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In India, capital gains are taxed based on holding period, type of asset and exceptions. Therefore, it is crucial to accurately classify capital gains and select the correct ITR form to avoid legal or financial consequences.
If you had sold shares, mutual funds, jewellery, real estate and so on in the financial year 2023-24, you might have ended up with capital gains or losses. Make sure you disclose it properly while filing your income tax return (ITR) this month.
Remember, capital gains and losses are taxed differently and there are specific ITR forms that you need to select for filing of returns. For instance, if you are a salaried individual with capital gains or losses, you must choose ITR-2 and provide details in the capital gains (CG) schedule.
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What are capital assets and how are taxes levied on such gains from such assets? Which Income Tax Return Form to select when filing for capital gains? Naveen Wadhwa, Vice President, Research and Advisory Division at Taxmann answered all these questions and also talked about key things to keep in mind while filing for capital gains in ITR.
Here are a few points that Wadhwa highlighted:
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• Capital gains are taxable as income and are defined as profits from selling capital assets.
• Classification of capital assets depends on the holding period and type of security.
• Capital assets include all assets owned by an individual, excluding personal effects and business assets.
• Understand how to differentiate between short-term and long-term capital assets.
• Tax rates on crypto assets and debt mutual funds have changed with recent Budget amendments.
Also read | ITR filing 2024: Avoiding double-taxation: How Form 67 can help you claim foreign tax credit
• The crypto assets and specified mutual funds are considered short-term capital assets, subject to a 30 percent tax rate.
• Long-term capital gains are taxed at a lower rate than short-term gains.
• Property gains are taxed as long-term or short-term capital based on the holding period.
• Check eligibility to claim indexation benefits and deductions for cost of improvements when filing capital gains from property sales.
• Futures and options profits are taxed as business income, with the applicable tax rate.
• The choice of ITR (Income Tax Return) form depends on the individual’s circumstances, including whether they have capital gains or business income.
• Choose the right ITR form for capital gains tax calculation.
• The right ideal form for reporting income is crucial, as it determines correct reporting and disclosure of foreign assets and income.
Also read | ITR filing: Seven points to bear in mind before filing income tax returns
• Advance tax payment is linked to total income and must be computed and paid accordingly.
• Provide capital gains details for specific dates (June 15, September 15, December 15, March 15) to calculate advance tax liability correctly.