All about Capital Gains Tax

You might have made some investment this year, which might yield you in the coming years. Or you might be getting off, of your past investment finding it to be no more rewarding in the current year. But is it so easy to escape, when you have invested for long term or gained some benefits out of your investment in its initial years? No, there’s huge compliance involved in admitting and withdrawing out of investments.

The Income Tax Act, 1961 guides for applicability of a Capital Gain tax, where any investor though holding any investment including any movable or immovable property receives any gain or profit out it during its holding period, at its resale, or at its maturity as the case may be. Capital gain tax is charged on the profits and gains realized by the investor on certain investments which the investor has to submit to the Income-tax department.

Taxgoal is an online CA service provider agency with a team of dedicated and highly professional tax consultants and compliance experts. From ITR Filing in India to TDS Compliance to Accounting & Book Keeping to Tax Audit Services to Trademark/Copyright/Patent Filling Services to Business Incorporation & Funding Advisory Services to an unending list of services, Taxgoal provides e-advisory to each and every Individual & business entity working in India. For ITR Filing in India , professionals there at Taxgoal provides dedicated support on tax computation , business taxation , tax compliance advisory, identity registration, audit consultation, advisory on income tax norms and much more .

Made cash transactions above Rs 2 lakh , you might receive a tax notice . Need support of our tax expert? Email us at support@taxgoal.in 

In this post you will get all basics about “ Capital Gains in Income Tax ” . Also you will get to understand “What compliances and provisions has been provided for Capital Gains in the Income Tax Act , 1961 ? .

About Capital Gains

Online ITR Filing in India , it is necessary to take care of reporting of profits and gains realized in the current year from past investments or fresh investments in the Income-tax return . As per Section 2 of the Income-tax Act 1961 , Capital gains include profit or gains received from transfer of capital asset. Capital Asset here refers to any property or security (in accordance with provisions of SEBI Act,1992 ) held by an assessee whether or not connected to his business or profession. Capital Assets are also classified on the basis of their holding period where assets:

• Held for not more than 12 months are treated as short term capital assets.

• Held for more than 12 months are treated as long term capital assets.

Capital Gains arise by way of transfer of any Capital Asset which can be either sale , exchange, acquisition, disposal or by any other way as prescribed in Section 2(47) and Section 47 of the IT Act.

Types of Capital Gains

Capital gains are generally classified on the basis of the holding period of the assets from the profit or gains has been realized. Income tax on Capital gains is computed after the transaction has been identified as a short term capital gain or long term capital gain.

Short Term Capital Gain : Capital Gains arising out of transfer of Short term Capital Asset like listed securities , zero coupon bonds, unlisted shares or immovable property held for not more than 12/ 24 months etc.

Long Term Capital Gain: Capital Gains arising out of the transfer of Long term Capital Asset like listed securities, zero-coupon bonds, unlisted shares, or immovable property all held for more than 12 /24 / 36 months as depending on the class of investment.

Tax Rate on Capital Gains

Tax Section	Gains	Rate	Exceptions
Section 111A	Short Term Capital Gain from Securities (where Security Transaction Tax is applicable )	15%	Securities >Held as stock in trade >STT is not applicable >Held by FII (Foreign Institutional Investors )
Section 111A	Short Term Capital Gain from Securities (where Security Transaction Tax is not applicable )	As per tax slab rate of the taxpayer	N/A
Section 112	Long Term Capital Gain from Securities (Applicable on all securities whether listed or not  )	20%	> Gains from Mutual funds. > Not applicable on NRIs
Section 112A	Long Term Capital Gain from Securities (Applicable on gains received for more than Rs 1 lakh and on all securities whether listed or not  )	10%	> Gains from Mutual funds. > Not applicable on NRIs. > Securities on which STT is not charged > Securities held as stock in Trade > Securities held by FII.

Computation of Capital Gains

Computation of Short Term Capital Gain		Computation of Long Term Capital Gain
Full Consideration Value / Realised Value	XXXXX	Full Consideration Value / Realised Value	XXXXX
Less : Cost of Acquisition	(XXXXX)	Less : Indexed Cost * of Acquisition	(XXXXX)
Less : Cost of Improvement (if any)	(XXXXX)	Less : Indexed Cost of Improvement (if any)	(XXXXX)
Less : Expenses incurred for Sale of Asset	(XXXXX)	Less : Expenses incurred for Sale of Asset	(XXXXX)
STCG	XXXXX	Less : Exemptions and Deductions (Section 54 etc)	(XXXXX)
		LTCG	XXXXX

• Indexed Cost of Acquisition : Cost of Acquisition X Cost inflation Index of the year of Acquisition

• Indexed Cost of Improvement : Cost of Improvement X Cost inflation Index of the year in which Improvements made.

Indexation Value Chart Check Here

Exemptions on Capital Gains 

Exemptions
Section 54	No Capital gain on Sale of Residential property if new residential property is purchased & held for at-least 3 years after purchase or construction.
Section 54B	No Capital gain shall be charged if any long term asset is sold to purchase Agricultural land and is held for at least 3 years
Section 54F	No Capital gain shall be charged if new Residential property is purchased from Sale of long term capital asset
Section 54GB	No Capital gain shall be charged if any long term asset is sold to buy shares of an eligible company as provided under the section.
Section 54D	No Capital gain shall be charged if any long term asset is sold to buy building or land for industrial undertaking
Section 54EC	No Capital gain shall be charged if any long term asset is sold to buy bonds redeemable after 5 years .
Section 54G	No Capital gain shall be charged if any long term asset is sold to buy any plant or machinery , any undertaking or setup SEZ in any rural area .
Section 54EE	No Capital gain shall be charged if any long term asset is sold to buy securities or funds notified by Central Government.

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How to Get Maximum of Your TDS Refunds

The policy of TDS (Tax Deducted at Source) was proposed to deduct certain tax amount from the income of the taxpayers just as he receives such income from a particular source. This was done to simplify tax compliances for the taxpayers.TDS is deducted on different income sources of the taxpayer like Fixed deposit interest income, share trading income, commission income, brokerage income, etc.. In most cases, the taxpayer’s TDS is deducted more than his applicable income tax slab for which he has to claim a refund of TDS deducted.

For Instance, the tax slab applicable on the taxpayer is 5% and TDS deducted on his income is 10%, if the actual tax amount is less than the TDS deductions, then the taxpayer has to claim the additional taxes paid to the government as per the difference of his tax slab applicable and file the required tax amount to the government. There are certain investment avenues and policies which can help a taxpayer to save most of his taxes and claim the maximum of his tax refunds from the government.

Taxgoal as a leading tax consulting firm online helps you receive the maximum of your TDS refunds online. Taxgoal holding expertise of industry known tax professionals and legal experts provides you the right advisory and time-bound solutions to all common tax problems. The agency basis a motive of simplifying taxation for its clients and build the most resulting tax solutions.

TDS Deductions

Some common reasons for which TDS is deducted from the taxpayers (Salaried / Self Employed) income:

1. TDS on rental income of a taxpayer from renting plant/machinery or some land/building.

2. TDS on income from securities.

3. TDS on lottery income.

4. TDS on proceeds from Immovable property.

5. TDS on investment schemes etc.

 

Confirming TDS deductions

TDS deductions are linked to the PAN of the taxpayer. A taxpayer can assess details of all TDS deductions on his account by checking a statement available at the TRACES Portal of the tax department. Once TDS has been deducted and deposited by the deductor, it is submitted to the department by him filling the TDS returns. As the TDS returns are submitted, the TDS amount is reflected in the TDS statement - Form 26AS of the taxpayer.

Best Practices to follow for Maximum TDS Refunds

Excess TDS deducted from taxpayers’ accounts can be claimed back from the Income Tax Department by income tax return filing. A taxpayer is eligible to claim a refund of tax if the actual tax liability of the taxpayer is less than the tax deducted on his account.  Here’re are some ways with which you can save a big part of your income from huge TDS deductions and claim the maximum refunds of taxes from the government.

1. Claim deductions by providing Investment Proofs: Salaried Employees are required to get TDS deducted on their salary income from their employers. They can claim a reduction in TDS deduction through providing them proofs of their investments to their employers which eligible to be claimed as deductions and exemptions under Section 80C and Section 10 of the IT Act. Investment proofs like proof of amount paid towards, NPS (National Pension Scheme) , PPF (Public Provident Fund ), Tax saving ELSS Funds, etc.

This will reduce the taxable income of the taxpayer and hence less TDS shall be charged.

2. Claim exemption on leave travel allowance: Assure that your employer has adjusted for exemption of your leave travel allowance before charging TDS on your salary income. LTA is exempted for employees up to a certain limit under Section 10(5).

3. Use Form 15G and Form 15h for declaration of incomes: If TDS is deducted from certain income sources of the taxpayers and if it is his only income source, then such a taxpayer can apply for non-deduction of TDS on such income by filing a Form 15G and Form 15H. Want to know more about these forms and other tax saving options,

4. Donations: Donations made in cash exceeding value Rs 2000 made with digital mode or other modes of payment are eligible for tax exemption under Section 80GGA of the Income Tax Act, 1961. So, donations can be availed as an alternative option to save taxes or save income from TDS Deductions.

5. Use Form 13 for Speculative Incomes: In case income from lottery tickets or some brokerage is received, submission of Form 13 to the Income Tax Assessing Officer can help the taxpayer to avail lower or no TDS deduction on such income.

6. Distribution of Fixed Deposit Investment: An effective saving TDS deduction on fixed deposit interest income can be by doing distribution of the FD amount among the family members and HUF and availing FD interest in their name.

How Tax goal helps you in claiming maximum TDS Refunds?

Consultants their Tax goal provides the required knowledge of investments and advisory on effective options for the taxpayer to save some part of their income from TDS deductions. We provide the right way of doing taxes and claiming the most out of their estimated tax liability. To our associates, we provide advisory on TDS refunds, tracking the status of refunds, way of going through delayed refunds, and assistance on all income tax queries.

File TDS returns or claim the most demanded TDS refund services in Delhi of us at support@taxgoal.in

Save Penalty on Income Tax Return Filing on Due Date

With relaxation in compliance norms for the corporate sector, the Government of India did announce for some effective policy measures for individuals and corporate entities to keep their business going and balance their compliance obligations during this time of the pandemic. In respite of the COVID-19 pandemic, the Finance Minister Nirmala Sitharaman in April 2020 announced to extend the due date for filing Income Tax Return for the AY 2020 -21to 30^th November 2020 which was to be filed on 31^st July 2020.

Due Date for Filling Income Tax Return for AY 2020-2021 (FY – 2019-2020)
Particular	Due Date
For all taxpayers on whom audit provisions are not applied	30th November 2020
For all taxpayers (inc. companies) on whom audit provisions are applicable	31st October 2020

To file a return of Income tax is the responsibility of every Indian citizen. It is obligatory for both individuals and the corporate sector if their income falls above the stated Income Tax exemption limit of government.

If you are a taxpayer or someone who’s looking out for assistance or a comprehensive guide on Income Tax Return filing, then throughout this post you will know all about who’s eligible or obliged to file a return of Income-tax, what all is to be mentioned in an ITR, due dates, Income tax forms and the consequences which one has to face if norms of ITR filing is defaulted or missed. Taxgoal.in is an online tax the consulting firm which embeds industry known professionals including reputed CA/CS/ICWA professionals, Auditors, and legal practitioners. Taxgoal qualifies all barriers of excellence in delivering quality services and advisory on matters related to company compliances, income tax return filing, tax audit, business audits, GST filling, Trademark, patents, business licenses, business registration, documentation, and liasoning.

Income Tax Return Filling – What is ITR?

A return of Income tax is a summarised statement of all sources from where the taxpayer has received some income, gained or reaped some profits, or has acquired losses during a financial year. It is necessary for every taxpayer to file an ITR annually to the government. It includes a detailed summary of the taxpayer about:

1. Income from Business / Profession
2. Income from Property (Capital Gains, Rent, etc )
3. Income from all Other Sources.

ITR is to be filed before the specified due date as announced by the Income Tax Department.

Income Tax Return Filing – Am I Eligible to file ITR?

As per the Income Tax Law, it is the duty of every Indian citizen to file an Income Tax Return annually to the government. Income Tax Return is filed to suffice income details to the government if his income is above the stated exemption limit of government (For ex: Exemption limit for FY 2019-2020 is Rs 2.5 lakh). While as per the IT Act, a taxpayer shall also have to mandatorily file an ITR if is obliged to do so by any provision of the act or if he is directed by any officer or any government official within the constraints of the law. The law provides the following criteria for Indian citizens to file an ITR annually on a mandatory basis:

	ITR Filling Eligibility for FY 2019-2020 (AY 2020-21)
For Individuals	Condition
S.no	Age	Income	ITR Applicability
1.	Age < 60 Years	Income > 2.5 lakh	Applicable
2.	Age > 60 Years Age < 80 Years	Income >  3 lakh	Applicable
3.	Age >80 Years	Income > 5 lakh	Applicable
Other criteria   1. If TDS has been deducted and the taxpayer needs a refund. 2. Has some reportable transactions like income from capital gain, property, or financial interest outside India. 3. If the taxpayer carries forward losses. 4. If specifically, a notice has been issued to the taxpayer from the department to furnish an Income tax return

ITR Filling Eligibility for FY 2019-2020 (AY 2020-21)
For Corporate entities
1. Income Tax Return is to be filed by HUF(Hindu Undivided Family ), Sole Proprietorship, Partnership, Company, etc. 2. If the entity has earned profit or loss in business. 3. If any other entity as per any legislation or the IT Act is abiding to file an ITR online.
Note: There can also be some different criteria applicable to individuals or corporate entities within which they have to file an Income Tax Return online.

Income Tax Return Filling – Why should I file ITR?

An Income tax return is conclusive proof of Income of a taxpayer. It is considered as a valid document for many government agencies, banks, loan institutions, and entities to trust the taxpayer before granting him any loan, financial aid, or any benefit. While if the taxpayer has income below the exemption limit of income as stated in the tax slab of government, then he is not obliged to file an ITR. But it is always advisable to go for filling of ITR even if it is not applicable, as the taxpayer with a filling of an ITR of his income he is entitled to avail all the linked benefits which are being provided by the government and other agencies. Some linked benefits of filing a return of Income Tax is:

1. To avail easy credit from financial institutions. Usually, less formalities have to be done to avail subsidized loans when ITR is submitted as proof of Income.

2. To claim tax refunds from government, if excess TDS(Tax Deducted at Source ) has been deducted from your FD savings or Investment income etc;

3. To claim discounts or benefits on insurance cover policies, health plans, and medical policies.

4. To claim preference in government projects and tenders.

5. To entitle yourself or your business “legally complied “

Note: Income Tax Return is a crucial document to hold, it is required in all aspects of financial transactions and beholds long term financial benefits. Also, it can be asked by the department officials or government if the taxpayer is held liable to pay Income Tax at a later stage. Hence, it is advisable to file an Income Tax Return annually to keep a legally entitled record of Your Income affairs.

Forms for Income Tax Return Filling India

To simplify compliance work for taxpayers, the Income-tax department has notified for different tax forms for different category of taxpayers to file their Income tax return online as per their eligibility or conditions of IT law as applicable.

Income Tax Return Forms to file for AY 2020-21 (FY 2019-2020)

Forms	Applicability Criteria
ITR -1 SAHAJ	ITR -1 SAHAJ is specifically for Individuals taxpayers having income up to Rs 50 lakh from l  Salary / Pension & ; l  Income from Agriculture land up to Rs 5 thousand and ; l  Income from one house property &; l  Income from Lottery Winnings, Race betting, etc &; l  Incomes from sources referred in Section 115BBDA or Section 115BBE.
ITR – 2	ITR -2 is specifically for Individuals and HUFs (Hindu Undivided Family ) not having income from profits and gains of business or profession but assessed to pay Income tax as per Rule 12 of the Income Tax Rules, 1962.
ITR – 3	ITR -2 is specifically for Individuals and HUFs (Hindu Undivided Family ) having income from profits and gains of business or profession and assessable to pay Income tax as per Rule 12 of the Income Tax Rules, 1962.
ITR – 4 SUGAM	ITR – 4 SUGAM has to be filed by Individuals, HUF(Hindu Undivided Family ) and Firms (other than Limited liability partnership )being a resident of India and having : Income up to Rs 50 lakh from Business or Profession computed under Section 44AD, 44ADA or 44AE.   But not to be filed by an individual who is either Director in a company or has invested in unlisted equity shares.
ITR – 5	ITR -5 is specifically for persons including AOPs (Association of Persons), LLPs (Limited Liability Partnership firms), BOIs (Body of Individuals ) or other entities taxable under law other than these : l  Individuals l  HUF l  Company  l  Person filling ITR-7
ITR – 6	ITR- 6 is specifically for Companies other than for companies filling exemption under Section 11
ITR – 7	ITR – 7 is specifically for Companies, including those who are required to file ITR under section 139(4A) or Section 139(4B) or Section 139 (4C) or Section 139 (4D).

Income Tax Return Filling - Due Dates for Filing Income Tax Return

A Return of Income tax is to be filed on or before the “due date” notified by the Income Tax Department. The Tax department notifies for the due date for filing return which usually has to be filed by the 31^st July of the preceding year (“Assessment year”). For instance, ITR for FY 2018-19 was to be filed by 31^st July 2019 (AY 2019-2020).

In case, the taxpayer by way of any special notice or intimation of the appropriate official of the department has been directed to file ITR by some particular due date or period. The taxpayer then shall have to file the Income-tax return as per the directions of the officials.

Income Tax Return Filling - Penalties or Consequences for Filling Income Tax Return

Filling of Income Tax Return is obligatory for all taxpayers held taxable as per the IT Act. The Act also provides for strict provisions and for application of penal fines and consequences for non –filling of Income-tax return or for non-compliance of Income-tax act rules are applicable in respect of ITR Filling.

As per the Income Tax Act, 1961 the following penal consequences shall have to be dealt with, in case if you failed to file ITR for AY 2020-2021.

• For non-filling of ITR by notified due date, a penal fine of Rs 10,000 as per Section 234F shall become applicable to the taxpayer. After payment of which the taxpayer shall be allowed to file a belated return. However, such a penalty shall not have to be filed in case of exempted income limit.

• For non-filling of ITR as per Section 139, you shall be liable to pay Interest of the liable tax amount.

• For non-filling delayed filling or non-compliance of any provision in respect of ITR filling, the taxpayer can be issued as an intimation of prosecution, can be imprisoned for a minimum tenure which either is 3 months or can be even 2 years.

• If the amount of tax evasion is more than Rs 25 lakh, then the taxpayer can even be imprisoned for a period of 6 months to even 7 years.

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