Income Tax Return 2019: Redemptions make ITR filing a tough task for ELSS investors

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Published: July 23, 2019 1:22:30 PM

Income Tax Return e-Filing for AY 2019-20: ELSS is considered as one of the most attractive tax-saving investments, because of its capacity to generate higher return in the long term, as well as for its tax efficiency.

Income Tax Return e-Filing 2019, ITR Filing 2019-20, Long Term Capital Gain, LTCG, Equity Linked Savings Scheme, ELSS, equity investment, equity-oriented funds, mutual fund, MF, ITR-1, ITR-2, salaried ivestors, tax-saving investmentsWith a 3-year cap on redemption, any withdrawal out of ELSS will essentially be a long-term capital gain or loss.

From just showing the Long Term Capital Gains (LTCG) from sale of Equity Linked Savings Scheme (ELSS) units under ‘Exempt Income (for reporting purpose)’ in 5-page ITR-1 last year, to revealing the LTCG in a complex ‘Capital Gain’ page in 26-page ITR-2, e-filing of Income Tax Return 2019-20 has become a big headache for the salaried people who invested in ELSS for saving tax and getting higher tax-saving returns.

ELSS is considered as one of the most attractive tax-saving investments, because of its capacity to generate higher return in the long term compared to its peers, as well as for its tax efficiency. Till FY 2017-18, ELSS not only used to provide 80C benefits on the amount invested, but the maturity amount and LTCG generated were also tax free, making it an investment in the Exempt, Exempt, Exempt (EEE) category. However, in the last year’s Budget, LTCG on equities and equity-oriented funds in excess of Rs 1 lakh, generated through redemptions made in a financial year, was made taxable.

Although, tax on LTCG dents the tax efficiency of ELSS partially, but it still rules on its ability to generate higher long-term returns. So, it is still an attractive choice for tax-saving investment among various groups of investors, including salaried people.

However, the change in taxation creates a big roadblock for the salaried people, who have invested in ELSS as well as in equities and other equity-oriented mutual funds (MFs), as from the comfort of filing a simple ITR-1, any redemption made last year will make them wade through the 26-page ITR-2 while filing their tax returns.

Redemptions of equities or equity-oriented funds made after 1 year from the date of investment are treated as LTCG. So, with a 3-year cap on redemption, any withdrawal out of ELSS will essentially be an LTCG or long-term capital loss.

Moreover, a new page 112 A has been introduced in ITR-2 and other Forms, that includes a 16-column table to reveal LTCG generated out of each transaction – be it sale of equity shares or units of equity-oriented MFs, including ELSS. Although 8 out the 16 columns need to be filled by an assessee, but introduction of such a large table to reveal each redemption leading to LTCG amid the peak tax-filing session in July created a ruckus.

“It asks for sale price and purchase price of all transactions,” says CA Karan Batra, Founder & CEO of, adding, “All transactions are to be reported irrespective of profit or loss, as the Income Tax Department doesn’t know whether it was a gain or a loss till the time we don’t report it in the ITR.”

“The new ITR Forms are asking for many details, which makes ITR filing cumbersome and time-consuming,” says Batra. He, however, clarifies that “Taxpayers have the option to either enter the Scrip-wise details of long-term capital gains or enter the consolidated value of LTCG directly under respective items in the pre-existing capital gain page.”

Whatever may be the options, but those are surely far more difficult than mentioning the LTCG just for reporting purpose in ITR-1. Moreover, salaried assessees may otherwise use the pre-filled option by choosing the “Prepare and Submit Online” option while filing ITR-1, but no such facility is available till now for ITR-2.

So, it would have been a better option to insert a single page for LTCG on equity and equity-oriented funds in ITR-1, to make life easier for salaried investors and to keep the appeal for ELSS among them intact.

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