Selling shares, mutual funds? Here's how you must report your LTCG in ITR filing

For investors, long term capital gains (LTCG) tax happens when an asset is held for over 36 months.

The deadline for filing ITR has been extended from July 31, 2019, to August 31, 2019. Photo: Reuters

The Long Term Capital Gains (LTCG) came back in India during Budget 2018 announcement, with a bang and elicited mixed feelings from markets, investors and experts. LTCG occurs for investors, when an asset is held for over 36 months. These assets are equities, preference shares, securities, units, equity oriented mutual funds and zero coupon bonds. It needs to be noted that, every income arising from other sources even including stocks and mutual funds, must be reported in Income Tax Return (ITR) filing, as per the Income Tax Department law. Hence, it is of utmost importance that you file ITR for your LTCG in order to avoid I-T department notice or being in its black list.

At present, the deadline for filing ITR has been extended from July 31, 2019, to August 31, 2019. Hence, taxpayers are having a few days' breather to still report their LTCG in ITR.

During the Budget 2018 announcement, former Finance Minister Arun Jaitley had laid out a new tax reforms in LTCG. Now, 20% tax rate is levied as LTCG except on sale of equity shares/ units of equity oriented fund. For sale of Equity shares/ units of equity oriented fund, the LTCG stands at 10% over and above Rs 1 lakh gains.

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Hence, here's how you should file your ITR for LTCG.

According to I-T department, while selling shares/mutual fund units, for the convenience of taxpayers, a tool in the form of Schedule 112A and 115AD have been provided. Thus, a taxpayer can fill the same so that final values will flow to the respective items in schedule CG under long term capital gains. However providing the information using the tool is not mandatory. Taxpayers can compute the aggregate gain/loss manually and input the values directly in the respective items in schedule CG under long term capital gains.

Using of the tool schedule 112A or 115AD to compute capital gains long term capital securities transactions is optional. In case you want to use the tool, the ISIN number of scrips can be obtained from https://www.nsdl.co.in/list-codes.php.

All resident and non-resident taxpayers who have income chargeable under long term capital gain covered u/s 112A will have to fill item B4 in ITR-2 and item B5 in ITR-3,5,6.

The data captured here will flow to ‘Schedule SI’ u/s 112A. In case of ‘Foreign Institutional Investors’ taxpayer has income chargeable under long term capital gain then, they have to fill u/s 115AD(1)(iii) under item B7 in ITR-2 and item B8 in ITR-3,5,6.

As per the provision of Income Tax Act, on LTCG, the exemption of Rs.1,00,000 should be provided while calculating Tax and not for the purpose of computing Income. Therefore for complying with the law, in the Utility the exemption field of Rs.1,00,000 provided in Schedule CG has been greyed-off and benefit of 1 lakh is considered in schedule SI to calculate the tax payable on such capital gains exceeding the threshold limit.

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