Reporting capital gains on the income tax return (ITR) will undoubtedly become a chore for the taxpayer. With the aim of the tax office to leave no stone unturned, the information in the ITR forms has only increased in recent years.
Here we simplify the reporting requirements for short-term capital gains (STCG) and long-term capital gains (LTCG) according to the capital gains overview in the ITR forms.
Information on ownership, equity
Fortunately, after many adjustments in recent years, there have been no significant changes to the current ITR forms (valid for fiscal year 21). The only change concerns immovables.
Here, the difference between the transaction value and the circle rate is changed from 5 percent to 10 percent in order to comply with the changes to the tax law proposed in the 2020 budget.
In the case of STCG / LTCG when selling properties, information such as consideration, stamp value, acquisition costs of the property and the name and PAN / Aadhaar number of the buyer etc. must be disclosed.
This information must be provided separately for each property transferred during the year. If you have sold land and buildings, specifying the buyer’s PAN is only mandatory if the tax deduction is made in accordance with Section 194-IA or is mentioned in the documents.
When selling listed stocks or equity-based mutual fund shares, while STCG can be reported for sale on a consolidated basis, share-by-share long-term capital gains disclosures (for which a LTCG tax of 10 percent was introduced in the 2018 budget) for sale above ₹ 1 lakh) for certain Transactions must be reported in accordance with Appendix 112A.
However, the Central Board of Direct Taxes (CBDT) made it clear in a press release dated September 26, 2020 that stock-related reporting in the ITR is only required for stocks that are eligible for grandfathering.
The grandfathering clause exempts LTCG tax on listed stocks until January 31, 2018 for securities purchased prior to that date.
The ITR form has introduced a dropdown function in Appendix 112A, where the taxpayer can choose whether the share was acquired “on or before” or “after January 31, 2018”.
For the listed shares / units acquired after January 31, 2018, only the consolidated amount of the sales consideration and the acquisition costs must be stated. For others, the fields stating “ISIN code” and “Name of the share / share” must be reported in scripts.
Amounts reinvested in certain specific forms such as home ownership, agricultural land or tax-free bonds – which fall under Section 54 – can be claimed as a deduction from capital gains. The details of these claims are to be specified in accordance with Part D of Appendix CG. Report information such as the cost of the new home / farmland and the amount invested in specified / registered bonds and the date of these transactions.
In addition, Part E of Appendix CG provides for the offsetting of capital losses in the current year against capital gains in the current year. Most of the schedule is filled in automatically, but be aware that long-term capital loss can only be adjusted with long-term capital gains. While short-term capital losses may be offset against both long-term and short-term gains.
In addition, Part F of the Appendix requires quarterly disclosure of income data under the heading “Capital Gains” which will be used in the calculation of pre-tax liability and interest under 234C. Thus, quarterly reports on the receipts or receipts of capital gains have to be reported.
Other timetables
While the majority of Annex CG requires the details to be entered, other investments relevant to the reporting of capital gains mostly only require confirmation, as most of the details would have been filled in automatically.
The capital gains in a financial year that remain after the intra-head netting (as discussed above) are accounted for in Appendix CYLA, in which the netting is made against the losses of the current year under various sources of income.
Losses under any other head can be offset against income under the capital gains head.
The income remaining after offsetting the losses of the current year is then shown in accordance with Appendix CYLA in Appendix BFLA, where loss carryforwards from previous years are offset.
The loss carryforwards according to this timetable are selected from the timetable CFL of the ITR form, in which the details of the loss carryforward must be entered manually. Note that the short term capital loss carried forward can be offset against any STCG or LTCG. However, a long-term capital loss carried forward can only be offset against an LTCG.
In the event of a capital loss instead of a capital gain, the capital loss remaining after the above adjustments is transferred to table CFL for loss carryforwards in future years, ie in the next eight assessment years from the assessment year in which the loss occurred.
Type of submission
Individuals with capital gains must report the income in the ITR 2 / ITTR 3 form for fiscal year 21. ITR 3 is required if a person has commercial or professional income in addition to income from capital gains.
The CBDT has launched a new offline utility called JASON for the 2021-22 assessment year. The existing Excel and Java utilities have been discontinued. The new JSON utility is currently enabled for ITR 1 through 4.
The utility imports and fills in the data as much as possible from the e-filing portal while entering the most important transaction data. Once the JSON file has been created, it will need to be uploaded to the new income tax filing portal, which is not yet fully functional.