YOUR REQUESTS: INCOME TAX: No tax benefit on the loss on FD due to the insolvency of the finance company

Thus, your son can buy foreign currency from the funds in his NRO account, without any monetary threshold.

By Chirag Nangia

I started a fixed deposit of Rs 5 lakh in January and February 2019 with DHFL and the due date was March and April 2020 with a due amount of Rs 5,48,990. After the acquisition of DHFL by Piramal Finance, it paid me Rs 1,2,3,610 on September 29, 2021. Will the FDR forfeiture loss be a nominal loss or a long-term / short-term capital loss term? Also, would the loss be calculated from the amount deposited or the amount at maturity? I have income from rental property and interest. Can this loss be offset with the above income?
—Ashok Jain
For tax purposes, a capital gain or loss arises when there is a “transfer” of a capital asset. “Transfer” includes the sale / exchange / surrender of assets or the extinguishment of rights for a price. Unlike securities (like stocks or bonds), business deposits cannot be transferred for a price. The Income Tax Act does not provide explicit guidance as to such a situation of loss of deposits in the event of the insolvency of a finance company. Therefore, the amount of loss you suffered should not be claimed or adjusted against any income and should be treated as a net loss.

I am a senior with interest income of Rs 1.75 lakh in fiscal year 2020-21 after adjusting for deductions of 80C. I have a long term capital gain of Rs 3 lakh from stocks of which Rs 1 lakh is tax free. Can I adjust the balance amount from the basic income tax limit balance of Rs 3 lakh or Rs 1.25 lakh and pay tax on Rs 75,000?
—Mangal Ranade
A resident individual is allowed to adjust the basic exemption limit against LTCG / STCG, after making other income adjustments. Therefore, you only have to pay tax on long-term capital gains exceeding your applicable basic exemption limit, Rs 3 lakh.

Can my NRI son purchase foreign currency from his country of residence from funds in his NRO account while visiting India? If so, for how much?
– (Name withheld)
NRO accounts can be opened / maintained in the form of current, savings, recurring or fixed deposit accounts and the funds from these accounts can be used to make all local payments in rupees. Thus, your son can buy foreign currency from the funds in his NRO account, without any monetary threshold.

The writer is director, Nangia Andersen India. Send your questions to [email protected]

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