Understand the tax implications of selling joint property when ownership shares aren’t defined, and explore the concessional 10% tax rate for patent royalties under Section 115BBF.
l How is long-term capital gains to be divided between holders of property purchased in joint names when there’s no mention of their individual share in the property?—B B Vij
When a property is purchased in joint names, such as between husband and wife, and the purchase deed does not specify their respective ownership shares, the Income-tax Act does not prescribe a fixed ratio. In practice, tax authorities look at the concept of beneficial ownership, which is generally determined based on factors such as the source of funds used for purchase, loan servicing (including who paid the EMIs), supporting documentary evidence (for example, bank statements), and any mutual understanding between the joint owners if it is supported by conduct. Where both owners have contributed equally and there is no evidence to the contrary, capital gains are typically divided equally (50:50). However, if one individual has funded the entire purchase, the capital gain may be attributable solely to that person.
l How do I calculate the tax on royalty received on a patent every year? Are there any exemptions?—Sumesh Behl
Income by way of royalty from an eligible patent (i.e., developed with at least 75% of the expenditure incurred in India) received by a resident patentee is taxable at a concessional rate of 10% (plus applicable surcharge and cess) under section 115BBF of the Act, on a gross basis without allowing any deductions. Alternatively, the patentee may choose to offer such royalty income to tax at the normal slab rates under the applicable head of income and can claim a deduction under Section 80RRB of the Act up to Rs 3 lakh per year or the actual royalty received, whichever is lower. However, no such deduction shall be allowed in the new tax regime under Section 115BAC.
l I am a salaried taxpayer and last year I opted for the new tax regime. As I have taken a home loan this year, can I opt for the new tax regime when I file income tax returns in July this year?—Dilip Sharma
Yes, you may opt for the new tax regime underSsection 115BAC of the Act while filing your return, even if you have availed a home loan. However, under the new regime, the deduction for housing loan interest under Section 24(b) of the Act is not available in respect of a self-occupied property but can be availed for a let-out property, without permitting set-off of any resulting loss against other heads of income. Carry out a comparative evaluation of the old and new tax regimes before exercising the option to determine the more beneficial choice.
The writer is managing partner, AKM Global, a tax and consulting firm. Send your queries to fepersonalfinance@expressindia.com
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