Tax Query: How do I claim a capital loss on DHFL/NCD shares?

Can I claim a capital loss on DHFL shares? It doesn’t even appear in my demat statement. The company had gone to NCLT. Please advise.

Khurchid

Capital gains/losses only come into play when capital property is transferred. In accordance with the provisions of Section 2(47) of the Income Tax Act 1961, “transfer” in respect of fixed assets includes –

(i) the sale, exchange or abandonment of the asset; Where

(ii) the extinction of any rights thereto; Where ……. ”

(iii) ….

We understand that the company has applied to the National Company Law Tribunal (NCLT) and the actions have been expunged.

In the event the company has gone into liquidation or the company has been returned to the NCLT under the Insolvency and Bankruptcy Code and the NCLT has authorized the company to extinguish the shares, you may claim the loss .

However, if the shares still exist, you will be able to recognize capital losses on the disposal of these shares which could be in the event of a company buy-back or company liquidation or off-exchange sale.

I had invested ₹5 lakh in DHFL NCD. After the insolvency of the said institution, the acquirer had settled the said investment by reimbursing me ₹2,27,901. How do I report this loss on my tax return?

K Shankara Rajan

As stated in the answer to the previous question, capital gains/losses only come into play when capital property is transferred. In accordance with the provisions of Section 2(47) of the Income Tax Act 1961, “transfer” in respect of fixed assets includes –

(i) the sale, exchange or abandonment of the asset; Where

(ii) the extinction of any rights thereto; Where ……. ”

(iii) ….

In this case, after the liquidation, I understand that the NCDs no longer exist and you received consideration for the extinction of the rights. The same would amount to a transfer and therefore capital gains/losses would arise.

The nature of capital gains/losses would be determined based on the holding period of these NTMs. The capital loss would be considered a long-term capital loss (LTCL) if the NTMs were held for a period longer than 36 months (12 months in the case of a listed NTM). Otherwise, it would qualify as a short-term capital loss (STCL).

The LTCL can only be adjusted for long-term capital gains. However, STCL can be adjusted against both LTCG and STCG. The unadjusted loss, if any, can be carried forward to subsequent tax years.

My insurance premium due falls on March 21 each year and I only pay it in April each year after 10 days from its due date. In which fiscal year can I claim deductions of 80 C for the premium paid?

Sankaran M

Deduction under Section 80C is available on the basis of payment. For the premium paid on your insurance policy (which is due in March), the deduction will be available within one year of the premium payment. We understand that you made the payment in April, therefore the deduction can be claimed in the year when the premium is paid, i.e. in April.

The author is a practicing Chartered Accountant

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Published on

September 17, 2022

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