Scrip-wise details only for LTCG grandfathered up to 31 January 2018

Investors and traders need not provide scrip-wise details of capital gains or intraday gains from listed equity shares in their income tax returns. A clarification from CBDT states that the scrip-wise details are necessary only in the case of long-term capital gains from grandfathered investments made up to 31 January 2018. Also, one need not provide the details for short-term capital gains and business income from listed equity shares.

The Finance Act 2018 had changed the method of taxation of long-term capital gains from listed equity shares. The gains become taxable from the FY 2018-19 (AY 2019-20). Under the Finance Act, the long-term capital gains until 31 January 2018 were grandfathered or treated as tax-exempt. 

The Finance Act also put in place a grandfathering mechanism to tax the long-term gains from investments made until 31 January 2018. One needs to compare the sale price with the fair market value as on 31 January 2018 and choose the lower of the two. Such lower value arrived at or the actual cost, whichever is higher, becomes the cost of acquisition. The comparison effectively exempts the notional gains as on 31 January 2018.

Also Read: All ITR forms for FY 2019-20 available on e-filing portal

For example, Mr A sold 500 shares of a listed company at Rs 400 a share on 16 February 2020. The date of purchase was 10 January 2017 for Rs 200 a share. The fair market value as on 31 January 2018 was Rs 300 a share. In this case, the holding period of the listed shares is more than one year, and the gains are long-term gains. The calculation is:

A Sale consideration (400*500) [A] 2,00,000
B Fair Market Value as on 31/01/2018 (300*500) [B] 1,50,000
C Purchase cost (200*500) [C] 1,00,000
D Lower of [A] and [B] = [D] 1,50,000
E Cost of acquisition – higher of [C] and [D] 1,50,000
Capital gains [A] – [E] 50,000

In the above example, the notional gains as on 31 January 2018 become exempt. However, there is a threshold exemption of Rs 1 lakh for long-term capital gains from the sale of listed equity shares and equity-oriented mutual fund units. In case your long term capital gains for a financial year are up to Rs 1 lakh, there is no capital gains tax liability.

The above calculation under the grandfathering mechanism requires scrip wise details for each transaction of the sale of listed equity shares and equity-oriented mutual funds. The mechanism allows for a correct calculation of the long-term capital gains.

As per the clarification, the taxpayer should provide scrip-wise details in the ITR only for the sale of investments bought until 31 January 2018. In other cases, the taxpayer can furnish the aggregate values of the sale consideration and cost of acquisition while reporting capital gains.

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