Mandatory disclosing of LTCG making ITR filing tough

The government has made it mandatory to disclose long-term capital gains (LTCG) earned from sources such as securities, equity mutual funds, and stocks. In addition, LTCGs of above Rs.1 lakh received on transfer of listed shares and units of equity mutual funds are taxable effective from the financial year 2018-19. Such gains were exempted previously.

Taxpayers are finding it difficult to keep up with the government’s policy changes applicable to LTCGs with respect to ITR filing. One such issue with filing is that the software utility has not considered the provision where the appreciation value of the shares/units acquired before 1 February 2018 is grandfathered.

The software utility miscalculated taxes resulting in taxpayers leaving the process incomplete. The updated utility was launched on 11 July 2019.

Adding to the issue at hand, the date of issue of Form 16 was extended from 15 June to 10 July. Salaried taxpayers have started filing their returns recently. On the other hand, the deadline for filing returns has not been extended; it continues to be 31 July 2019. With all these issues at hand, the penalty for not filing returns by the deadline can go up to Rs.10,000.

Also Read: Income tax department may extend ITR filing deadline of July 31

The ITR forms are designed in such a way that taxpayers must include ISIN code/folio number of the sold shares/units of equity mutual funds that resulted in capital gains. When there are multiple sales transactions, it is tough to gather the required information and file taxes in 20 days’ time.

Sumit Ansaani, Chartered Accountant says, “There is no problem with providing the details of capital gains held. The issue here is that the utility had a bug in the first place and it was recently fixed. Considering the remaining time to the deadline, it creates a rush and chaos in the minds of the people. The government cannot ask us to provide so much information in the 11th hour.”

The need of the hour is an extension in the due date for filing returns. Given the changes in policies and a delay in distributing Form 16, it is necessary that the due date is extended. It is difficult for most taxpayers to understand and implement the policy changes within a short time span remaining.