Filing your income tax return in India gets complicated if you’ve made money from selling stocks, mutual funds, or property. Tax expert CA Nitin Kaushik warns that using the wrong ITR form or making mistakes in reporting capital gains can lead to tax notices, refund delays, and even penalties.
Key Points for Taxpayers with Capital Gains:
Choose the Right ITR Form:
ITR-1: Only for salaried people with up to Rs 1.25 lakh long-term gains from listed shares or mutual funds. Not for traders or those with multiple properties.
ITR-2: For salary, property income, and all types of capital gains (but not for F&O or intraday trading).
ITR-3: For business income, including F&O and intraday trades.
ITR-4: For presumptive business income and up to Rs 1.25 lakh LTCG, but not for detailed capital gains reporting.
Report Gains Correctly:
Capital gains are profits from selling assets like shares, mutual funds, or property.
Gains are split into short-term and long-term, each taxed differently.
For shares held over 12 months, long-term capital gains above Rs 1.25 lakh are taxed at 12.5 percent (without indexation).
Fill Out Schedule CG:
You must give details like purchase price, sale price, holding period, and any exemptions claimed.
Mistakes or mismatches with your Annual Information Statement (AIS) or Form 26AS can trigger tax notices.
Claim Exemptions Carefully:
Section 54: Reinvesting gains from selling a house into another house can save tax.
Section 54EC: Up to Rs 50 lakh invested in specified bonds (like NHAI or REC) within 6 months of sale can be tax-free.
Each exemption has strict rules—follow them exactly.
Special Cases:
ESOPs are taxed as salary when exercised, but later gains are capital gains.
Bonus shares are considered bought at zero cost, so all sale proceeds are taxable as gains.
For property, if your sale price is below the stamp duty value, the higher value is used for tax, which can increase your tax bill.
Keep Proper Records:
Save demat statements, broker notes, property deeds, and receipts for improvements. These help you calculate gains and prove your case if the tax department asks questions.
Don’t Wait Until the Last Minute:
Filing early gives you time to fix mistakes and avoid stress or penalties.
