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Mint
a day ago
- Business
- Mint
No taxable income? You may still have to file a return in these scenarios.
One question that always comes up during tax season is: 'Do I need to file a return if my income is below the basic exemption limit?" At first glance the answer seems obvious. No taxable income, no return. But India's Income tax Act doesn't look at things through the 'income earned" lens alone. And frankly, that makes sense. Think about that one friend on Instagram whose weekdays are a blur of exotic vacations. When you meet them in person, they complain: 'Buddy, I'm broke." Yet they're somehow sipping sangria in Spain and Seychelles every other week. Wondering how the math works? So is the taxman. Not having taxable income doesn't automatically mean you're off the hook. The law looks at how you live, spend, and save—not just how you earn. That's why it says: even if there's no taxable income, certain people must still file a return. It's the government's way of keeping track of big financial moves, opulent lifestyles, and transactions that would otherwise have slipped through the cracks. The basic rule Companies, limited liability partnerships (LLPs) and partnership firms have no escape—they must file returns every year, even if they have zero income or losses. For individuals and others, Section 139(1) of the Act requires you to file a return if your gross total income (before deductions under sections 80C, 80D, etc) exceeds the 'maximum amount not chargeable to tax". This the part that trips people up: is that ₹2.5 lakh (old regime) or ₹3 lakh (new regime)? Earlier, the limit was ₹2.5 lakh ( ₹3 lakh for senior citizens, ₹5 lakh for super-seniors). But now the new regime under Section 115BAC has become the default, with a basic exemption of ₹3 lakh. So the trigger can be said to be ₹3 lakh, not ₹2.5 lakh. And it doesn't matter which regime you eventually pick—the law looks at the 'maximum amount not chargeable to tax" under the Finance Act, which is ₹3 lakh. That said, many professionals still advise filing a return if your income crosses ₹2.5 lakh to avoid disputes and build a clean record. That's the simple part. Now let's get into some lesser-known but equally important triggers. Hidden triggers Even if your income is below taxable limits, you are required to file a return if you cross certain thresholds or perform certain transactions. You must file a return if in these situations: Why does the government do this? This may all sound cumbersome, but it's not about troubling the small guy. It's about gathering data and keeping tabs on large money flows. If someone deposits crores in current accounts or spends lakhs abroad, the tax department wants a paper trail, even if the person technically owes no tax. Why you should consider filing voluntarily Even if you are not required to file a tax return, doing so can strengthen your financial profile, speed up loan and visa approvals, ensure refunds are processed smoothly, and act as a shield in case the taxman comes knocking later. Think of it as your annual financial report card. Vijaykumar Puri is a chartered accountant and partner at VPRP & Co LLP, Chartered Accountants.
Mint
03-08-2025
- Business
- Mint
How to calculate stamp duty on the share of property my brother is gifting me?
—Name withheld on request As per Indian Stamp Act, 1899 read with state-specific laws, most states prescribe stamp duty on a gift deed as calculated based on the share being transferred as per the current market value, not the original contribution ratio — unless the shareholding is clearly recorded in the registered sale deed. In your case, although your brother contributed 30% of the purchase price, the registered deed considers both of you as 50:50 co-owners, since there's no explicit mention of contribution ratios. A money receipt, while helpful, is not conclusive evidence of ownership proportion in property law unless acknowledged in the title document itself. So, if the current market value of the property is ₹ 100 and your brother is gifting 'his share,' the stamp duty would typically be calculated on ₹ 50 (i.e. half the property's current market value), not ₹ 30. That said, stamp duty rates and exemptions vary by state. Some states offer concessional stamp duty for gifts between siblings or close relatives, and the definition of 'relative' for this purpose may also differ. It's advisable to consult the local Sub-Registrar and/ or a property lawyer to check if sibling-to-sibling gifts qualify for such concessions in your state. —Name withheld on request Under law, Hindu Undivided Family (HUF) is treated as a separate entity, distinct from its members (including Karta). The HUF has its own PAN, bank accounts, demat accounts and files its own tax returns. ESOPs are granted to an individual in their capacity as an employee, and are not usually transferable to the HUF, even after vesting. In most cases, the terms of the ESOP plan are likely to prohibit any such transfer. Even if technically permitted, shifting vested ESOPs to the HUF for tax planning may not work in substance. In short, ESOPs cannot be used for HUF-based tax planning. Routing such income through the HUF would likely be considered tax avoidance, and the income may still be clubbed back to the original holder under section 64(2) of the Income-tax Act, 1961. CA Vijaykumar Puri, partner at VPRP & Co LLP, Chartered Accountants
Mint
29-07-2025
- Business
- Mint
Selling property? Know what counts as ‘cost of improvement' for capital gains calculation
When you sell a residential property, the profit earned—known as capital gains—is taxable. However, this tax can be significantly reduced by claiming allowable deductions such as the cost of improvement. While this term is widely used, not every property-related expense qualifies, tax experts caution. This Mint story explains what expenses qualify as improvements, citing legal provisions and real-world examples. How is the cost of improvement defined? Chartered Accountant Vijaykumar Puri clarified: 'Cost of improvement is clearly defined in income tax law, specifically under Section 55. It refers to expenses of a capital nature related to additions or alterations to an asset. Not all expenses qualify as capital expenses." Essentially, capital expenses are those that materially enhance the value or life of the property. For instance, structural changes such as converting a 3BHK into a 2BHK to expand the hall area, or major renovation work like flooring, tiling, or painting as part of a refurbishment project qualify. But regular maintenance like fixing a broken tap or paying property taxes do not. Puri added: 'The key distinction is between capital expenses and routine expenses. Capital expenses are those that add value or significantly modify the property, while routine expenses like maintenance or statutory fees are not considered when calculating the cost of improvement." Also read: Who can avail the indexation benefit on property sale and is it even worth it? Keep proof ready Proper documentation is essential. Even valid expenses can be disallowed without proof. 'To claim these expenses, you must have proper documentation and bills," said Puri. He recalled a striking case: 'A taxpayer submitted bills using the Calibri font for expenses claimed before 2007—the year Calibri was introduced. AI technology quickly picked up on this discrepancy." His warning is clear: 'Trying to forge documents or be 'over-smart' with tax claims is no longer a viable strategy." What does the law say? Ajay Vaswani, a chartered accountant and NRI tax advisor, explained that the capital gains computation is governed by Sections 48 and 55 of the Income Tax Act. 'Section 48 outlines the computation of capital gains and permits the deduction of: expenditure incurred wholly and exclusively in connection with the transfer, indexed cost of acquisition, and indexed cost of improvement," he said. He added that Section 55 defines 'cost of improvement" strictly as capital expenditure incurred in making any additions or alterations to the property after acquisition. 'Routine maintenance and expenses already claimed under other heads, such as 'Income from House Property', are explicitly excluded." Also read: Why you must defer property sale from March to April Eligible vs ineligible When calculating capital gains on property sale, it's essential to know which costs are allowed. Improvements like adding rooms, rewiring, plumbing, or new flooring qualify. Even large-scale painting projects, if part of a renovation, may count. Not allowed: routine touch-ups, society charges, property tax, electricity meter fees. Paying tenants to vacate the property qualifies, since it improves the marketability of the asset. Legal fees and transfer costs—like NOCs or society charges—are also deductible, as is brokerage or commission paid to agents. For instance, 'brokerage or commission paid to agents for facilitating the sale of the property is deductible, as it is an expenditure incurred wholly and exclusively in connection with the transfer," Vaswani noted. Many homeowners make the mistake of including expenses that the income tax act doesn't allow. These include; routine maintenance or society charges, property taxes, municipal levies, or electricity connection fees are not allowed. What about home loan interest? According to Vaswani, home loan interest can be added to the cost of acquisition when calculating capital gains, provided it hasn't been claimed under any other head, like Section 24. Adding such interest can help reduce capital gains tax at the time of sale. Explaining the distinction under the old tax regime, Vaswani stated that for self-occupied properties, interest deduction is capped at ₹2 lakh/year, applicable only if construction is completed within five years from the end of the financial year in which the loan was taken. If not, the limit reduces to ₹30,000, and any excess interest cannot be carried forward. For let-out properties, there's no upper limit on interest deduction, but set-off against other income is limited to ₹2 lakh/year. Any remaining loss can be carried forward for 8 years, but only against 'house property income', not other heads. Under the new tax regime, no home loan interest deduction is allowed, whether for self-occupied or let-out properties. Further, loss from house property cannot be set off or carried forward. Vaswani suggested that taxpayers under this regime may capitalise the interest, that is, add it to the cost of acquisition, if it relates to purchase or construction and hasn't been claimed elsewhere. This reduces the taxable capital gains. Furniture sales On furniture sold with the house, Vaswani clarified it's not taxed with the property since furniture is a movable personal asset under Section 2(14) of the Income Tax Act. But if no separate value is assigned to it in the sale deed, the full sale price may be taxed as part of the capital gain. To avoid this, 'itemise furniture value separately," he advised. Vaswani highlighted a recent legislative change affecting NRIs: 'Pursuant to recent amendments, non-residents (NRIs) are not eligible to claim indexation benefit on the sale of immovable property in India on or after 23 July 2024." They can still claim valid capital improvements, but can't use indexation to adjust for inflation—raising their tax liability. Final thoughts Understanding what constitutes a valid cost of improvement can help reduce your tax liability, if done right. As Puri cautioned, 'The Income Tax department is becoming increasingly sophisticated in detecting fraudulent claims, even using AI technology to identify inconsistencies." Whether you're a resident or an NRI, it's best to maintain a clear record of capital improvements and avoid including any ambiguous expenses. According to experts, only legitimate, value-adding, and well-documented expenses stand the test of tax scrutiny. Also read: These bonds offer tax exemption on long-term capital gains. But are they right for you?
