Citing a media report claiming that stock traders/day traders are required to furnish scrip wise details in the return of income for AY 2020-21, the Central Board of Direct Taxes (CBDT) has clarified that there is no requirement of scrip wise reporting for day trading and short-term sale or purchase of listed shares.
This is because gain from share trading in case of stock traders or day traders is generally categorised as short-term capital gains or business income as their holding period of shares/units in most of the cases is less than one year.
In the Schedule 112A of Income Tax Return (ITR) Forms, however, only long-term capital gain (LTCG) arising out of sale of shares/units after a holding period of more than 1 year is to be reported.
“The scrip wise details in the return of income for AY 2020-21 is required to be filled up only for the reporting of the LTCG for these shares/units, which are eligible for the benefit of grandfathering,” said CBDT in its Press Release.
As the LTCG on sale of shares and equity-oriented mutual fund (MF) units were made taxable in the Union Budget presented on February 1, 2018, the gains till January, 2018 were exempted.
Grandfathering is allowed by comparing different values (such as cost, sale price and market price as on January 31, 2018) for each share/unit, there is a need to capture the details of each share/unit.
So, the CBDT has clarified that the scrip wise details are not required in Schedule 112A for AY 2020-21 for computation of capital gains/business income from shares/units, which are not eligible for grandfathering.
However, there will be no respite for the long-term investors investing in equities or equity-oriented MFs as there is no provision for reporting consolidated LTCG even if the grandfathering is not applicable.
So, if an investor redeems his/her investment in equity MF done through monthly SIP after 10 years, he/she will have to fill 7 columns in 240 rows for a single investment. In case an investor has 10 SIPs, he/she has to fill 2,400 rows after redeeming the investments after 10 years.
The CBDT, however, said that without scrip wise entries, taxpayers may not claim the grandfathering benefit properly.
Moreover, without separate entries, the income tax authorities can’t check the correctness of the claim, argues the CBDT. As a result many returns will require to be audited, which may lead to unnecessary grievances/rectifications at a later stage.
“If scrip wise LTCG is available, it can be cross verified by the Department electronically with stock exchange, brokerage companies, etc and there will be no need to subject these ITRs to further audits or scrutiny,” said CBDT.
However, it is not clear, if scrip wise data may be checked electronically, why the data can’t be pre-filled in Schedule 112 of ITR Forms.
