There’s marginal relief for stock market investors. The Central Board of Direct Taxes (CBDT) has clarified that scrip-wise disclosures are not required for short-term sale or intra-day trades. But if you are going to report long-term capital gains (LTCG), then you will have to disclose the details.
Will I have to furnish scrip-wise details if I have booked LTCG during financial year 2019-20? What is the CBDT’s objective behind seeking this information?
Yes, you will have to, if your LTCG is eligible for grandfathering. “Scrip-wise details required include name of the scrip, ISIN, purchase price, sales price and the dates of these transactions,” says Karan Batra, Founder and CEO, Chartered Club. If you draw a salary or pension and have booked capital gains, you will need to furnish these details in the tax return form ITR-2.
The grandfathering clause, which reduces the tax impact for investments made on or before January 31, 2018, was introduced in the Union Budget 2018, along with the 10 per cent tax on LTCG over Rs 1 lakh in a year. Budget 2018 has protected your gains till January 31, 2018. Only gains that have been accruing from February 1, 2018 onwards (and assuming you stayed invested as on 1 April 2018 and beyond) will be taxed on sale.
It’s because of this clause that transaction-wise details are needed. “The purpose is to ensure that tax officials can verify and validate your computation of capital gain after factoring in the grandfathering clause,” says Batra. This will not possible if you were to provide a consolidated capital gains figure.
Why did the CBDT issue a clarification on disclosure of capital gains?
Certain news reports had implied that even day traders will have to declare transaction-wise details of capital gains made on sale of equity shares and equity mutual funds. The CBDT refuted these reports, affirming that scrip-wise details will have to be furnished only if you had booked LTCG. “The gains from share trading in the case of stock traders or day traders are generally categorised as short-term capital gains or business income. This is because their holding period of shares or units in most of the cases is less than one year, which is a prerequisite for the gains to be categorised as LTCG,” the CBDT said in an official release. There is no requirement in the income tax return form for providing scrip-wise details in case of short-term or business income arising out of share transactions, it added.
ITR forms provided this option last year too. Why has scrip-wise disclosure resulted in disquiet amongst taxpayers this year?
Yes, but scrip-wise details were not compulsorily required to be disclosed in filing tax returns for the financial year 2018-19 (assessment year 2019-20). At the time, the tax department had given in to concerns of tax-payers and had accepted consolidated figures. Now, you have to disclose the scrip-wise details in schedule 112A. “The (new) ITR forms were notified in May and included a detailed schedule (for LTCG). As per the e-filing utility submission of this schedule mandatory. So, while the schedule was included last year as well in ITR-2, it was optional and return filers were allowed to provide a consolidated LTCG figure,” says Archit Gupta, Founder and CEO, Cleartax.
This has also made the process cumbersome. Chartered accountants say that the biggest challenge is not furnishing the data but obtaining it in an appropriate format from broking and mutual fund aggregator firms. “Many do not provide ISIN codes in their transaction statements. We have to manually search and feed this data into the return filing software. Also, most demat and mutual fund statements are provided in PDF format, which means that each transaction detail has to be manually copied and pasted in our return filing software. This is particularly cumbersome when it comes to disclosing systematic investment plan (SIP) details,” says Batra. This is because each purchase would have been made at different dates over a period of time.
“Ideally, they should provide these statements in excel format. After all, the income tax department had already enabled the option to provide scrip-wise details in the previous assessment year (2019-20),” he adds.
What is the best approach to completing this part of the return-filing process?
To make the process relatively easier, you can ask your brokerage, fund house or mutual fund aggregator to provide the details in an excel to facilitate easy copying and pasting on to online ITR form as also ISIN of each scrip. While you have time until November 30 to complete the process, it’s best to start right away so that such procedural hassles can be ironed out at the earliest.
You can also consider private tax return filing portals or chartered accountancy firms that allow you to upload these reports and pay a fee to complete this schedule as part of the return filing process.