Taxpayers who have sold shares last fiscal will have to fill up finer details of every share sale in their income tax return for assessment year 2020-21 for computing long-term capital gains tax liability.
The ITR-2 form, which individuals other than businessmen or professionals have to use, demands finer details of share sales, such as international securities identification number (ISIN), share name, quantity, sale and purchase price as well as fair market value at the end of January 2018, in all cases.
Experts pointed out that the e-filing form does not offer the option of giving the summary or aggregate capital gain figures, which would have avoided the need to fill up details in 13 columns for each item, a hassle in cases where data is voluminous. This information sought in the tax return, experts said, is similar to the kind of details sought at the time of a scrutiny.
A government official said the details were sought as part of the income tax department’s overall goal of raising the level of disclosures. The department is particularly keen on finding cases where persons have made high-value share market transactions yet reported meagre taxable income. Ownership of assets disproportionate to the reported income draws tax officials’ attention.
In fact, the number of persons who file tax returns claiming no tax liability has become a major problem for the department, an issue flagged by Prime Minister Narendra Modi in August, while scaling up the faceless assessment scheme. Only 15 million persons—about a fourth of the 65 million income tax return filers—actually pay any tax, while the rest either claim no tax liability in their returns or get their entire tax outgo back as refunds, Mint reported on 14 August. This made Modi appeal to those outside the tax net to come clean and pay taxes.
This addition in ITR is a big burden on all eligible taxpayers, said Arun S. Kutty, senior partner at Virmani, Roy & Kutty, a chartered accountancy firm. “Imagine people invested under say, a portfolio management scheme, who on their behalf would have done hundreds of sale/purchase during the year, having to enter each and every entry into their tax return manually,” said Kutty.
This, he said, is the kind of information that is asked at the time of a scrutiny assessment. The taxpayer should be trusted to give the correct information in summary as was done in the past, he said.
The department is cognizant of the issue, said the government official quoted above, who spoke on the condition of anonymity. Finance ministry officials have been busy with the Bills that are now making their way through the Parliament, including the taxation Bill that extends various due dates, cleared by Lok Sabha on Saturday, and there is still time if any change is to be made to the income tax return form if the government decides to do so, explained the official. Taxpayers have time till November end to file returns for assessment year 2020-21.
The return form has added schedules for reporting scrip-wise details. “Taxpayers are left with the mechanical job of accurate data input, while the schedules automate the complex computation of capital gains and tax thereon. The time and effort involved in completing the schedules is an added burden on the tax cost already borne by the taxpayers,” said Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP.
Detailed information is being sought for capital gains from sale of equity shares and mutual funds, and taxpayers have to mandatorily report full details on all scrips sold along with ISIN number, said Archit Gupta, founder and chief executive officer of cleartax, a fintech firm offering taxpayer services.
