New Delhi: The Income Tax Department issued a clarification on Saturday stating that there is no written reporting requirement for daily trading and the short-term sale or purchase of shares listed on income tax returns for the year of appraisal 2020-21.
In a welcome relief to taxpayers, CBDT said there will be no requirement for scripted reporting in ITR, where earnings come from day-to-day trading shown as business income or in the short-term capital gains nature, where they are not claim any grandfathered benefits. .
Long-term capital gains in stocks above ₹1 lakh is now taxed at a rate of 10%. In addition, investments made up to January 31 were protected with an exemption from gains made up to January 31, 2018 for investments previously made.
“There was a report in a certain section of the media that stock traders / day traders are required to provide details in script form on income return for fiscal year 2020-21. Profit from stock trading in The case of stock traders or day traders is generally classified as short-term capital gains or business income. This is because their holding period of shares / units in most cases is less than one year, which is a prerequisite for earnings to be classified as long-term capital gains.There is no requirement on the return of income for the submission of written reports in the event of short-term or business income arising from stock transactions, these reports are distorted and misleading, “CBDT said in an official statement.
The Finance Law of 2018 allowed the exemption of the gains made on the listed shares / specified units until 31.01.2018 by introducing a grandfathering mechanism for the calculation of long-term capital gains for these shares.
The script details in the TI returns for AY 2020-21 are required to be completed only for the long-term capital gains report for the stocks / units that are eligible for the grandfathered benefit.
Since the exemption will be allowed by comparing different values (such as cost, selling price and market price as of 01.31.2018) for each share / unit, it is necessary to capture the details of the script to calculate the capital gains of these shares . / units. “Deed details are not required on income tax return forms for fiscal year 2020-21 for calculating capital gains / business income from stocks / units that are not grandfathered,” he said. the tax authority.
“Without this reporting requirement, there may be situations where the taxpayer cannot claim or wrongly claim the benefit of the exemption due to lack of understanding of the provisions. Also, if the above calculation is not performed strictly and the taxpayer can enter the total only figures, there will be no way for the tax authorities to verify the accuracy of the claim and therefore many returns will need to be audited, which may lead to unnecessary claims / rectifications at a later stage . is available, the Department can verify it electronically with the stock exchange, brokerage firms, etc. and there will be no need to subject these tax returns to further audits or scrutiny, “said CBDT.
The basic idea behind asking for finer details is basically to catch taxpayers who don’t disclose their transactions.
Since many new investors began investing in mutual funds in the past, and some have also entered the equity markets, the tax department wants to make sure they disclose the earnings that arise from these investments.
Some experts also believe that this will make the tax filing process long and time consuming, since instead of giving the accumulated profit or loss, one will now have to give more precise details of all transactions, it reported. . Mint.
“The primary intent behind requiring written details is to facilitate the taxpayer in correctly calculating the long-term capital gains on these shares / units. The requirement to provide written information on the income tax return is not unique to India. Also internationally, the taxpayer must provide basic information to report capital gains. For example, in the US, a taxpayer who has capital gains from the transfer of shares must complete the details of the deed on Schedule D of Form 1040 – US income tax return form declared by the tax authority.
.
