[FAQs] Income Tax Returns (ITR) | Capital Gains

Vide Circular No. 6/2016, dated 29-2-2016, the CBDT has instructed the Assessing Officers to consider the following while deciding whether surplus generated from the sale of listed shares or other securities is taxable as capital gains or business income:

1. Where the assessee himself, irrespective of the period of holding of listed shares and securities, opts to treat them as stock-in-trade, the income arising from the transfer of such shares/securities would be treated as its business income.
2. In respect of listed shares and securities held for more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as capital gains, the same shall not be put to dispute by the Assessing Officer. However, once taken by the assessee in a particular Assessment Year, this stand shall remain applicable in subsequent Assessment Years. The taxpayer shall not be allowed to adopt a different/contrary stand in this regard in subsequent years.

The CBDT has formulated the above principles to reduce litigation and maintain consistency in the treatment of income derived from the transfer of shares and securities. All the relevant provisions of the Act shall continue to apply to the transactions involving the transfer of shares and securities.

The CBDT[1] has decided that the income arising from the transfer of unlisted shares would be considered under the head ‘Capital gains’, irrespective of the holding period, to avoid disputes/litigation and maintain a uniform approach.

Intra-day trading is considered a speculative business, and the resultant gain or loss would be a speculative gain or speculative loss. Speculative gain is taxed at normal rates, and speculative losses can only be set off against speculative profit.

The benefit of the maximum exemption limit shall be available from long-term capital gains taxable under Section 112A. However, the assessee cannot take the benefit of deduction available under Chapter VI-A. The taxable income and tax liability thereon shall be calculated as under:

In respect to Assessment Year 2020-21, the CBDT has clarified[2] that the scrip-wise details are required to be filled up for those shares/units that are eligible for grandfathering. The Finance Act, 2018 has allowed exemption to the gains made on the listed shares/specified units up to 31-01-2018 by introducing grandfathering mechanism for computation of long-term capital gains for these shares.

Following the press release, we may conclude that the scrip-wise details are not required in income tax return forms for AY 2023-24 to compute gains that are not eligible for grandfathering.

Schedule CG of ITR requires the assessee to furnish the details relating to the immovable property transferred during the year. To track all the transactions related to the sale of immovable properties, the schedule seeks the buyer’s information, such as the buyer’s name, PAN/Aadhaar No. of the buyer, address of the property, etc. It is mandatory to furnish these details irrespective of the fact that immovable property sold is situated in India or outside India. However, quoting of PAN of the buyer is mandatory only if tax is deducted under section 194-IA or is mentioned in the documents related to the sale of the property.