I understand that 10 per cent LTCG tax on equity is chargeable when the profit in this category exceeds ₹1 lakh. I sold a few shares that I had held for more than a year. Based on the highest price obtained on January 31, 2018, I have arrived at a gross profit of ₹3,08,500. Do I have to set aside ₹30,850 (10% of the total) as tax payable? Or should I reduce the limiting factor of ₹1 lakh from the ₹3,08,500 and pay 10 per cent on ₹208,500? Please confirm whether the 4 per cent health and education cess is to be paid on ₹3,08,500?

AK Ramdas

As per the amendment made in the Finance Act, 2018, long-term capital gains exceeding ₹1 lakh arising on transfer of listed equity shares shall be taxable at a concessional rate of 10 per cent. Further, surcharge (if any) and health and education cess at 4 per cent shall apply.

You have earned LTCG of ₹3,08,500 in FY2018-19. As the LTCG in excess of ₹1 lakh is taxable, you are liable to pay taxes at 10 per cent on ₹2,08,500 — ₹ 20,850. Surcharge at the rate of 10 per cent or 15 per cent is applicable if your income is over ₹50 lakh or ₹1 crore, respectively. Besides, cess at the rate of 4 per cent is applicable on the total value of tax and surcharge. Based on the limited details provided, we understand that the surcharge may not apply in your case. Therefore, the total tax payable is ₹21,684 (₹20,850 + ₹834 (4 per cent of ₹20,850).

If an NRI gives a credit card in his name to a resident Indian to use in India with a limit, is there any tax incidence on the NRI or the resident Indian?

Laxman

There are no direct provisions under the I-T Act which governs the taxability on the usage of an NRI’s credit card by a resident Indian. However, in case the credit-card payments are made by the NRI on account of the card usage by the resident, it may tantamount to a ‘gift’, and provisions of Section 56 (2)(x) of the I-T Act may apply if such payments exceed ₹50,000. The resident will be then required to pay tax on the same.

However, an exemption is provided if the NRI qualifies to be a relative of the resident Indian as prescribed under the provisions of the I-T Act and subject to conditions.

Subject to the above, there may not be any direct tax implications.

We have restricted our comments to the provisions of the I-T Act. Provision of a credit card by a NRI to a resident Indian may have to be examined from the perspective of FEMA (Foreign Exchange Management Act) and RBI regulations.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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