Introduction
ITAT Ruling relief to taxpayers who wish to claim capital gains deductions, though they may have not filed returns. ITAT has given landmark ruling which is much in need to all taxpayers, who might have missed the filing of their income tax returns but still intend to claim capital gains deductions.
ITAT Ruling
The bench of ITAT has rendered such an order where it decided that people can claim capital gains deductions even if they have not filed income tax returns. Such an order is against the norm, as understood in the conventional sense: that only those taxpayers shall avail of the abovementioned benefits who have filed their returns.
Important Takeaways from ITAT Ruling:
•Does not Prohibit Residents to Avail Deductions: ITAT clarified that Income Tax Act does not prohibit its residents from availing deductions if they haven’t filed their returns.
•Substantive Rights: The tribunal clarified that the said focus must always stay on the substantive right of the taxpayer to deduct rather than on technicalities as filing of return.
•Effects on Tax Payers: All tax payers whose returns remained un-filed were considered for this capital gains tax exemption.
What is Capital Gains and How Can It Be Claimed?
Capital Gains: This is actually sort of income that one earns as a result of the sale of capital assets such as property or shares and even other investments. These can either be a short-term capital gain or long-term capital gain depending on the period that it has been held for.
Relief under Capital Gains: Income Tax Act reduces the tax liability of the taxpayer. The most common ones are as follows:
•Section 54 Any residential property is invested
•Section 54F Any capital gain bonds are invested
•Section 54EC any specified bonds are invested
Use of ITAT Ruling
Decision of ITAT would be of great value for the taxpayers:
•Capital Gains Relief to Non-Filers: even missed returns are eligible for capital gain relief.
•Importance of Record: Sellers of assets as well as investments and the people who are investing their capital gains have to retain proper record that refers to the above-selling assets as well as investing in capital gains.
• Specialized Knowledge Needed: Taxpayers need tax experts so that they understand the precise implications that come along with the ruling and make them fulfil tax legislation.
How To Avail Capital Gains Exemption Without Filing Return
ITAT order, in the case under discussion is a perfect antidote but one needs to avail of the exemption doing everything in the right order-
1. Revival in case of a Late Date: File a late return of the concerned assessment year that becomes due on or before the last date.
2. Annex relevant documents with Return: Annex sale deeds, records of purchase of properties, and proof of investments
3. Professional Help: As such you would ensure to get professional help in making all the returns so as to claim the highest possible capital gain.
Where the judgment of ITAT has been a relief in large measure, still there are certain points that need to be kept in mind before one tries to claim such capital gains exemptions:
Belated Return: Filing Date
When late returns can be filed: In case that is not the same then the additional claim cannot be done.
Interest and Penalties: The late submission of returns may incur interest and penalties that could offset some of the after effects of the deduction.
Recordation and Documentation
Book Keeping: Accurate recordation of all transactions involved in the sale and purchase of assets
Original Documents: These are preserved as an evidence for ownership and investment.
Bank Statements: They are kept to prove the actual date and amount of the transaction.
Specific Deduction Sections:
•Section 54: It allows investment for that much relief which can be taken on income in case there is investment in a residential property.
•Section 54F: Under this, there is investment in specific bonds and allowance is made for deduction over the above amount.
•Section 54EC: Here, you are given relief for investment in bonds issued by the government for capital gain. Seek a Tax Professional
•Simple Case Scenario: If your tax position is complicated, seek a tax professional who will educate you on the actual effects of the judgment given by the ITAT.
•Strategic Planning: A tax professional can facilitate having a more tax-efficient strategy that will prohibit the increasing spending of your money for extra taxes, bringing you away from being over-taxed.
•Update: A tax professional can keep you updated on any new policy and legislations for tax purposes; you would avoid a breach of such law.
Conclusion
Of course, this decision brings a great deal of relief to the taxpayer who, in all probablities, might have thus missed an opportunity to file returns. The ruling by the ITAT stands subject to further interpretation and cannot be said to apply in all cases. Hence, it would be advisable to undergo a proper consultation with a tax expert and assess your particular situation to understand the prevailing implications of such a ruling.
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