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

  • ITR Week 2024-25|Blog|Income Tax|
  • 4 Min Read
  • By Taxmann
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  • Last Updated on 19 June, 2024

Capital Gains

Capital Gains refer to the profit realized from the sale or exchange of an asset that has appreciated in value over time. The gain is the difference between the asset's purchase price (cost basis) and selling price. Capital gains can occur on various types of assets, including stocks, bonds, real estate, and personal property.
There are two main types of capital gains:
– Short-Term Capital Gains: These are gains from the sale of assets held for one year or less. Short-term capital gains are typically taxed at the same rate as ordinary income.
– Long-Term Capital Gains: These are gains from the sale of assets held for more than one year. Long-term capital gains usually benefit from lower tax rates than short-term gains, encouraging long-term investment.

FAQ 1. I have earned profit from selling listed shares I have held for over 12 months. Will this be treated as capital gain or business profit?

According to Circular No. 6/2016, dated 29-2-2016, the Central Board of Direct Taxes (CBDT) has provided guidelines for determining whether the surplus from the sale of listed shares or other securities should be treated as capital gains or business income:

  • Stock-in-Trade: If the assessee chooses to treat the listed shares and securities as stock-in-trade, irrespective of the holding period, the income from their transfer will be considered business income.
  • Long-Term Capital Gains: For listed shares and securities held for more than 12 months prior to transfer, if the assessee opts to treat the income from their transfer as capital gains, the Assessing Officer will not dispute this choice. However, the stance taken by the assessee must remain consistent in subsequent Assessment Years. Changing this position in later years is not permitted.

These guidelines are aimed at reducing litigation and ensuring consistency in the tax treatment of income from the transfer of shares and securities. All other relevant provisions of the Income Tax Act will continue to apply to such transactions.

Furthermore, the CBDT[1] has decided that income from the transfer of unlisted shares, regardless of the holding period, will be treated under the head’ Capital gains’ to minimize disputes and maintain a uniform approach.

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FAQ 2. I have earned a profit from intra-day trading. Is it taxable as business profit or capital gain?

Intra-day trading is classified as a speculative business. The gains or losses from such trading are considered speculative gains or losses. Speculative gains are taxed at normal income tax rates, while speculative losses can only be offset against speculative gains.

FAQ 3. I have earned a long-term capital gain of Rs. 10 lakhs, taxable at 10% under Section 112A. I have also made an eligible investment of Rs. 1 lakh for Section 80C deductions. How much tax do I need to pay on such income?

The exemption limit applies to long-term capital gains taxable under Section 112A, but deductions under Chapter VI-A are not applicable to such gains. The tax calculation is as follows:


Amount (Rs.)

Total income (long-term capital gains in excess of Rs. 1,00,000)


Less: Maximum amount not chargeable to tax


Gross total income


Tax rate under Section 112A


Tax payable (after cess)


FAQ 4. Mr X has transferred equity shares of various companies after holding them for more than 12 months. Does he need to enter the details of capital gains for each scrip in the ITR?

The Finance Act 2018 introduced a grandfathering mechanism to exempt gains on listed shares and specified units up to 31-01-2018 for the computation of long-term capital gains. For the Assessment Year 2020-21, the CBDT has clarified[2]  that scrip-wise details are required for those shares or units eligible for grandfathering. Based on this, it can be inferred that for AY 2024-25, scrip-wise details are not needed in the income tax return forms for gains that are not eligible for grandfathering.

FAQ 5. Should property and buyer information be reported under the Capital Gain Schedule if such property is situated outside India and sold to a non-resident?

The Capital Gain Schedule (Schedule CG) in the Income Tax Return (ITR) requires the assessee to provide details of any immovable property transferred during the year. This includes the buyer’s information such as name, PAN/Aadhaar No., property address, purchase and sale dates, country, and zip code. It is mandatory to provide these details whether the property is located in India or abroad. However, the buyer’s PAN is only required if tax is deducted under section 194-IA or if it is mentioned in the sale documents.

[1] Letter F.No.225/12/2016/ITA.II, dated May 2, 2016

[2] Press Release, dated 26-09-2020

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[FAQs] Income Tax Returns (ITR) | Annual Information Statement (AIS)
[FAQs] Income Tax Return | Tax Payment | TDS | TCS | Refunds
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