The Central Board of Direct Taxes (CBDT), on June 14, 2019, relaxed the rules on disclosing the long-term capital gains from equity and related investments while filing the income-tax returns (ITR) for fiscal 2019 (the assessment year 2019-20).
In this blog, I will discuss more about the recent announcement by CBDT and how it will help a taxpayer pay the long-term capital gains during this filing season.
The Process So Far
Until now, an individual was required to disclose the long-term capital gains on each equity mutual funds investment separately in the income tax returns.
What Has Changed?
The CBDT has now clarified that an individual is now just required to disclose the consolidated amount of the long-term capital gains from different equity-oriented investments in the ITR.
To recap, the Finance Bill 2018 reintroduced the long-term capital gains tax on equity and related instruments.
Effective, April 1, 2018, the gains from any equity and related instruments are taxed at 10% if these instruments are held for a long-term period of over 12 months.
While computing the tax liability, an individual needs to consider two things – the exemption up to ₹1 lakh for long-term capital gains and the grandfathering clause.
For investments in equity and related instruments on or before January 31, 2018, the gains are considered to grandfathered and thus will be exempted from tax.
How Will It Impact IT Return Filing?
The change is likely to simplify the process of filing if the gains are more than Rs 1 lakh from equity and related instruments in the financial year 2018-19.
For people who made equity investments, for the first time, during fiscal 2019, the gains shall be disclosed in the tax returns that are due for filing during the month.
As per the notification from the board, an assessee is required to compute LTCG separately for equity shares, equity-oriented mutual funds, business trusts and the likes where Securities Transaction Tax (STT) has been paid.
However, the assessee has the flexibility of mentioning the aggregate amount in the ITR instead of bifurcated value.
Benefits Of The Move
Previously, taxpayers faced issues about reporting gains from the sale of equity shares due to the calculation methodology. The problem was also because grandfathering is involved. Thus, arriving at the fair market value (FMV) or the purchase price was not accurate. With the new development, these errors shall be corrected.
Where To Disclose The Details?
The CBDT has notified that the forms ITR-2 and ITR-3 are amended and updated to accommodate these changes.
An assessee is required to disclose the aggregate long-term capital gain and long-term capital loss in the specified columns provided in these forms.
ITR-2 (the form used by individuals and Hindu Undivided Families (HUF) not having income from business or profession) may find a mention of LTCG in Section B4.
Similarly, in the form ITR-3 (the form used by individuals and HUFs having income from business or profession) may find a mention in Section B5 of the form.
Non-resident Indians can disclose LTCG in Sections B7 and Section B8 of ITR-1 and ITR-3 forms, respectively.
It is great to see CBDT relax the rules on LTCG disclosure, reducing the overall hassle of filing Income Tax returns for taxpayers. I hope the department simplifies the reporting of long term capital loss as well, since the issues regarding carry forward of losses on sale of equity instruments still persist.
Disclaimer: The views expressed in this post are that of the author and not those of Groww