The tax filing season has started and you must be busy collecting important documents to make the process less taxing. One of the most complicated things while filing ITR is to calculate tax on capital gains, as you need to consider several things before arriving at the right figure. But there is one breather as changes announced during Budget 2018 for computation of capital gain on equities will be applicable from 2018-2019, and not from the financial year 2017-2018 for which we are going to file income tax return (ITR) by July 31st.
Capital gain is levied on assets, such as equities, real estate, debt funds and gold, by subtracting the indexed cost of acquisition from the sales value. To help you calculate capital gain here are 4 most important points to help you filing ITR this tax season.
1) You must know whether your capital gain is long-term or short-term
It is important to know the nature of the capital gain, as tax rate to be levied depends on whether it is short term or long term gain.
Real estate: If the property is sold within 24 months then it is considered to be held for short term period. If the property is held for more than 24 months it falls into the long-term category. The period has reduced from 36 to 24 months from the financial year 2017-2018.
Equities, Bonds, Debentures: They are considered short-term capital assets when held for 12 months or less. If held for more than 12 months then the asset is considered long-term.
Gold and Debt-Oriented Mutual Funds: An asset which is held for not more than 36 months or less is a short-term capital asset. An asset that is held for more than 36 months is a long-term capital asset.
2) You should know special rates as per which capital gain is taxed
Once you know the nature of the capital gain-long or short term- you need to find out the rate applicable to your gains.
Real estate: In case of property short-term capital gain is taxed as per the income tax slab you fall into while the long-term capital gain is taxed at 20 per cent with indexation.
Equities, bonds, debentures: In case of equities, including equity mutual funds, the short-term capital gain is taxed at 15 per cent while the long-term capital gain is taxed is exempted. Vikas Dahiya, Director, All India ITR, said, “Short-term capital gain from the equity shares or equity oriented mutual funds is taxed at the special rate of 15 per cent plus education cess.”
Gold and debt funds: In case of gold and debt-oriented short-term capital gain are taxed as per the income tax slab you fall into while the long-term capital gain is taxed at 20 per cent with indexation.
3) No deduction under chapter VI-A applicable to capital gains
Gross total income is calculated after before making deductions under Chapter VIA of the Act, which includes 80C, 80CCC, 80CCD and 80U. But one needs to remember that no deduction under chapter VI-A of Income Tax Act will be applicable for capital gains. So, while applying deductions do not include income from capital gains.
4) You need to choose the right ITR Form
If you also have capital gains (apart from salary, house property and income from other sources) than ITR 2 is applicable. ITR-2 also applies to people with total income of more than Rs50 lakh. It is for taxpayers who have agriculture income of more than Rs5,000.