Share transfer to kin will not attract tax
I am working with a private firm as an accountant. I have a query regarding rent payable, account adjusted to rent, deposit account. For example, if we are paying Rs 1 lakh rent plus Rs 10,300 service tax at the rate of 10.3 per cent. We deduct TDS of Rs 10,000 (on the rent only). We had paid two months of rent — Rs 2 lakh — as a
deposit. We had vacated the premises on October 31, 2009 and the last two months rent was adjusted to rent deposit account. We have neither paid service tax nor deducted TDS in the two months. So kindly explain service tax and TDS procedures.
Madhu P
Via email
TDS on rent for these two months has to be deducted and paid with interest before March 31, 2010. The expenditure pertaining to rent for the two months amounting to Rs. 2 lakhs will be disallowed and added back to your income for FY 2009-10. However, if the TDS amount is deposited during FY11, the same will be allowed as admissible expenditure. As far as service tax liability is concerned, it is the duty of the landlord to collect and pay the service tax applicable to him.
For FY 2008-2009, I had filed my tax returns from Jaipur, where I was working. The I-T department has sent a refund of Rs 9,930 in January 2010. In the meantime, I shifted to Chennai and was unable to trace the refund cheque, which my friend sent me later on. Upon receiving it, I deposited the cheque immediately in the bank, but it was dishonoured due to the expiry of due date. I want to ask if I can get a fresh cheque? If yes, please tell me the procedure that has to be followed. Is there any procedure to get the cheque deposited directly to my bank account?
Pinaki Ranjan Datta
Via Email
You are required to submit the refund voucher received from the I-T department to the same assessing officer for revalidation along with a letter. You may mention all your bank particulars — account number, MICR code etc and request for the transfer of refund amount to your bank account through ECS directly. It is however advisable to follow up with the official through your representative.
The father of one of my friends has been holding on to a firm’s shares for more than four years which is worth Rs 20 lakhs as on today. He would like to transfer them to his daughter, who in turn would sell them in less than a year to part fund the purchase of a property in her husband’s name. Please clarify what is the best course of action?
K.S. Ram Prasad
Via email
The transfer of shares to daughter’s account will not attract any tax liability. In case the shares are traded on a recognised stock exchange, there will be no capital gains tax liability on sale of such shares because they are held for more than one year. In case, the mode of transfer of shares is by way of gift, will or inheritance, the cost and period of holding of the previous owner is also considered and hence there will be no capital gains tax liability in the hands of the daughter.
(Kamal Rathi is a chartered accountant, representing Rathi & Malani, a Hyderabad-based accounting firm. Readers can mail their queries on income tax tokamalrathi.ca@gmail.com.)
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