Investors must prepare tax-filing checklist early to avoid hiccups

With the task turning more complex, procrastinating will compound your problems

Filing of income-tax returns (ITRs) just turned more time-consuming and complex for people who engage in frequent share transactions. If you sold shares during the last financial year, then you have to fill up a number of details (name of share, sale price per unit, full value of consideration, etc) for Assessment Year 2020-21.

This rule applies only to listed shares or units held for more than 12 months — that is to long-term capital gains or losses. Says Gopal Bohra, partner, N.A. Shah Associates: “This rule does not apply to securities held for less than 12 months.”

The I-T forms (specifically ITR 2, ITR 3, ITR 5, and ITR 6) have a specific schedule — Schedule 112A —wherein the details of listed shares/units sold during the year, on which securities transaction tax has been paid, can be reported. Schedule 112A applies to all assesses, barring charitable entities to whom ITR 7 is applicable.

Even for Financial Year (FY) 2018-19, the ITR forms are contained in Schedule 112A. Says Balwant Jain, investment and tax expert from ApnaPaisa: “Those ITR forms had the option to provide the consolidated figures. But in the forms for 2019-20 (FY20), it has become mandatory to declare the finer details.”  

Those who engage in share transactions should begin compiling this data early. Says Suresh Surana, founder, RSM India: “Even though the due date for filing ITRs for FY20 has been extended up to November 30, those who have to report transactions under Schedule 112A should start collating scrip-wise details right away.”

In future, keep an excel sheet or a file where you enter the dates and details of all sale transactions carried out during the year.

Says Surana: “In case the security/share does not have international securities identification number code, mention ‘INNOTAVAILAB’. Even brokerage firms provide transaction details for the financial year for tax-reporting purposes. Take their help.” Those who engage in frequent transactions may seek the help of a chartered accountant.

While this measure does make tax filing more cumbersome, it has certain benefits.

Says Bohra: “The authorities get data for specified financial transactions from stock exchanges, brokers, etc. Their system maps that data with your tax returns. Any mismatch, especially in the case of high-value transactions, could result in a notice from the I-T department. It’s better to furnish all details in the ITR forms rather than undergo the hassle of being served a tax notice.”

Finally, keep in mind two points. One, ensure you avail of the benefit of grandfathering. This means that the fair value of the shares or units as of January 31, 2018, should be used for the purpose of calculating long-term capital gains or loss.

Two, in case there is an overall loss (except loss from the head ‘Income from House Property’), your tax return should be filed on or before the due date, i.e., November 30 for losses to be eligible for being carried forward. “If filing of returns is delayed, the losses will lapse and not be available for set-off in subsequent years,” says Surana.