Things have grow to be tough for the buyers investing in equities – together with fairness linked financial savings scheme (ELSS), which is likely one of the standard tax-saving choices, and different equity-oriented mutual fund (MF) schemes – after reintroduction of tax on long-term capital achieve (LTCG) from equities.
Not solely the buyers have to pay 10 per cent tax on features exceeding Rs 1 lakh from redemption of equities and equity-oriented funds in a monetary yr, however revealing the capital features within the Income Tax Return (ITR) has additionally grow to be a frightening activity.
Till January 31, 2018, the LTCG on equities have been tax free. So, the salaried buyers solely have to reveal the features in ITR-1 as exempted earnings. But on making redemption on or after February 1, 2018, salaried taxpayers can not file ITR-1, as there is no such thing as a provision of showing capital features on this ITR Form.
As a outcome, other than paying tax on LTCG from sale of equity-oriented funds, such taxpayers have to file advanced ITR-2 as a substitute of a lot easier ITR-1.
If the models redeemed comprise investments made earlier than and after January 31, 2018 by means of systematic funding plan (SIP), they must segregate the investments made earlier than and after the cutoff date.
This is as a result of the closing NAV on January 31, 2018 might be thought of as buy worth of the models purchased earlier than the cutoff date, whereas for the models bought on or after February 1, 2018, precise buy worth might be taken under consideration for calculation of LTCG.
Moreover, funding sensible separate entries are to be made within the web page 112A of ITR-2 (and different ITR Forms as relevant) to declare LTCG on redemption of equity-oriented funds.
Due to the double hassle, many fairness buyers are suspending the redemption determination.
However, it’s higher to make redemption in smaller portions yearly as no tax is payable on LTCG as much as Rs 1 lakh in a monetary yr.
So, whereas the ache of submitting ITR-2 (or different relevant ITR Forms apart from ITR-1) can’t be prevented, buyers might no less than avoid wasting capital achieve tax by making smaller redemption yearly.