Reporting capital gains from shares, mutual funds and other investments in income tax returns has become more detailed after tax changes introduced over the past two years. According to reports from Mint, while most changes to capital gains taxation were implemented in FY24-25 or AY25-26, taxpayers filing returns this year for AY26-27 still need to navigate a detailed reporting framework, particularly for equity transactions. One significant change for listed equity makes reporting simpler this year - taxpayers no longer need to separately report equity long-term capital gains depending on whether the sale took place before or after 23 July 2024, as the tax rules changed midway through the financial year.
For debt investments, a major change took effect from 1 April 2023 that requires careful reporting. As reported by Mint, until 31 March 2023, units of debt MFs sold after three years were treated as long-term and taxed at 20%. However, from 1 April 2023 onwards, all debt MFs are treated as short-term irrespective of holding period and taxed at slab rates. This means taxpayers must carefully report gains from debt funds depending on whether units were purchased before or after 1 April 2023. For debt fund SIPs, experts advise using the First In First Out (FIFO) method to identify pre-April 2023 units eligible for LTCG with indexation from post-April 2023 units.
For listed equity shares and equity-oriented MFs, investments held for more than 12 months qualify as long-term and are taxed at 12.5% after the annual exemption of ₹1.25 lakh, while short-term capital gains are taxed at 20%. According to Mint, taxpayers filing through the e-filing portal are required to enter transaction details in Schedule 112A for eligible investments under Section 112A, with all entries reported scrip-wise. The reporting requirement has reverted to the usual distinction between shares acquired before and after 31 January 2018 for grandfathering provisions, eliminating the mid-year bifurcation that applied last year.
Capital gains reporting requires careful quarterly allocation to ensure advance tax compliance. As reported by Mint, in Part F of Schedule CG, all capital gains made during the year are reported quarterly, with details of multiple transactions across different quarters needing separate reporting. Taxpayers must gather all required documents including broker's capital gains statements, purchase costs, holding periods, and investment proofs for exemption claims under sections 54, 54EC or 54F. Additionally, capital losses should be reported even if there is no immediate tax benefit, as they can be carried forward for up to eight assessment years.
According to Neeraj Agarwala, senior partner at Nangia & Co, taxpayers should report capital losses even if there is no immediate tax benefit, as losses can be carried forward for up to eight assessment years. Janhavi Pandit, a Mumbai-based chartered accountant, noted that in case of buyback participation during FY2025-26, the cost of acquisition of such shares should be claimed as capital loss in the specific field provided in Schedule CG. Since capital gains are not pre-filled in ITR forms, taxpayers are responsible for computing and reporting gains correctly, making it essential to spend time reconciling transactions and classifying them correctly before filing to avoid reporting errors and unnecessary tax disputes.
