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Yogi Zone

Useful articles for your finance management by our team of experts

Capital gains to be declared during tax filing

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Capital gains

Whether intentional or unintentional, non-disclosure of incomes is a sin as per income tax act. We have been discussing various incomes that need to be declared while filing tax returns. This article is part of that series where we will be discussing various capital gains that need to be declared in the ITR form.

(Also see: 8 important tax changes in 2014)

Capital gain is basically the profit generated by selling an asset. The asset can be stocks, equity mutual funds, gold or real estate. It is not exempt for tax filing. In many cases, there can also be loss by selling an asset. This is known as capital loss. Capital loss can be used to offset the capital gains in order to reduce the overall tax. Here are the short term capital gains (STCG) and long term capital gains (LTCG) of various products that we must declare while filing income tax returns:

Shares/Equity Mutual Funds

1) STCG

Profit from equity products such as stocks and mutual funds is considered as STCG if the holding period for such products is up to 1 year.

2) LTCG

If stocks or mutual funds are held for more than 1 year, then it would be treated as LTCG. In such cases, tax on them would be nil. However, you need to declare the profit obtained in the tax returns.

(Also see: Six lesser known deductions during tax filing)

Gold

1) STCG

If investment in gold is up to 3 years, it is treated as STCG for the purpose of tax. This is only in the case of physical gold. If gold is held in the form of ETF of gold fund, the tenure would be 1 year.

2) LTCG

Gold investment in treated as LTCG if holding period of the investment is more than 3 years. In such cases, indexation benefit is also given while calculating tax.

Real Estate

1) STCG

Any investment in real estate such as house property, flat, plot, etc is treated as STCG if it is held up to 3 years. Profits are added to the total income for calculation of tax.

2) LTCG

Investments in real estate such as the ones mentioned above are treated as LTCG if investment is for more than 3 years duration. Indexation benefit is provided in such cases. This can reduce the overall tax burden.

Did you like this article? Please leave your valueable comments.

 

  • kalpana

    In case of purchasing flat or house, which date is considered for capital gains – date of sale deed or possession?

    • Av Suresh

      Date of sale deed is considered while calculating capital gains.

  • VIRAL

    I want to show the LTCG with indexation for my debt funds in the return to be filed for FY 2013-14
    that is AY 2014-15.
    In the new ITR-2 forms released for AY 2014-2015 the Capital gains section has been changed a lot from last year.
    I am not able to see a suitable option for reporting LTCG with indexation
    Following are the sections in schedule CG for LTCG..
    B1 – for land or building (without indexation )
    B2 – for bonds or debentures (with indexation)
    B3 – for listed securities or units or zero coupon bonds (with out indexation)
    B4 – NRI
    B5 – NRI
    B6 – NRI
    B7 – not in B1 to B6 but (without indexation )

    So where does one show debt fund LTCG with indexation ? Should I show in B2 only ? as that the only option with indexation but its meant
    for bond & debenture only

  • Sri

    I have sold our agricultural land in our village. This land was purchased around 10 years back.From my study on capital gain taxes over internet, I came to know that the agricultural land that is in rural area (village that is not within 8 km from municipality and with less than 5000 population ) is not considered as capital asset. Do I need to declare this transaction in ITR

    • Av Suresh

      Yes, you need to declare under the exempt income category.

  • Ram

    Which ITR form to be used for salary income and some short term capital gain/loss. Can the short term capital loos be adjusted against salary income? Can the short term capital gain be added to salary income and taxed accordingly?

    • Av Suresh

      ITR-2 needs to be used when there is capital gains. Capital losses cannot be adjusted against salary income. Capital gains have to be taxed as per the taxation rules for them. Salary taxation is separate.

  • singh

    sir,

    We are a partnership firm and recently sold capital assets of book value about 3 lacs and consideration is about 52 lacs we onvested the proceeds of rs 50 lacs in Bonds of rec, now for the purpose of income tax return what value is to be eaken as purchae of these disposed assets, (our purchase value 18 years back was about rs 15 lacs and assets were added later on also now book value stands at rs 3 lacs).

    kindly let us know the position as per income tax the value to be taken as acquisition and improvemen sale expense is say 10000/=

    thanks

    inderjeet

    • Av Suresh

      Cost of acquisition will be the purchase price with indexation benefit included. Expenses need to be deducted from the derived value.

  • philip

    While calculating short term capital gains, can cumulative interest paid on home loan be deducted while calculating capital gains?

    • Av Suresh

      Home loan interest can be claimed as deduction only u/s 24. It cannot be used to offset capital gains.

  • yogiexpert

    No, it needs to be invested only in residential property within 1 year before or 2 years after sale. If you are constructing one, time period will be 3 years.

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