ITR filing: Form 16 not the only document you need, even income from investments need to disclosed

Well, it’s that time of the year when we are expected to file your income tax return (ITR). The last date to file ITR is the 31st July. But when you sit down to file ITR, Form 16 which issued by your employer may not be the only document you need.

With the Form 16, your income from selling capital assets, house property and interest on deposits needs to be disclosed in your ITR form. Sudhir Kaushik, CFO, and Founder, Taxspanner.com, an online tax filing and planning service, told the Economic Times, “Tax authorities are tightening the noose around tax offenders. Taxpayers should know that most residual incomes are taxable and they can no longer get away by misreporting them.”

Profits from the sale of capital assets like mutual funds, stocks, gold and immovable property (house or land) are capital gains. Taxpayers have to report capital gains in schedule CG of the ITR forms. So capital gains must be disclosed in your ITR form.

Capital gains:

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.

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.

Shares and mutual funds: Gains from transfer of shares and equity oriented mutual funds within a year of purchase are considered STCG; after a year, they are considered LTCG. For the current AY 2018-19, STCG tax for such assets is 15%. Whereas LTCG from equity is exempt from tax.

Gold and bonds:

Jewellery or bullion are chargeable to capital gains tax, irrespective of the method of acquisition—self-purchased, gifted or inherited. If sold before three years from the date of purchase, gains are considered STCG, else LTCG. STCG from sale of gold is taxed at the slab rate, and LTCG at 20% with indexation.

Rent Income:

Rent income from any house property apart from one self-occupied house has to be declared under income from house property head. If the second house is vacant, it is treated as ‘deemed to be let out’ and you will have to report notional rent in your ITR returns.

Income from other sources

Income from dividends, gifts, interest from deposits and non-recurring incomes from winning lottery, horse racing, gambling, cross word puzzle etc are to be reported under this section. Some of these incomes enjoy tax benefits. Even then these incomes should be reported in the ITR. . Also because tax benefits on most of these sources are available to certain limits, beyond which the remaining amount is taxable.

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