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Tax on long term capital gains? Here's the ITR form you should use
October, 14th 2020

Assesses who are required to file Income Tax Return (ITR) should determine the type of ITR form before actually filing it. The form must be chosen in accordance with the income that the taxpayer earns, or if the taxpayer holds assets in a country other than India. Likewise, the treatment of capital gain as well as its reporting plays a major role while selecting ITR forms.

Capital gains are the difference between the selling price and purchase price of the equity share. These are based on the period of holding and whether it is listed or unlisted.

In the case of listed equity shares or mutual funds which are held for more than one year, the gains are long-term in nature and get taxed at a tax rate of 10 percent. However, there is no tax for aggregate long-term gains up to Rs 1 lakh in a financial year.

According to Archit Gupta, Founder and CEO, ClearTax, any LTCG (taxable or tax free) can be claimed through filing ITR form 2, assuming the taxpayer does not have any business income. Business income includes income received from the sale of products or services.

On the other hand, assessees having income from business and profession shall fill ITR form 3 for reporting capital gains.

"To be more precise, exempted LTCG will be reported in exempt income (EI) schedule of the ITR forms," explains Kapil Rana, Founder and Chairman, HostBooks.

In the case of companies, Rana says the exempted LTCG can be reported in schedule EI of ITR form 6. Other than Individual, HUF or company, the reporting of exempted LTCG can be reported in schedule EI of the ITR form 5.

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