LTCG makes filing I-T returns tough
LTCGs of more than Rs 1 lakh on the transfer of listed shares and units of equity mutual funds are taxable from FY 2018-19 onwards.
Almost all taxpayers, excluding super-seniors above 80 years, have to e-file their income tax returns (ITRs). With the due date for filing of the tax returns for many individuals (including salaried) being July 31, anxiety is widespread among both taxpayers and professionals. The general view is that an extension in the due date is needed. The due date is September 30 only for those professionals or business persons who have to get a tax audit done. The fallout of not filing an I-T return on time is a penalty of up to Rs 10,000 (it will be Rs 5,000 if return is filed by December end). For those with a taxable income of less than Rs 5 lakh, the penalty is Rs 1,000.
LTCGs of more than Rs 1 lakh on transfer of listed shares and units of equity mutual funds are taxable from FY 2018-19 onwards. Earlier, such gains were exempt. To mitigate the tax burden, if the shares were acquired before February 1, 2018, the appreciation in the value of shares/units from the date of purchase up to January 31, 2018 are grandfathered.
Thus, the computation itself, which taxpayers are dealing with for the first time since introduction, is a complex exercise. Each year, the tax authorities issue the software utility that enables taxpayers to file their ITRs online. A recent utility update (for forms ITR-2 and ITR-3), which has added new fields to be filled in, such as ISIN and folio numbers of all securities sold during the year, is causing heartburn. Individuals who incurred LTCGs have to use ITR-2. ITR-3 is used by businessmen and professionals.
Rajeev Khandelwal, a Delhibased chartered accountant, says, “On July 11, CBDT revised the e-filing utility for forms ITR-2 and ITR-3. Schedule 112A, where share-wise or unit-wise details of capital gains have to be filled, was updated, requiring taxpayers to also provide the ISIN/folio number of the respective company or mutual fund. The ISIN number has to be traced from the demat account of the taxpayer or obtained from publicly available data. Collating it is a timeconsuming task, especially where there are multiple sale transactions and time is short.”
Also read: All you need to know about long-term capital gains on equity investments
This utility update perhaps was meant to help taxpayers. But unknowingly, owing to a late release and addition of a new field that has to be filled in, it has created new hurdles. “Prior to July 11, taxpayers who had incurred LTCGs faced computing errors in the software utility on the e-filing portal. Thus, till this date, they were unable to file their I-T returns,” points out Ameet Patel, chairman of taxation committee at Bombay Chartered Accountants’ Society (BCAS).
“Probably, tax authorities took note of this difficulty. With just 20 days to go for the due date, a revised utility was released, which sorted the glitches in computation, but created a new requirement. Taxpayers do not keep information such as ISIN codes handy in the documents they rely upon to fill their I-T returns. Now, they have to find out the ISIN code/folio numbers of all shares/units sold and fill up the utility again,” adds Patel. He explains, “It is not feasible to opt out of Schedule 112A with its scrip wise details and provide a consolidated line-item of the LTCGs earned in the year, as this leads the taxpayer back to square one with the problem of incorrect computation cropping up.”
“Further, many taxpayers use the services of tax experts, who in turn use their own private software for computation and finalising the I-T returns. It takes alot of time and effort to keep updating this software, each time the utility is updated by the tax authorities. Thus, additional time is lost,” explains Surya Bhatia, investment adviser.
The Central Board of Direct Taxes (CBDT), in its July 16 press note, points out that there is no change in the I-T return forms since April 1, when these were first notified. The utility for e-filing of ITR-2 and ITR-3 was released on May 2 and May 10 respectively, it states. The release adds, “The software utility update is a dynamic process and is continuously taken up as per the feedback received from the users/filers to ease their experience in electronic filing of I-T returns.”
“Once the ITR forms are notified, how can such changes be made in the utility and new fields be added without going through the due process of law of notifying the amendments?” asks BCAS, which has made a representation to the finance ministry.