All you wanted to know about reporting capital gains in ITR forms

Reporting capital gains in income tax returns (ITR) is undoubtedly becoming tedious for taxpayers. With the taxman aiming to leave no stone unturned, the disclosures in the ITR forms have only increased in the last few years.

Here, we simplify the reporting requirements of short term capital gains (STCG) and long-term capital gains (LTCG) under Capital Gains Schedule in the ITR forms.

Property, equity disclosures

After many tweaks over the last few years, there is thankfully no significant change to the current ITR forms (applicable for FY21). The only change is in the case of immovable property.

Here the difference between the transaction value and the circle rate is now altered to 10 per cent, from the previous level of 5 per cent, to be in line with the amendments in the tax law proposed in the Budget of 2020.

In case of STCG/LTCG on the sale of immovable property, it is mandatory to disclose the details such as consideration, stamp value, cost of acquisition of the property and name and PAN/Aadhaar number of the buyer etc.

These details should be furnished separately for each immovable property transferred during the year. If you have sold land and building, quoting the PAN of buyer is mandatory only if tax is deducted under section 194-IA or is mentioned in the documents.

For sale of listed equity shares or equity-oriented mutual fund units, while STCG on sale can be reported on a consolidated basis, scrip-wise details for long-term capital gains (for which LTCG tax at 10 per cent was introduced in Budget 2018 for sale exceeding ₹1 lakh) for certain transactions have to be reported under Schedule 112A.

However, the Central Board of Direct Taxes (CBDT), vide a press release dated 26.09.2020, clarified that scrip-wise reporting in the ITR was required only for those shares/units eligible for the benefit of grandfathering.

The grandfathering clause exempts tax on LTCG on listed equity shares up to January 31, 2018 for those securities bought before that date.

The ITR form has introduced a drop-down feature in Schedule 112A wherein the taxpayer can select if the share/ unit was acquired “on or before” or “after 31.01.2018”.

For the listed shares/units acquired after 31.01.2018, the consolidated amount of sale consideration and cost of acquisition alone should be reported. For others, the fields requiring details of “ISIN code” and “name of share/ unit” scrip-wise has to be reported.

Amounts reinvested in certain specified forms such as residential house property, agricultural land or tax free bonds – which comes under Section 54 – can be claimed as deduction from capital gains. The details of such claims have to be furnished as per part D of the Schedule CG. Information such as cost of new residential house/agricultural land and amount invested in specified/notified bonds and date of these transactions are to be reported.

Further, part E of the Schedule CG provides for set-off of current year capital losses with current year capital gains. The schedule is mostly auto-filled but note that the long-term capital loss can only be adjusted with any long-term capital gains only. While short-term capital losses are allowed to be set-off against both long-term and short-term gains.

Also, part F of the Schedule requires reporting of quarter-wise details of incomes under the head ‘capital gains’, details of which is taken for calculation of advance tax liability and interest under 234C. Thus, capital gains accrual or receipt have to be reported on a quarterly basis.

Other schedules

While most of the Schedule CG requires entering the details, other schedules relevant to reporting of capital gains mostly require just confirmation as most of the details would have been auto-populated.

The capital gains in a financial year, remaining after intra head set off (as discussed above), will be reflected in Schedule CYLA, where set-off against current year losses under various heads of income takes place.

Here, losses under any other head can be set off with income under the capital gain head.

Subsequently, the income remaining after set off of current year losses, as per Schedule CYLA will be shown in Schedule BFLA, where set off of brought forward losses of earlier years takes place.

The brought forward losses under this schedule will be picked from Schedule CFL of the ITR form, in which brought forward losses details are to be manually entered. Note that brought forward short-term capital loss can be set off against any STCG or LTCG. However, brought forward long-term capital loss can only be set off against an LTCG.

In case of capital loss instead of capital gain, the remaining capital loss after above adjustments will be taken to Schedule CFL for losses to be carried forward to future years - that is, next eight assessment years from the assessment year in which the loss was incurred.

Mode of filing

Individuals having capital gains shall report the income in ITR 2/ITTR 3 form for FY21. ITR 3 is required when an individual has income from business or profession in addition to capital gains income.

The CBDT has launched a new offline utility called JASON for the assessment year 2021-22. The existing excel and java utility have been discontinued. The new JSON utility has currently been enabled for ITR 1 to 4.

The utility will import and pre-fill the data from e-filing portal to an extent possible, while the key transactional data has to be keyed in. Once the JSON file is created, it that has to be uploaded to the new income tax e-filing portal, which is yet to be fully functional.

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