1. An individual having Capital Gain on sale of Equity is required to file ITR 2. The article discusses the procedure to report Equity Capital Gain in Income Tax Return New Portal.

2. STEP BY STEP PROCEDURE

(a) Login to www.incometax.gov.in

(b) The path is: – e-file>Income Tax Return > File Income Tax Return. Select: AY 2021-22 (Current AY) > online. Start New filing > Individual> Select ITR Form > ITR 2> Let’s Get Started. Tick on the reason for filing Tax. Taxable income is more than basic exemption limit.

(c) Select Schedules –  General

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 1

(d): Click on Income Schedule and select the following schedules: –

Reporting of Capital Gain on Sale of Equity – ITR 2 Image

 (e)  Click on Schedule Capital Gain. Select Type of Capital Assets: –

Reporting of Capital Gain on Sale of Equity – ITR 2 Image

3 DOWNLOAD DEMAT ACCOUNT STATEMENT: Demat Account statement is a summary of all the transactions in the Demat account. The statement provides the relevant details like sale consideration, date of acquisition, cost of acquisition, Period of holding, ISIN Code, etc. These details are required to be reported in Capital Gain Schedules of Income Tax Return.

Demat Statement can be download either directly from the website of the relevant national depository or through a broker with whom the taxpayer maintains a Demat account.

4. Capital gains tax on Equity can be long-term or short-term, depending on the duration for which the individual holds the Equity.

5. SHORT TERM CAPITAL GAIN (STCG): Equity shares, units of equity-oriented mutual funds, or units of business trust having a holding period of less than 12 months are considered Short Term Capital Assets.

Capital Gain arising on transfer of such Capital Assets, transferred through a recognized stock exchange and liable to Securities Transaction Tax (STT), is Short Term Capital Gain covered under section 111A of Income Tax Act.

Short-term capital gain under section 111A is taxed at a flat tax rate of 15% provided that such transaction is chargeable to Security Transaction Tax.

If total taxable income excluding short-term gains is below taxable income i.e. Rs 2.5 lakh the shortfall of basic exemption can be adjusted against short-term gains. The remaining short-term gains shall be then taxed at 15% + 4% cess on it.

Security Transaction Tax (STT) is a tax levied at the time of purchase and sale of securities listed on Stock Exchanges in India.

Equity Oriented Mutual Fund is the funds that invest 65% of the investible funds in the Equity Shares of the domestic companies.

Business trusts are like mutual funds that raise resources from many investors to be directly invested in realty or infrastructure projects. 

5.1 REPORTING OF STCG UNDER SECTION 111A

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 4

Click on Add details.

The example of Demat Account Statement indicating the details of Capital Gain is as follows: –

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 5

Enter Consolidated amount of consideration received from sale of short term Assets & cost of acquisition thereof in the financial year. CBDT vide press release dated 26 September 2020 clarified that script-wise reporting is not required for the sale of the short term listed shares

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 6

Note: Indexation is not considered for calculating the Cost of Acquisition / Improvement in the case of Short Term Capital Gain.

6. LONG TERM CAPITAL GAIN The Equity Share and Equity related instruments like Mutual Fund Units having more than one year of holding is Long Term Capital Assets.

Long Term Capital Gain on sale of Equity Share and Equity related instruments like Mutual Fund Units, liable for Security Transaction tax covered under Section 112A of Income Tax Act.

The rate of long-term capital gains tax on these listed securities is 10% for gains exceeding the threshold of Rs 1 Lakhs

7. REPORTING OF LTCG – SHARES ACQUIRED AFTER 31ST JAN 2018

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 7

Capital Gains on sale of shares, acquired after 31.01.2018 is the difference between the selling price and the actual cost of acquisition, as no indexation benefit is provided under section 112A

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 8

The following screen indicating Long Term Capital Gain will be displayed

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 9

8. GRAND FATHERING PROVISION -SHARES ACQUIRED BEFORE 31ST JAN 2018

Capital gains from the sale of listed equity shares, units of the mutual fund, and business trust were exempted until FY 2017-18 (AY 2018-19)

The Finance Act, 2018 introduced the grandfathering provisions to exempt long-term capital gains earned until 31 January 2018.

A method of determining the Cost of Acquisition (COA) has been specifically laid down in the case of specified securities bought before 1 February 2018.

Cost of Acquisition will be calculated as follows:

(a) Fair Market value as of 31st Jan 2018 F
(b) Actual Selling Price S
(c ) Lower of (a) and (b) L
(d) Original Cost of Acquisition( purchased before 31st Jan 2018 P
(e) Cost of Acquisition ( Higher of the L & P ) C

ILLUSTRATION

Sl. Fair Market Value(F) Actual Selling Price (S) Lower of (F) & (S) = L Original Cost of Acquisition (P) Cost of Acquisition (Higher of L & P = C )
(a) 2,00,000 4,00,000 2,00,000 1,00,000   2,00,000
(b) 1,80,000 1,00,000 1,00,000 1,50,000   1,50,000

ILLUSTRATION

Mr. Anupam purchased 1000 shares @ Rs 150 in the year 2005. On 17.09.2021, he has sold the shares @ 300/- per share. Fair Market price of these shares as on 31st Jan 2018 is Rs 160/- per Share. The Cost of Acquisition and Long Term Capital Gain will be computed as follows

Cost of Acquisition

Sl Fair Market Value(F) Actual Selling Price (S) Lower of (F) & (S) = L Original Cost of

(P)

Cost of Acquisition (Higher of L & P = C )
1000*160 =1,60,000 1000*300 =3,00,000  

1,60,000

1000*50 = 1,50,000  

1,60,000

Capital Gain = Selling Price – Cost of Acquisition

                             3,00,000- 1,60,000

                         = Rs. 1,40,000

Tax on Long-term Capital gain on equity shares listed on a stock exchange are not taxable up to the limit of Rs 1 lakh.

The long term capital gain of more than Rs 1 lakh on the sale of equity shares or equity-oriented units of the mutual fund will attract a capital gains tax of 10% and the benefit of indexation will not be available to the seller

8.1 REPORTING OF CAPITAL GAIN UNDER GRANDFATHERING PROVISION

Scrip-wise details are required to be reported in ITR 2 for LTCG eligible for Grandfathering clause. Script-wise details include the name of the scrip, ISIN, purchase price, sales price, and the dates of these transactions.

The purpose is to ensure that tax officials can verify and validate the computation of capital gain after factoring in the grandfathering clause.

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Once you enter script-wise detail in 112A Schedule and click on Add, the cost of Acquisition and Capital gain will be auto calculated by the portal and will be displayed as indicated below: –

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8.2 CHALLENGES: – The biggest challenge is to obtain script-wise details in an appropriate format from broking and mutual fund aggregator firms. “Many do not provide ISIN codes in their transaction statements. The taxpayer needs to search manually and feed this data into the return filing software. Further, 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 return filing software. This is particularly cumbersome when it comes to disclosing systematic investment plans (SIP). It is better to ask brokerage, fund house, or mutual fund aggregator to provide the details in excel to facilitate easy copying and pasting on to online ITR form as also ISIN of each scrip.

9. SCHEDULE SI The taxpayer having Short term – long-term Capital gain is required to select Schedule SI: – Income chargeable to tax at special rates. This schedule is nothing but a summary of taxable Capital gain, special tax rate, and tax thereon.

Reporting of Capital Gain on Sale of Equity – ITR 2 Image 12

10. ADJUSTMENT AGAINST BASIC EXEMPTION LIMIT: A resident individual and resident HUF can apply for adjustment of the exemption limit against Long Term Capital Gain.

In the above illustration, Mr. Anupam does not have any other income.  The total income including the LTCG is below the basic exemption limit, hence there is no tax liability.

No tax deduction under sections 80C to 80U is allowed from long-term capital gains.

*****

Disclaimer: The article is for educational purposes only.

The author can be approached at [email protected]

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32 Comments

  1. Anis says:

    I found the article very informative, lucid & helpful.

    However, I am experiencing a problem on which I would appreciate help. My LTCG on sale of shares is Rs 14, 458/- My understanding is that this income is Tax-Free (as it is below the threshold of Rs 1 lakh). However, for some mysterious reason, this figure is getting added into my total income & thereby inflating my tax liability. Kindly advise as to how to handle this. Is it that the IT dept feels that income above the threshold of Rs 1 lakh needs to be reported & those below the threshold need not be reported?

    1. Anita Bhadra says:

      Tax on Capital Gain up to Rs 1,00,000 is not being calculated
      You can confirm this by clicking on Schedule SI and also reconfirm by calculating tax separately.

      The portal presentation is such as tax is added whereas actual tax liability is on total income after basic exemption of Rs 100000 on LTCG

  2. mohanlal sinha says:

    I am filing my itr2.I am pensioner with agriculture income over Rs.5000 and some capital gain on mutual fund units. My problem is the schedule EI is not appearing in the it Portal and have tried several times but unable to enter the agriculture income due to missing of schedule EI. Please help. Thanks.
    with regards.

    1. Anita Bhadra says:

      It is appearing .
      First time when you select , it won’t display .

      Click on > Add more schedules ( Left side down ) You will find Schedule EI

  3. D.Kamath says:

    Kindly request you to explain the same in the specific context of its applicability to NRI Individuals. Given the fact that all Purchase/sale transactions are executed through the NRE PIS Accounts held with a bank in India whereby the Capital gains tax is computed by the bank and is deducted in full as TDS and credited to Revenue.

  4. BIPLAB CHANDA says:

    After filling Schedule 112A, LTCG is 1040/-.
    But it’s getting added to Total Income and being taxed. But upto 1.0 lakh is exempted.
    Kindly advise how to avail of rebate.
    For this Filing of ITR2 by me is getting delayed.
    Plz help.

    1. Anita Bhadra says:

      Check the schedule SI . You will find the net figure after adjustment of basic exemption.
      You can also check preview before filing the return .

  5. S Narayan says:

    Lucid article on capital gains on equity shares and MF units.
    Likewise I would appreciate information on capital losses on shares and MF units.

  6. Kausik Ray says:

    Thanks for this extremely educative piece of information. Kindly also let me know about which form I am required to submit for IT Return informing capital gains and dividends given I have already a monthly income from pension also.

  7. Pradeep Kumar Sharma says:

    How do you account a investment capital loss and STCG net loss / but LTCG profit and hundreds of share security transactions done in a iifl portfolio managed fund when those people don’t supply info as required by itr2 and uploadable and even info in report cannot be copied.
    Because in the form those are separatly demanded

    And if you have dabbled in securities on your own too then to combine the two is another hassle as even depository banks like icici dont generate report in itr2 requurd format.

    Your suggestions please.

  8. p.padmanabhan says:

    very informative.I am yet to begin preparation. Can u pl mail me your mail id to enable me to get in touch with you for clarification of doubts? thanks in advance.

  9. Saikrishna says:

    The Illustrations of the 111A are completely erroneous. The figures given in the situation like ‘FV as on 31st Jan, 2018’ is 37.537.5 per share, but the calculation takes it as 160 per share while solving it. Also the Original COA given is 50 per share, but taken as solved under 150 per share.

    1. Anita Bhadra says:

      Thanks for your humble comment . Schedule 111A and SI both to be selected . Amount in SI will automatically flow from 111A . However, it need to be confirmed

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