How to fill Capital Gains in your Income Tax Return


Capital Gains are the profits that you earned when you sold an investment (capital asset like stocks, bonds, Mutual Funds, real estate).

Since they are a type of income, capital gains are taxable and need to be reported correctly in your income tax return for the financial year in which the sale was made.

Remember: no sale, no capital gains i.e. if you are just sitting on your profits and haven't actually sold anything in the past FY, then you don't have any capital gains to pay tax on.

Filling up capital gains correctly in your income tax return can be a cumbersome process especially if you are doing for the first time.

But it's a necessary evil - if you don't report your capital gains correctly, it is equivalent to under-reporting your income for tax evasion and you can face penalties later.

In this post, I will show you how to fill your capital gains correctly in the right ITR, step by step.

Note: If you want to know more about how gains from Mutual Funds are taxed then read here. This post is just about reporting of Capital Gains in your ITR.

Part 1. Get your Capital Gains Report

You can get your Capital Gains Report for the previous FY from the investment platform that you are using to invest.

For example on Goalwise, you can download it as an excel file from your dashboard as shown below:

Capital-Gains

This is how my Capital Gains Report looks:

Screenshot--175-

Different investment platforms will have different formats and usually pdf is more popular than excel, although the latter is more useful.

If you are investing via multiple platforms or investing online as well as offline, then you can get the Capital Gains Reports from CAMS/KARVY.

Read our step by step guide on how to get your Capital Gains Report.

Any Capital Gains Report will generally tag each sale as whether it was Equity or Debt and whether it was Short-term or Long-term along with showing the sale value, purchase value and gains from that sale.

Part 2. Preparing the data

You don't need to enter every single transaction in your ITR especially when dealing with just Mutual Funds and stocks - aggregate values will do.

So which aggregate values do you need to know?

Since short term gains and long term gains in Equity and Debt are taxed differently so we need the totals for each type separately for the entire year.

Table 1. Totals of sale, purchase and capital gains for the entire year

Type of Gains Total Sale Value Total Purchase Value** Total Capital Gains
Equity STCG*
Equity LTCG*
Debt STCG
Debt LTCG
* Stocks can be combined with Equity Mutual Funds
** In case of Debt LTCG this will be Total Purchase Value after taking indexation into account

Then we also need period-wise Capital Gains as required in the ITR in order for them to determine your tax liability accurately (capital gains tax becomes payable in the quarter in which the sale is made and NOT while filling the ITR). This is again at an aggregate level by type of capital gains.

Table 2. Period-wise Capital Gains (periods as specified in ITR)

Type of Gains Gains from sale made b/w 1st April to 15th June 2018 Gains from sale made b/w 16th June to 15th September 2018 Gains from sale made b/w 16th September to 15th December 2018 Gains from sale made b/w 16th December 2017 to 15th March 2019 Gains from sale made b/w 16th March to 31st March 2019
Equity STCG*
Equity LTCG*
Debt STCG
Debt LTCG
* Stocks can be combined with Equity Mutual Funds

This is all the data you need from your Capital Gains Report to fill up your ITR.

Now it may take some manual work, depending on what kind of Capital Gains Report you have.

I will be using the Capital Gains Report provided by Goalwise which makes it more convenient for me to do this since it is in excel and it already classifies each sale as Equity/Debt and Short-term/Long-term so I just need to apply the respective filters and sum it up.

Example of Debt STCG calculation from my Capital Gains Report:

Screenshot--176--2

Similarly, I can do it for all the four types of capital gains and fill up Table 1.

For Table 2, I have to add an additional filter of date range for the sale date column once for each period.

Example of Debt STCG calculation from sale made b/w 16th June to 15th September 2018:

Screenshot--183-

Any Capital Gains Report will have all the details, but you may have to do the filtering and summations manually in case of pdfs etc.

Finally you will want to have the two tables filled up like this:

Table 1. Totals of sale, purchase and capital gains for the entire year

Type of Gains Total Sale Value Total Purchase Value Total Capital Gains
Equity STCG 0 0 0
Equity LTCG Rs. 9,008 Rs. 10,000 Rs. -991.97
Debt STCG Rs 33,999 Rs 32,665 Rs 1,334
Debt LTCG 0 0 0

I don't have any Long-term Capital Gains in Debt MFs and Short-term Captial Gains in Equity MFs.

Thanks to Goalwise's smart rebalancing, I actually have negative Equity LTCG this year which I can use to offset any positive LTCG in future. (yay!)

Table 2. Period-wise Capital Gains

Type of Gains Gains from sale made b/w 1st April to 15th June 2018 Gains from sale made b/w 16th June to 15th September 2018 Gains from sale made b/w 16th September to 15th December 2018 Gains from sale made b/w 16th December 2017 to 15th March 2019 Gains from sale made b/w 16th March to 31st March 2019
Equity STCG 0 0 0 0 0
Equity LTCG 0 0 0 0 Rs. -992
Debt STCG Rs 257 Rs 165 Rs 913 0 0
Debt LTCG 0 0 0 0 0

You can just use rounded up values like I have - just make sure that the totals match.

Once you have this data ready, the actual filling up is pretty easy.

Part 3. Filling up the Capital Gains data in the ITR

First we need to select the right ITR to fill.

ITRs are classified according to types and sources of income one may have.

You can see the complete list here - https://www.incometaxindiaefiling.gov.in/main/ListOfITRsAndOtherForms

You can't use ITR 1 if you have capital gains.

If you are a salaried individual and have capital gains you need to file ITR 2.

If you have business income or income from professional consultancy and have capital gains then you need to fill ITR 3.

In this post, we will use ITR 2 as our reference but the same would apply to ITR 3 as well.

You can download the ITR 2 excel utility here - https://www.incometaxindiaefiling.gov.in/downloads/incomeTaxReturnUtilities

Make sure you select Assessment Year as 2019-20 (and not 2018-19) while filing returns for FY 2018-19.

itr-pagge

It will get downloaded as a zip file - ITR2_2019.zip

Unzip it and there will be an excel file named ITR2_2019_PR3.xls which is the actual ITR file that you have to fill.

It has a lot of sheets - one for each schedule.

You need to fill several sheets in order to file a complete return. We will just be covering the Capital Gains part here.

Capital Gains information goes in two sheets - 'CG' (Capital Gains - all except Equity LTCG) and 'Tool-112A' (Equity LTCG).

All sheets have a lots of rows. Cells where you can enter values are marked in lime green - very few of them need to be filled in most cases.

Here is a summary of what goes where:

Type of Gains Schedule Section Subsections
Equity STCG Schedule CG Section A Total Sale Value goes in 2-(i)-ia "Full value of consideration"
Total Purchase Value goes in 2-(i)-ib-i "Cost of acquisition without indexation"
Equity LTCG Schedule 112A - ISIN (Col 2)
No. of units (Col 4)
Sale NAV (Col 5)
Purchase NAV (Col 8)
NAV/FMV as on 31st Jan 2018 (Col 10)
Debt STCG Schedule CG Section A Total Sale Value goes in 5-a-ii "Full value of consideration in respect of assets other than unquoted shares"
Total Purchase Value goes in 5-b-i "Cost of acquisition without indexation"
Debt LTCG Schedule CG Section B Total Sale Value goes in 9-ii "Full value of consideration in respect of assets other than unquoted shares"
Total Purchase Value goes in 9-b-i "Cost of acquisition with indexation"
Period-wise Capital Gains Table Schedule CG Section F Equity STCG row goes in 1 "Short-term capital gains taxable at the rate of 15%"
Debt STCG row goes in 3 "Short-term capital gains taxable at applicable rates"
Debt LTCG row goes in 5 "Long-term capital gains taxable at the rate of 20%"

Here are screenshots highlighting each type of entry:

Equity STCG:

Schedule CG Section A
Total Equity STCG Sale Value goes in 2-(i)-ia "Full value of consideration"
Total Equity STCG Purchase Value goes in 2-(i)-ib-i "Cost of acquisition without indexation"

Equity-STCG

Equity LTCG:

Schedule 112A (Equity LTCG) in sheet 'Tool-112A'.

Equity LTCG information goes in Schedule 112A "Long-term capital gains from transactions on which Securities Transaction Tax is paid".

Here you have to fill up one row for each Equity LTCG sale that you have done.

You will have to fill up details like ISIN (Col 2), No. of units (Col 4), Sale NAV (Col 5), Purchase NAV (Col 8), NAV/FMV as on 31st Jan 2018 (Col 10) for each MF/equity share sale under Equity LTCG.

Equity-LTCG

This will automatically fill up the Schedule CG Section B (4) for Equity LTCG with the aggregate values after applying the necessary adjustments for FMV on 31st Jan 2018.

Note: If you already have Equity LTCG calculations with proper accounting for FMV on 31st Jan 2018 (Equity LTCG grandfathering), like in the Goalwise Capital Gains Report, then you can skip filling the 112A section and directly just fill up Schedule CG Section B (4) for Equity LTCG.

  • Total Equity LTCG Sale Value goes in 4-(a) "Full value of consideration"
  • We can't directly use the total purchase value as cost of acquisition as that is not adjusted for FMV on 31st Jan 2018. So, calculate cost of acquisition as (Total Equity LTCG Sale Value - Total Equity LTCG) and enter that value in 4-(bi) "Cost of acquisition without indexation"

Debt STCG:

Schedule CG Section A
Total Sale Value goes in 5-a-ii "Full value of consideration in respect of assets other than unquoted shares"
Total Purchase Value goes in 5-b-i "Cost of acquisition without indexation"

Debt-STCG-1

Debt LTCG:

Schedule CG Section B
Total Sale Value goes in 9-ii "Full value of consideration in respect of assets other than unquoted shares"
Total Purchase Value goes in 9-b-i "Cost of acquisition with indexation"

Also mark 10-a as No if it's not applicable.

Debt-LTCG

They are all blank as I don't have any Long-term Capital Gains in Debt MFs.

Period-wise Capital Gains:

Schedule CG Section F
Equity STCG row goes in 1 "Short-term capital gains taxable at the rate of 15%"
Debt STCG row goes in 3 "Short-term capital gains taxable at applicable rates"
Equity LTCG row goes in 5 "Long-term capital gains taxable at the rate of 10%"
Debt LTCG row goes in 6 "Long-term capital gains taxable at the rate of 20%" (for resident Indians).

For NRIs: Debt LTCG is also taxed at 10% and there are no indexation benefits. So Equity LTCG and Debt LTCG both need to be summed up and put in row 5 for NRIs.

tempsnipff

That's it.
You are done with reporting Capital Gains in your income tax return.

To keep it simple, I have not covered the following:

  1. Reporting losses in order to be carried forward for set-off in subsequent years
  2. Setting-off of losses from previous years against this year's capital gains
  3. Indexation of long term capital gains for Debt MFs.

These can be covered in a future post perhaps. :)

Resources:
NAV of Mutual Funds on 31st Jan 2018