Long-term capital gains not part of total income

I am a senior citizen aged 69 years. For the assessment year 2010-11, my income from other sources was Rs 2.1 lakh, Rs 80,000 was under the head capital gains on sale of equity shares, which is exempt from income tax.

I understand that the maximum amount not chargeable to tax in respect of senior citizen is Rs. 2.4 lakh for the year ending March 31, 2010.
In such a case, please clarify if the capital gains exempt from tax needs to be included to determine the total income. Do I have to file a return of income for the assessment year 2010-11?
V. Subramaniam
Via email

The long-term capital gains arising on shares (dealt in recognised stock exchange and where securities transaction tax is paid) will be exempt from tax and therefore need not be included in determining the total income. From the facts provided by you, it appears that you do not need to file a return of income because an individual is required to file a return only if his total income exceeds the maximum amount not chargeable to tax. Your income is only Rs. 2.1 lakh, which is below the threshold limit applicable to senior citizens and not chargeable to tax. Hence, it is not mandatory for you to file a return of income for the assessment year 2010-11.

If I invest in equity shares or mutual funds on cum dividend basis and sell it on ex-dividend date, the period of holding being one day or more, what will be my income-tax liability?
Rama Sharma
Via-e-mail

Section 94(7) of the Income-Tax Act provides that if a person buys or acquires any securities or unit within a period of three months prior to the record date and sells or transfers the same within a period of three months after such record date and dividend or income on such securities or unit is exempt, then the loss, if any, arising from the said sale will be ignored to the extent of such exempt dividend or income. However, with effect from April 1, 2005, (assessment year 2005-06 and onwards), the time limit in relation to the sale of units (and not securities) is extended from three months to nine months after such record date.

Our company reimburses telephone expenses within a specified limit depending on the position occupied by the employees. Since such reimbursement is less than the amount actually paid by the employee, we do not consider it as a taxable perquisite in view of exemption provided under rule 3 (7) (ix). However, some of the employees have telephones in the name of their spouse or parents. Will this make any difference?
Rama Sharma
Via-e-mail

The practice allowed by the company appears to be in order. The right of deduction for the use of the telephone by the employee cannot be denied to the employer merely because the telephone is in the name of a family member. Further, your company has also taken care to set a limit for reimbursement and hence there should not be any problem in claiming deduction under this head.
(Kamal Rathi is a
chartered accountant,
representing Rathi & Malani, a Hyderabad-based
accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com [1].)