How to File Capital Gains Tax?

The Indian tax system offers a ton of benefits. But navigating it can often be complicated, especially when it comes to capital gains. 

Whether you've profited from selling property, stocks, or other capital assets, it is crucial to understand the process of filing taxes and the capital gains ITR form to use. This will help you ensure compliance with the law and fulfill your tax responsibilities efficiently.

Before diving into the process, let's understand how to select the right capital gains ITR form.

ITR form for capital gain

If I have capital gains, which ITR to file? This is a common question most taxpayers have. Depending on your status and income, you can file taxes using three capital gains ITR forms:

ITR-2: This is a dedicated ITR for salaried persons with capital gains. It also includes Hindu Undivided Family (HUF) with capital gains income. However, the ITR 2 capital gains form does not include income from business or profession.

ITR-3: Individuals or HUFs can use this form to file ITR for capital gains and business income.

ITR-4: If you are an individual or HUF with income from capital gains and fall under presumptive tax schemes, you can use this ITR form for capital gains taxation. It includes all firms except LLPs.

Documents required for filing capital gain ITR form

Here is the paperwork required for filing capital gain ITR form-

1. For sale of immovable property

1. Sales and purchase deed, improvement cost details, transfer expenses showing the sale value, purchase value, and any cost of improvement.

2. Full address of the property

3. Supporting documents when claiming exemption under section 54 or 54EC

4. Details of the buyer like PAN and Aadhaar card.

2. For sale of equity shares, mutual funds, or virtual digital assets

1. In case of sale of mutual funds, you need to generate consolidated capital gain statements from CAMs and Kfintech.

2. In case of sale of equity shares, contact your broker for a capital gain statement or Tax P&L

3. In case of sale of virtual digital assets, you need to generate transaction report or P&L report from the respective exchanges.

Eligibility criteria to file ITR-2 form

It is mandatory to fill the ITR-2 form if you meet the following criteria-

1. Salaried or pensioned individuals with income exceeding Rs. 50 lakhs.

2. Any Indian individual or member of the Hindu Undivided Family (HUF)

3. Individuals with rental income from multiple house properties

4. Individuals earning capital gains from the sale of mutual funds, shares, immovable property, and virtual digital assets.

5. Individuals earning more than Rs. 5000 from agricultural income

6. Individuals who are a director in any foreign or domestic company

7. Individuals with foreign assets or foreign income

8. Individuals holding unlisted equity shares in any domestic or foreign company

9. Individuals with income from other sources like lottery winning, horse racing, etc.

10. Individuals who have brought forward loss or loss to be carried forward under any income head.

Documents required to file ITR-2 form

Below are some essential documents required while filing ITR-2 form-

1. Aadhaar card

2. PAN 

3. Challan of the paid taxes

4. TDS certificate/ Form 26AS

5. Bank account details

6. Original return details (if filing for a revised return)

7. Notic related details (If filing in response to any notice)

Eligibility criteria for filing income tax return form 3

If you are a taxpayer and meet the following eligibility criteria, you must fill out the ITR 3 form-

1. Resident or non-resident individuals

2. If you are a director of a company 

3. If you have pension as an income source

4. If you are earing an income from house property

5. If you have holdings in unlisted equity shares

6. If your income is taxable under ‘profits and gains of business or profession’ (salary, commission, bonus, interest, remuneration)

Additionally, you can use ITR form 3 if your total income includes the following-

1. Income from single or multiple house properties.

2. Income from betting on races, lottery, or any other gambling legal within the law.

3. Income from foreign assets.

4. Income from short-term or long-term capital gains.

5. Income from business or profession under a proprietorship firm owned by an individual or HUF.

Steps to fill a capital gains ITR form

Visit the official website of the IT department and follow these steps to file your capital gains tax:

Step 1: Log in to your account with your credentials. If you're a new user, click 'Register' to set up your account.

Step 2: Select e-File> Income Tax Returns> File Income Tax Returns. 

Step 3: Select 2022-23 as your assessment year and 'Online' as the mode of filing. Now, click on continue.

Step 4: Select your status and the suitable ITR form and click 'Proceed.'

Step 5: The next page will have five types of schedules. Select 'General' and 'Income schedule.' Now, click on 'Schedule capital gains' and select the type of asset from the list.

Step 6: To fill out the short-term capital gains ITR form, click 'Add details' and enter the consolidated sale amount along with the Cost of Acquisition (COA) in a particular fiscal year. But if you're wondering how to file long-term capital gains in ITR 2, click 'Schedule 112A' and enter details like the transaction date, purchase and sale price, ISIN, etc. Now, click on 'Add.'

Step 7: Review Part B TTI after confirming the appropriate schedule and click on 'Preview return.'

Step 8: Download the ITR and open the declaration tab.

Step 9: Provide the required details and click 'Proceed to validation.'

Step 10: Once your ITR is validated, you must verify it within 30 days. You can do this online or by sending a signed copy of the ITR-V (acknowledgment form) to the IT department's office in Bangalore.

Wrapping Up

Filling out the capital gains ITR form might seem daunting. But by following the right steps, you can ensure a smooth and hassle-free experience. Learn all about investments and related taxation with Tata Moneyfy's mutual fund investment website or download the Moneyfy App now!

FAQs on How to Show Capital Gains in ITR

What is the exemption of capital gains tax?

Certain capital gains, such as gains from specified assets or under specific conditions (e.g., proceeds from sale of a residential property reinvested in residential property), are exempt from tax under Sections 54, 54F, and 54EC.

How do I report capital gains income?

You can report capital gains income by filling out ITR-2, which requires details of your capital asset transactions, costs, and resulting gains or losses.

What happens if I don't report capital gains in ITR?

Failure to report capital gains can lead to penalties, interest on unpaid taxes, and scrutiny from tax authorities, resulting in additional liabilities.

How to calculate tax on capital gains?

You can determine the capital gains based on whether the gains from the investment were long-term and short-term.