“There is no requirement in the return of income for scrip wise reporting in case of short-term/business income arising from share transactions,” the Central Board of Direct Taxes (CBDT) said Saturday.
The 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 or units in most of the cases is less than one year which is a pre-requisite for the gains to be categorised as long-term capital gains.
However, the Finance Act, 2018 allowed exemption to the gains made on the listed shares or specified units up to January 1, 2018 by introducing grandfathering mechanism for computation of long-term capital gains for these shares.
“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 long-term capital gains for these shares or units which are eligible for the benefit of grandfathering,” the Board clarified.
As the grandfathering is to be allowed by comparing different values (such as cost, sale price and market price as on 31 January 2018) for each shares or units, there is a need to capture the scrip wise details for computing capital gains of these shares or units, the Board added.
The scrip wise details are not required in income tax return forms for AY 2020-21 for computation of capital gains or business income from shares or units which are not eligible for grandfathering.
“Without this reporting requirement, there may be situations where taxpayer may not claim or wrongly claim the benefit of grandfathering due to lack of understanding of the provisions. Also, if the above calculation is not made scrip wise and taxpayer is allowed to enter the total figures only, there will be no way for the income tax authorities to check the correctness of the claim and therefore many returns will require to be audited, which may lead to unnecessary grievances or rectifications at a later stage,” the CBDT said.
The main intent behind requiring scrip wise detail is to facilitate the taxpayer in correctly computing the long-term capital gains on these shares/units.
The Board added that providing scrip wise information in the income tax return was a global practice. For example in USA, a taxpayer having capital gains from transfer of shares is required to fill scrip wise details in Schedule-D of Form 1040 – income tax return form in USA.