Basic exemption limit on short-term capital gains only for resident individuals, HUFs: Harsh Roongta

My query is what is income tax liability on short-term capital gains (STCG) to a non resident (NRI) when income is less than the minimum threshold of Rs 2,50,000. The income tax department software is charging 15% STCG even income is less than Rs 2,50,000. Please clarify.
—A H Poonawala

In case the short-term capital gains were on account of listed equity shares which were sold on a stock exchange or equity-oriented mutual fund, then the provisions for tax calculations as per section 111A of the Income Tax Act provide that 15% tax is payable by non-residents on a flat basis without getting any benefit of the initial exemption limit of Rs 2,50,000. Unfortunately, the basic exemption limit is available only for resident individuals and HUFs, and not for any other entities. If the short-term capital gains is not on account of either of the two types of sale mentioned above, then the benefit of initial exemption will be available even to non residents.

I am salaried person. Last year, I switched my job to a new company. I withdrew all my Employee Provident fund (EPF) balance around, which was Rs 5,45,000, on which 10% TDS has already been deducted under section 192A. I had withdrawn the EPF before completion of 5 years. Now, my question is in which Income Tax returns should I file my return, ITR 1 or ITR 2? And, under which head I need to show the above proceeds received, salary or other sources? I had used the above proceeds for repayment of my loan. Am I liable to any further tax liability since the TDS is already deducted.
—Vijayendra Devadiga

The amounts withdrawn from the EPF shall be treated as "salary", but the tax payable on it is calculated in a complicated manner as provided in Rule 9 of Part A of the forth Schedule to the Income Tax Act. It is not possible to explain the full implications of that calculation without knowing a number of additional facts. Essentially, whatever contribution was made by your employer will be treated as taxable salary in that year and if you have claimed any deduction under section 80C in respect of your own contribution to the EPF, that will be reversed for each of the years in which it was claimed and the interest accrued on the full EPF will be treated as income of each year. All the past year's assessment will be re-worked on the above basis and the additional tax payable will be found out by the assessing officer and charged in this year. Please make full disclosure as required in the I-T form applicable to you.

Harsh Roongta is a chartered accountant and Sebi-registered investment expert. Send your queries – be it on mutual funds, tax, loans or savings – to personalfinance@dnaindia.net or tweet them to @AskHarshdna