Total income and tax of a resident senior citizen with a house property loss and long-term capital gain (as set, 1961 Act, AY 2019-20)

Readings

1. Mr. Rohit Seth is a resident individual aged 66, a senior citizen for the year.
2. The salary of ₹3,00,000 is the income already computed under the head Salaries.
3. The long-term capital gains are taken as taxable at 20% under section 112; the question does not say they arise on listed equity shares (the other case is shown at the end).
4. The savings bank interest of ₹40,000 is interest on a deposit with a bank.
5. The wife's premium of ₹18,000 is dated 05.04.2019, which is in the previous year 2019-20, so it is not a payment of 2018-19. As shown below, the result is the same either way.
6. The Sukanya Samriddhi deposit is in the account of a girl child of his or one for whom he is the legal guardian, as section 80C(4)(ba) requires.
7. The question does not say whether the infrastructure company's debentures form part of an eligible issue of capital. They are taken to: section 80C(2)(xix) covers subscription to debentures forming part of an eligible issue of capital approved by the Board on a public company's application, an eligible issue being one by a public company formed and registered in India whose entire proceeds are used wholly for an infrastructure business referred to in section 80-IA(4) (Explanation (i) to that clause). The other case is shown at the end.

Set off of the house property loss

• A loss under Income from house property can be set off against income under other heads only up to ₹2,00,000 a year (section 71(3A)); the other ₹15,000 is carried forward to be set off against house property income of the next eight years (section 71B).
• Where the assessee has capital gains, such a loss may be set off against them as well (section 71(2)). The ₹2,00,000 is set off against the long-term capital gain: that gain is taxed at 20%, while the slab income it would otherwise reduce is taxed here at only 5%, so this saves the most tax.

Deductions under Chapter VI-A

• The policy was taken in 2017-18, after 1 April 2012, so only premium up to 10% of the sum assured counts.
• Section 80TTB, inserted with effect from 1 April 2019, applies from this year to a resident aged 60 or more.
• Chapter VI-A deductions are allowed only from income other than the long-term capital gain (section 112(2)); that income is ₹6,15,000, more than the ₹1,90,000 claimed.

Computation of total income

Tax liability

Resident aged 60 to 79 (Finance (No. 2) Act, 2019, First Schedule, Part I, Paragraph A, item (II); Finance (No. 2) Act, 2019, section 2(11)): nil up to ₹3,00,000, 5% to ₹5,00,000, 20% to ₹10,00,000, 30% above; health and education cess 4%.

No rebate under section 87A, since for this year it is given only where total income does not exceed ₹3,50,000 (its footnotes date the higher limit from 1 April 2020). No surcharge at this income. ₹27,300 is a multiple of ten (section 288B).

If the facts are read otherwise

• Wife's premium as a payment of 2018-19: 10% of ₹1,75,000 is ₹17,500, which takes the section 80C items to ₹1,77,500; the deduction stays capped at ₹1,50,000, so nothing changes.
• Loss set off against the slab income instead: total income is the same ₹5,25,000, but other income falls to ₹2,25,000; the unused ₹75,000 of the exemption limit reduces the gain (proviso to section 112(1)(a)), leaving ₹2,25,000 taxed at 20%: tax ₹45,000 and tax liability ₹46,800, which is why the set off against the gain is chosen.
• Gains on listed equity shares taxed under section 112A: the ₹1,00,000 left after the set off is not above the ₹1,00,000 that section exempts, so only the ₹6,250 on other income is payable: tax liability ₹6,500.
• Debentures not part of an eligible issue: the ₹35,000 falls out of section 80C, whose items total ₹1,25,000, all deducted; total income is ₹5,50,000 (other income ₹4,50,000), tax ₹27,500 and tax liability ₹28,600.