Capital features on equities: All it’s essential to know when submitting returns this 12 months

Mint provides you a useful information on tips on how to report capital features from shares and fairness mutual funds.

Choose the suitable ITR type

ITR-2 is the commonest type for people and Hindu Undivided Families (HUFs) who’ve earnings from capital features however no enterprise earnings. For people or HUFs with earnings from earnings and features of enterprise or occupation who even have earnings from capital features, ITR-3 is to be crammed. 

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Until final 12 months, taxpayers with any capital features could not use the easier ITR-1 (Sahaj) and ITR-4 (Sugam) kinds. However, for evaluation 12 months 2025-26 onwards, in case your whole long-term capital features (LTCG) from listed equities or fairness mutual funds do not exceed ₹1.25 lakh and you haven’t any carry-forward capital losses, you possibly can go for ITR-1 or ITR-4, supplied different necessities are fulfilled. 

Gather paperwork

The ITR utilities haven’t been launched but, however when you have capital features, you must begin accumulating these paperwork:

Capital features assertion: Your capital features assertion will be downloaded from a registrar and switch agent (RTA) akin to Kfintech and CAMS, or from the asset administration firm’s web site. The P&L assertion will be downloaded out of your brokerage account. It has particulars of the acquisition date, buy worth, promoting date, promoting worth and web acquire or loss for every transaction that must be crammed within the ITR.

Invoices for bills: Any bills incurred for the acquisition or sale of the asset, akin to brokerage and stamp responsibility, will be claimed as a deduction. Abhishek Mundada, accomplice, Dhruva Advisors, stated solely bills incurred in reference to the capital features will be claimed as deductions.

“Broker costs, stamp responsibility and financial institution costs are allowed however securities transaction tax (STT) shouldn’t be,” he stated. “Charges in portfolio administration companies (PMS) are debatable as these are thought of extra as advisory charges, particularly when lump sum or combination charges are agreed upon, which might not be allowed as a deduction. However, if these charges are transaction-specific and payable solely when the transaction is consummated, they are often claimed as deductions.”

Annual data assertion: The AIS captures particulars of your monetary transactions throughout the 12 months, together with securities and mutual fund transactions. You ought to cross-verify all the knowledge within the AIS for accuracy. Sanjoli Maheshwari, govt director, Nangia Andersen India, stated whereas the AIS generally is a helpful reference software when reporting capital features, taxpayers shouldn’t depend on it utterly. 

That’s as a result of usually there are errors within the AIS owing to grandfathering provisions, mismatches in knowledge reported by the dealer and the depository, and duplication of entries by numerous reporting businesses.

Janhavi Pandit, a chartered accountant in Mumbai, defined how there could also be mismatches in knowledge reporting. “If you acquire shares via a demat account with dealer A and shifted to dealer B earlier than promoting the shares, dealer B could not have right value of acquisition of the shares. Values reported within the AIS thus must be confirmed with precise contract notes on the time of buy,” she stated.

“Discrepancies in knowledge reported within the ITR and the AIS can result in delays in processing of the ITR or refunds, earnings tax notices, and even detailed scrutiny,” Maheshwari stated.  “To keep away from this, taxpayers ought to reconcile the main points supplied by the stockbroker or PMS via which the precise capital-gain transactions have been made with the AIS. Details should be as per the precise transaction paperwork, and AIS ought to solely be used as a reference software,” she added.

Investment proofs: If you claimed any exemptions in your capital features by reinvesting them underneath sections 54, 54EC, 54F, and so forth, preserve the paperwork useful as you have to to fill within the particulars to keep away from paying capital features tax. 

Determine the holding interval and tax charge

It is essential to appropriately determine the holding interval of the fairness asset to categorise it as short-term or long-term. “For FY25, there’s uniformity within the holding interval to find out whether or not capital property shall be short-term or long-term. For listed securities, together with fairness shares, debenture/ bonds, ReIT, invIT, and fairness mutual funds, 12 or extra months of holding makes them long-term property. For unlisted securities, the holding interval is 24 months,” stated  Mundada.

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However, there’s added complexity within the tax charges this 12 months as there are two totally different tax charges for fairness property bought earlier than and after 23 July 2024. For property bought earlier than that date, the STCG and LTCG charges are 20% and 10%, respectively. For property bought after that the STCG charge is 20% and LTCG charge is 12.5%. The ITR kinds require you to report capital features made earlier than and after 23 July 2024 individually. Calculating and reporting capital features on fairness shall be barely extra difficult because the tax and holding interval must be calculated individually for every fairness asset.

How to fill in Schedule CG

Capital features must be reported underneath Schedule CG within the ITR type. Schedule CG asks for a number of particulars such because the date and price of acquisition, the date and quantity of sale, bills associated to the switch, and the listed value of acquisition (for LTCG on non-equity property). For long-term inventory and mutual fund holdings, scrip-wise particulars are to be crammed in for every transaction underneath Schedule 112A. To report STCG on fairness, you solely want to supply the full sale quantity and price of acquisition, not particular person scrip-wise particulars. 

The system will calculate the LTCG or STCG based mostly on the dates and quantities you enter.  However, scrip-wise reporting of every LTCG transaction will be tedious.

Last 12 months there have been two methods of reporting LTCG scrip-wise – manually filling within the knowledge or importing a comma separated values (CSV) file. Manual submitting is okay if there are just a few transactions, however importing a CSV helps save time if there are a number of transactions.

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“The CSV format template will be crammed in from the capital acquire statements (Excel format) supplied by brokers. The detailed directions and coding for use are supplied by the earnings tax portal,” stated Pandit. 

It shouldn’t be but identified if transaction particulars of shares and mutual funds, as they seem within the AIS, shall be pre-filled within the ITR utility or not. “If such pre-filled knowledge is supplied to taxpayers, it is going to be simpler to overview and edit it for Schedule 112A,” stated Pandit. 

Stock splits, demergers and Esops

While filling within the particulars, you need to be further cautious in instances of inventory splits, demergers and worker inventory choices (Esops). “As a shareholder, you must contemplate the corporate bulletins with respect to demerger, share cut up, and so forth. This will have an effect in your reporting in case you could have bought these shares,” Pandit added. When promoting shares obtained via Esops, their honest market worth ought to be thought of within the 12 months they have been exercised.

After you could have crammed within the particulars and the utility calculates capital losses in your fairness property, these are set-off and carried ahead. “Once the taxpayer enters all of the transactions in Schedule CG, the income-tax utility mechanically sets-off the STCL and LTCL in opposition to eligible capital features, if any, throughout the 12 months. The utility will then mirror the web capital features, if any, after making use of the set-off in Schedule CG,” stated Maheshwari.

If capital losses should not set-off within the present 12 months, the utility will mechanically populate Schedule CFL (carried ahead losses) with the unabsorbed losses, exhibiting the quantity that may be carried ahead to subsequent years.