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

YOUR QUERIES: INCOME TAX: No tax benefit on loss on FD due to insolvency of finance company
© Provided by The Financial Express So your son may buy foreign currency from the funds of his NRO account, without any monetary thresholds.

By Chirag Nangia

I started fixed deposit of Rs 5 lakh in January and February 2019 with DHFL and maturity date was March and April 2020 with maturity amount Rs 5,48,990. After Piramal Finance acquired DHFL, it paid me Rs 1,23,610 on September 29, 2021. Loss on extinguishment of FDR will be a nominal loss or long term/ short term capital loss? Further, loss would be calculated from amount deposited or maturity amount? I have income from rental property and interest. Can this loss be set off against the above income?

-Ashok Jain

For taxation purposes, capital gain or loss arises when there is a ‘transfer’ of capital asset. ‘Transfer’ includes sale/ exchange/ relinquishment of assets or extinguishment of rights for a price. Unlike securities (like shares or debentures), corporate deposits cannot be transferred for a price. The Income Tax Act does not explicitly provide guidance as to such a situation of loss of deposits in case of insolvency of a finance company. Therefore, the amount of loss suffered by you must not be claimed or adjusted against any income and should be treated as dead loss.

I am a senior citizen with interest income of Rs 1.75 lakh during FY 2020-21 after adjusting for 80C deductions . I have Rs 3 lakh long term capital gain from equities of which Rs 1 lakh is tax free. Can I adjust the balance amount from the balance of the basic income tax limit of Rs 3 lakh which is Rs 1.25 lakh and pay tax on Rs 75,000?

-Mangal Ranade

A resident individual is permitted to adjust the basic exemption limit against LTCG/ STCG, after making adjustments of other income. Therefore, you have to pay taxes only on the long-term capital gains over the basic exemption limit applicable to you,Rs 3 lakh.

Can my NRI son buy foreign currency of his resident country from the funds of his NRO account while visiting India? If yes, for how much?

-(Name withheld)

NRO accounts may be opened / main-tained in the form of current, savings, recurring or fixed deposit accounts and the funds in such accounts can be used for making all local payments in rupees. So your son may buy foreign currency from the funds of his NRO account, without any monetary thresholds.

The writer is director, Nangia Andersen India. Send your queries to

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