For all those taxpayers required to report long-term capital gains on sale of Equity Shares/ Mutual Funds in the FY 18-19, there is a Good News.
Reporting of LTCG details in your ITR for AY 19-20 has now been simplified.
The LTCG tax on such equity investments/ Mutual Funds other financial assets was re-introduced for the FY 2018-19 and reporting capital gains in the ITR forms was indeed challenging to most taxpayers.
The Taxpayers were required to provide a separate computation of capital gains for each scrip (equity share) or units of mutual fund sold during the year and the aggregated amount should be provided. However, the Government on July 19 has clarified that the taxpayers now have an option to either enter the scrip wise details of long term capital gains or enter the self-calculated aggregate value of long term capital gains directly under respective items without entering scrip wise details.
As a taxpayer, now one may exercise either option based on one’s convenience. This facility is now available in ITR-2, 3, 5 & 6 utilities.
It is important to note that earlier LTCG from equity shares and equity MF were tax-free. However, from FY 2018-19, LTCG is subject to 10 per cent tax on gains above Rs 1 lakh in an FY. The taxation is, however, grandfathered i.e. gains made till Feb 1, 2018 remains outside the tax net.
Hopefully, with the recently introduced option to either show break-up of LTCG or aggregate amount, the taxpayers will find it easier to file the ITR for AY 2019-20.
Those filing income tax return in ITR Form 2,3,5 and 6 will stand to benefit from this new move from CBDT and will be able to complete the ITR filing process in time as the income tax return filing last date is July 31.
The Government’s step towards simplification of ITR forms is indeed praiseworthy. It remains to be seen, what balancing steps will be further introduced to check malpractice by certain tax payers to declare lesser Gains or to show loss when infact there is a profit.
Will there be automated Income Tax Notice to all those tax payers who go for this option, still remains doubtful.
We would advise all Honest taxpayers to compile and maintain a scrip wise summary of all the transaction of sale and its purchase as per prescribed format. This exercise will not only give you peace of mind but will give you confidence over your documentation to meet any Income Tax Query in case of scrutiny.