Tax Query: How to report loss on ESOPs in the income tax return?

Mr Sumit has suffered a short-term loss of Rs 1 lakh under the share options in the FY 2019-20. He is confused about whether such loss will be reported in the income tax return or not? If yes, how will he report such loss? 

It is assumed that Mr Sumit has sold the shares received by his employer under the employee’s stock option plan (ESOP) and those shares are shares of an Indian company. He must have paid the perquisite tax on such share options at the time of allotment. 

According to the forms issued in FY 2019, any income or loss from the sale of such shares will be reported in the ITR-2 form. In case the share options are listed on a recognised stock exchange in India and securities transactions tax (STT) has been paid on such transfer, he will have to fill the required details in Schedule CG – Row A2 – “from sale of equity share or unit of equity oriented Mutual Fund (MF) or unit of a business trust on which STT is paid under Section 111A or 115AD(1)(ii) proviso (for FII)”.

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And where the shares are not listed on any recognised stock exchange in India, he must fill the details in Schedule CG- Row A5- “from the sale of assets other than at A1 or A2 or A3 or A4 above”. 

Since he has suffered a short-term capital loss on the sale of such shares, he can carry forward the loss for next eight financial years (subject to certain conditions), provided the loss has not been adjusted in the current FY. Once all the details are filled in the Schedule CG, the net loss amount will be auto-populated in the Schedule-CFL to carry forward to the next financial years. Do remember that the income tax return for the FY 2019-20 must be filed within the due date then only the loss will be allowed to be carried forward.

For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in