Update By CBDT No need for scrip-wise reporting of day trading and short term capital gains in ITR

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#CBDT issues clarification for filing income tax returns for the assessment year 2020-21 in the press release dated 26th of September 2020 that there is no requirement of scrip wise reporting for day trading and short-term sale or purchase of listed shares details.

Below are details of the press release dated 26th of September 2020.

Press release by #CBDT said that there was a report in a certain section of media that stock traders/day traders are required to furnish scrip wise details in the return of income for FY 2019-20 (AY 2020-21). The gain from share trading in case if stock traders or day traders is generally categories as short-term capital gains or business income. This is because their holding period of share/units in most of the case is less than one year which is a prerequisite for the gains to be categorised as long-term capital gains. As there is no requirement in the return of income for scrip wise reporting in case of short-term/business income arising from share transactions, these reports are distorted and misleading.

Further, #CBDT added that the Finance Act, 2018 allowed exemption to the gains made on the listed shares/specified units up to 31st of January 2018 by introducing grandfathering mechanism for computation of long-term capital gains for these shares. The scrip wise details in return of income for FY 2019-20 (AY 2020-21) is required to be filled up only for the reporting of the long-term capital gains for these shares/units which are eligible for the benefit of grandfathering.

As the grandfathering is to be allowed by comparing different values (such as cost, sale price and market price as on the 31st of January 2018) for each share/units, there is a need to capture the scrip wise details for computing capital gains of these shares/units. The scrip wise details are not required in income tax return forms for FY 2019-20 (AY 2020-21) for computation of capital gains/business income from shares/units which are not eligible for grandfathering.

Without this reporting requirement, there may be situations where the taxpayer may not claim or wrongly claim the benefit of grandfathering due to lack of understanding of the provisions. Also, if the above calculation is not made scrip wise and the taxpayer is allowed to enter the total figures only. there will be no way for the income tax authorities to check the correctness of the claim and therefore many return will require to be audited. which may lead to unnecessary grievances/rectifications at a later stage. If scrip wise long-term gain is available, it can be cross verified by the Department electronically with the stock exchange, brokerage companies, etc and there will be no need to subject these income tax returns to further audits or scrutiny.

Thus, the main intent behind requiring scrip wise details is to facilitate the taxpayer incorrectly computing the long-term capital gains on these shares/units. The requirement to provide scrip wise information in the income tax return is not unique to India. Internationally also, the taxpayer is required to provide scrip wise information for reporting capital gains. For example in the US, a taxpayer having capital gains from transfer of shares is required to fill scrip wise details in Schedule-D of Form 1040 - Income tax return form in the USA.

Source- (Twitter, Income Tax India)