ITR Filing:Reporting Of LTCG Gains On Equity Made Simpler

Tax on long term capital gains made on equity investment has been re-introduced in the Union Budget of 2018 with the grandfathering clause. While it was being considered as a big headache because of the intricacy, the income tax department has taken a step in this direction and eased the work of taxpayers for reporting the same. This has been done for the ITR filing to be done for the AY 2020 or FY 2019.

The big change

For the FY 2018-19, you need to report consolidated gains made from equity investment. Equities investment qualify as long term if held for over one year and in the current requirement, as against the earlier proposed required to report each of the equity investments separately, you will have to report net gains from equity-oriented investments. Further, the gains attract LTCG over and above the value of Rs. 1 lakh in the FY 2018-19.

LTCG on equity re-introduced in Finance Bill 2018 and effective from April 1, 2018

Also, another point that needs due consideration of equity investor is that the LTCG tax implications on equity investments become applicable in case the STT is paid both at the purchase and sale of such securities.

Also read: What is grandfathering?

In the grandfathering provision, any gains made up till January 31, 2018, have been made exempt from the tax net. STCG has been not revised and STCG tax @ 15% continues to be charged (excluding cess and surcharge).

LTCG on equity made during FY 19

The reporting for long term gains earned on equity will be made for the first time by equity investors for the return that has to be filed until July 31, 2019, provided the date is extended further as can be likely the case as CBDT has extended the date for issuance of Form 16 by employers.

How reporting has to be done for equity LTCG in ITR?

The assessee has to calculate the LTCG gains on each of the equity-oriented schemes separately but reporting has to be done on an aggregate basis.

"Earlier, taxpayers were facing issues with reporting gains from the sale of equity shares due to the manner in which calculations were to be made in the online form. This was happening since there was grandfathering involved and the resulting values from the selection of the fair market value (FMV) or the purchase price were not accurate. Now this error has been corrected," said Archit Gupta, founder and chief executive officer, ClearTax, an online tax and investing platform.

However, problems persist in the way long-term capital loss (LTCL) needs to be reported. "The online form still has a problem in case of a loss, as the values for carrying forward of loss on the sale of equity instruments is not getting reflected properly. Hopefully, the department will resolve this issue soon," said Gupta.

Reporting of LTCL on equities

Reporting such loss in ITR is also of paramount importance as it can be used to set off LTCG made on any of the assets in the current fiscal year. Also, if such losses exceed the gains made, there is a provision to carry such loss capital gains earned in up to eight subsequent FYs.

ITR forms for reporting LTCG on equity

Different assessee type are required to report such gains on different ITRs, say for instance, resident individuals and HUFs with no profits and gains from business or profession, need to report such income in ITR 2.

ITR 3 is for individuals and HUFs who have income made from profits and gains from business or profession need reporting such income in Section B5.

Non-resident income tax assessees, need to disclose LTCG in Sections B7 and B8 of ITR-1 and ITR-3 forms, respectively.

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