Capital Gains

DISCLOSE CAPITAL GAINS IN YOUR INCOME TAX RETURN While filing your income tax return (ITR) for assessment year (AY) 2018-19, the deadline for which is 31 July, don’t just look at the Form 16 you get from your employer even if you are a salaried individual. Make sure you disclose gains or losses made from selling shares or redeeming mutual fund (MF) units, or selling a property or jewellery. Irrespective of the amount gained or lost, one must disclose capital gains or losses while filing ITR. Here is how you can calculate capital gains from different assets and how to disclose them while filing ITR. Calculating capital gains Profits or gains arising from transfer of a capital asset such as property, gold, shares and bonds are considered capital gains and taxed under the income head “capital gains”. Such gains are of two types—short-term and long-term—depending on the period of holding. Capital gains are calculated by deducting the cost of acquiring the asset from its sale value. But the rules are different for different assets. Real estate: Gains made from transfer of immovable property (land, house, apartment) within two years of purchase are considered short-term capital gains (STCG); after two years, they become long-term capital gains (LTCG). The LTCG rate is 20% with indexation, while STCG is taxed at the slab rate. To calculate LTCG, first calculate the indexed cost of acquisition “by multiplying the cost of acquisition with the notified cost inflation index (CII) for the year of sale and dividing this by CII of the year of purchase,” said Sandeep Sehgal, director-tax and regulatory, Ashok Maheshwary & Associates LLP, a chartered accountancy firm. But if the asset was bought before 2001, then you need to use the fair market value (FMV) as on 1 April 2001 and then calculate the indexed cost of acquisition. For instance, if the property was bought in 1995, you need to calculate the property’s FMV as on 1 April 2001 and then arrive at the cost of acquisition. Read more on how to calculate FMV and indexed cost of acquisition at here and here. The rules are different for inherited or gifted property. Here, the “cost of acquisition incurred by the previous owner and his or her period of holding is considered to compute gains,” said Sehgal. Read more at www.starhealthdevarajan.com/news/540