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

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.

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.

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:

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.

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.