Taxpayers mandated to share details of each mutual fund, stock sold

While filing ITR, a new ruling has made it compulsory to file Schedule 112A that lists information of every sale or redemption of listed equity shares and equity mutual funds

Taxpayers mandated to share details of each mutual fund, stock sold

A new ruling has made it mandatory for taxpayers to disclose details of every sale or redemption of mutual funds and shares. This essentially means that when reporting capital gains or losses during filing of income tax returns (ITR) for assessment year (AY) 2020–21, individuals will have to give details of each sale transaction.

Taxpayers will have to do this by filing Schedule 112A, and are required to share information such as the name of the equity investment, sale and purchase price, quantity, international securities identification number (ISIN), as well as fair market value (FMV) at the end of January 2018.

What was the case earlier?

Schedule 112A was introduced in AY 2019–20. However, at that time it was optional. Taxpayers were allowed to submit consolidated information of all sales. They could put the cumulative net capital loss or gain without having to get into the details of each transaction. This was a lot easier when compared to disclosing each sale transaction – which is what they will have to do now.

Related: 6 Reasons why you should invest in mutual funds 

Why was the new mandate introduced?

The new ruling was made by the income tax department to catch individuals who evade tax by not disclosing their long-term capital gains. More and more people are investing in shares and mutual funds today, and the government wants to ensure they pay the appropriate tax on their gains. 

By getting taxpayers to share details of every transaction, the income tax department will be able to cross-check all information with TDS, transaction statements, etc. This way, they can spot discrepancies and identify tax evaders. 

Related: What are stock SIPs?

How can taxpayers fulfil the criteria?

The new mandate is no doubt a lengthy process and is likely to be tedious for taxpayers. Every fund house or broker provides sale transaction information in various formats. This means the process cannot be automated just yet; taxpayers will have to manually input details when filing ITR. They will also have to ensure that details are entered correctly, as there is a high chance of human error. 

Where can taxpayers find their equity sale information?

Taxpayers will have to take capital gains/ loss tax statements from their respective fund houses or brokerage firms that handles their investments. These statements will have all the details broken down transaction-wise. They will have to rely on these reports for reference when filing ITR.

How will capital gains be taxed?

It is important to note here that capital gains on equities earned up to 31 January 2018 are exempt from long-term capital gains tax. The tax liability will be computed basis the additional gains from 1 February 2018. Hence, taxpayers will have to disclose the market value of their equity investment till 31 January 2018. The gains thereon will be taxed at 10%. Look at these 6 Income sources that do not attract tax. 


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