Dear sir/madam My query is 1)I want to know which section disallows fixed deposits, unlisted goi bonds,kisan vikas patra to be considered as capital asset 2)why indexation benefit is not applied on them,as this will reduce our taxes/I can claim notional LT capital loss on principal amount I have 2 points to support these 1)Nabhi's "Income-tax Guide" its Board of Editors have opined that redemption of debt instruments like debentures, fixed deposits and bonds are transfers resulting in capital gains as they involve extinguishment, termination, cessation or cancellation of rights in a capital asset on the authority of CIT v East India Charitable Trust (1994) 206 ITR 152 (Cal) 2)As per section 2(14) capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, Nowhere ,fixed deposits/NSCs/GOI bonds r shown as exception/excluded Pls tell me your views wrt above 2 .i had asked similar query for GOI bond and 80% CAs denied to consider goi bonds as capital asset
Dear Sir,
1) Fixed deposit, KVP are not securities as aper SCRA Act,1956. It covered bonds therefore I replied bonds can be treated as capital asset if they are capital indexed bonds. Therefore no indexation benefit is allowed to them.
2) Extinguishment is abandon/surrender of my rights in property. In case of maturity of FD, KVP there is no Extinguishment of rights.
Thanks
Hi,
Hope you are doing well !
1) In your earlier question you have asked about taxation of 7.75% GOI bonds. These are not capital indexed bonds. Also, 7.75% GOI bonds are not transferable/tradeable. So we have replied accordingly that it will not be treated as capital assets.
Further, the principal portion of fixed deposit is not taxable as it's not a capital asset as per definition in section 2 of the income tax act .
Interest on fixed deposits alone is taxable under the “Other sources” and is subject to tax deduction at 10%.
2) Capital gain arises only if there is a capital asset and there is transfer of capital asset .
Fixed deposit/unlisted goi bonds/ kisan vikas patra on maturity there is no extinguishment of rights / there is no question of transfer.
Thanks & Regards,
Payal Chhajed
Hi
Interest on fixed deposits is taxable under the head “Other sources” and is subject to tax deduction at 10%.
Capital gain arises only if there is a capital asset and there is transfer of capital asset .
Fixed deposit, unlisted goi bonds, kvo erc are not considered as capital assets.
