Scrip-wise reporting in ITR must only for LTCG exemption, not for day-trading, short-term gains: CBDT

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September 27, 2020 12:34 PM

The Finance Act, 2018 exempted gains made on the listed shares/specified units up to January 31, 2018, by introducing grandfathering mechanism for computation of LTCG for these shares.

income tax, income tax return, ITR, ITR-1, ITR-2, salaried individual, equity investment, equity-oriented mutual fund, MF, ELSS, schedule 112A, long-term capital gain, SIP, STP, SWPThe gain from share trading in case of stock traders or day traders is generally categorised as short-term capital gains or business income.

The Central Board of Direct Taxes has clarified that there is no requirement for scrip wise reporting for day trading and short-term sale or purchase of listed shares in the filing of income tax return (ITR) in assessment year (AY) 2020-21. The ministry, in a statement on Saturday, said that the gain from share trading in case of stock traders or day traders is generally categorised as short-term capital gains or business income. “This is because their holding period of shares/units in most of the cases is less than one year which is a prerequisite for the gains to be categorised as long-term capital gains.”

The clarification came following certain media reports around “stock traders/day traders are required to furnish scrip wise details in the return of income for AY 2020-21,” the ministry added. The scrip wise details are needed while filing ITR for AY 2020-21 for reporting long-term capital gains (LTCG) for listed shares or specified units eligible for the benefit of grandfathering. The Finance Act, 2018 exempted gains made on the listed shares/specified units up to January 31, 2018, by introducing grandfathering mechanism for computation of LTCG for these shares.

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The ministry added that since the grandfathering is allowed by comparing different values inlcuding cost, sale price and market price as on January 31, 2018, for each shares/units, the scrip wise details for computing LTCG of these shares/units are required. “Without this reporting requirement, there may be situations where a taxpayer may not claim or wrongly claim the benefit of grandfathering due to lack of understanding of the provisions,” the statement added.

Moreover, if the calculation is not made scrip-wise and the taxpayer is allowed to enter the total figures only, the income tax authorities won’t be able to check the correctness of the claim. As a result, many returns will have to be audited leading to unnecessary grievances/rectifications at a later stage. Need for scrip wise details in ITR, however, is unique to India, the ministry said. For instance, in the US, taxpayers having capital gains from transfer of shares have to share scrip wise details in their income tax form Schedule-D of Form 1040.

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