No Scrip wise reporting for Short-Term Listed Shares

Background and Facts:

  • There was a report in certain section of media that Day traders are required to furnish scrip wise details in the return of income for AY 2020-21.
  • Gain from share trading in case of day traders is generally categorised as short-term capital gains or business income as the holding period of shares/units is less than one year.
  • The Finance Act, 2018 allowed exemption of the gains made from listed share up to 31.01.2018 by introducing grandfathering mechanism.
  • Grandfathering is to be allowed by comparing different values (such as cost, sale price and market price as on 31.01.2018) for each share/unit, there is a need to capture the scrip wise details for computing capital gains of these shares/units for the same F.Y. 2018-19 only.

Need for clarification:

  • Without this reporting requirement, there may be situations where taxpayer may not claim or wrongly claim the benefit of grandfathering.
  • Also, if the above calculation is not made scrip wise and 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 returns will require to be audited.

Clarification on scrip wise reporting:

  • Scrip wise reporting is required only in case, where long-term gain is available during the F.Y. 2019-20 and the same can be cross verified by the Department electronically with stock exchange, brokerage companies, etc. no need to subject these income tax returns to further audits or scrutiny.
  • The main intent behind requiring scrip wise detail is to facilitate the taxpayer in correctly computing the long-term capital gains on these shares/units.
  • No requirement scrip wise reporting in the return of income for F.Y. 2019-20 in case of short-term gain/business income arising from share transactions.

 

Comments:    

Thus, it can be concluded that, the Scrip wise detailed reporting for the sale and purchase of shares/Units is required to file in the return of A.Y. 2020-21 only in case, long term capital gain. Consequently, the day traders can enter the total figure of profit while filing the return.

Source:  Press release dated 26.09.2020, Central board of direct taxes.

-Mayank Mittal, Associate, ShineWing India