Gopal Bohra and Mansi Desai
Have you earned capital gain on transfer of certain capital asset during the financial year ending 31st March 2018 and are you ready to file your income tax return after incorporating such capital gain? Here some tips for you on how to compute your capital gain for the purpose of disclosure in tax return.What are capital gains?
1. Stock in trade, consumable stores or raw materials held for the purpose of business or profession
2. Personal effects that are movable property held for personal use but excludes jewellery, archaeological collection, drawings, paintings, sculptures or any work of art
3. Agricultural land in certain areas, 6 percent or 7 percent gold bonds, National defence bonds, special bearer bonds, and gold deposit bonds under the gold deposit scheme.
Computing capital gains can be a complex and challenging task depending on the nature and number of financial transactions undertaken by the assessee. Income-tax form requires mandatory disclosure of all capital gains realized during the year. The tax rate for these gains depend on the asset class and the holding period. On the basis of the holding period the capital asset are further divided into short term and long term capital assets.Holding period
Capital gain tax ratesThe capital gain tax rate for a resident is as under:
Similarly, on transfer of any other long term capital asset (only land or building or both from AY2019-20 onward) one can invest in certain specified bonds within 6 months from the date of transfer. The taxpayer can invest whole or part of capital gains in such bonds subject to maximum of Rs 50 lakh.Disclosure in ITROnce you computed your capital gains or losses, the next step is to include them in your ITR form. There are different ITR forms based on the type and amount of income. Individuals with income from salary and capital gains are required to file ITR 2. While individuals with income from business or profession and capital gain are required to file ITR 3.
Even if capital gains earned are tax-exempt, they need to be disclosed in the return in schedule EL.(The writer is partner and article trainee at N.A. Shah Associates LLP)