.

Besides, as the long term capital gains on securities in respect of which STT is paid is exempt, the long term capital loss incurred thereon is neither allowed to be set off against any income nor is it allowed to be carried forward in any subsequent year. Thus, the loss you have incurred will lapse.