One of my client is having income from share market transaction as well as professional income. Sir, my question is what to do to know that particular share is held for short term or long term as the share market account contains almost 500 entries. Any short cut available? & each & every transaction should be filled while filling ITR?? Please help me on this topic. Thanks in advance.
16 June 2015
Thank you sir... But how to prepare income tax return & the last profit or loss is treated as his profit for the period & what about dividend received?? if you explained in detail than it would be a great help.
31 July 2024
To manage and report income from share market transactions along with professional income efficiently, follow these guidelines:
### **1. Distinguishing Between Short-Term and Long-Term Capital Gains**
**Short-Term vs. Long-Term:**
- **Short-Term Capital Gains (STCG):** If the shares are held for less than 12 months from the date of acquisition to the date of sale. - **Long-Term Capital Gains (LTCG):** If the shares are held for more than 12 months.
**Steps to Determine Holding Period:**
1. **Check Transaction Dates:** - For each share transaction, compare the acquisition date and the sale date. - Use the **first-in-first-out (FIFO)** method if shares of the same company are acquired on different dates.
2. **Use Software Tools:** - Consider using financial software or trading platforms that can generate reports showing the holding period for each share. Many platforms have features to automatically classify shares as STCG or LTCG based on the holding period.
3. **Consolidated Reports:** - Obtain a consolidated report from your broker or trading platform, which usually categorizes the transactions and provides details about STCG and LTCG.
### **2. Filing Income Tax Return**
**Capital Gains Reporting:**
1. **Schedule Capital Gains:** - Use **Schedule CG** in the ITR form to report capital gains. It is divided into sections for STCG and LTCG. - Fill in the details of each transaction including sale value, purchase value, and date of acquisition and sale.
2. **Profit or Loss Calculation:** - **Profit/Loss Calculation:** Calculate the profit or loss for each transaction by subtracting the purchase value from the sale value. - **Net Calculation:** Aggregate all the STCG and LTCG to determine the total taxable capital gains.
3. **Declare Dividend Income:** - **Schedule OS (Income from Other Sources):** Report any dividends received under Schedule OS of the ITR form. Dividends are taxable under this schedule. - **Dividend Details:** Mention the total amount of dividend received, and include it in the total taxable income.
**Example of Reporting:**
- **Short-Term Capital Gains:** - Total STCG = ₹50,000 - Report under Schedule CG → STCG section.
- **Long-Term Capital Gains:** - Total LTCG = ₹1,00,000 - Report under Schedule CG → LTCG section.
- **Dividend Income:** - Total Dividend Received = ₹5,000 - Report under Schedule OS → Dividends section.
### **3. Preparing Income Tax Return**
1. **Fill in the Details:** - **Personal Information:** Enter personal and financial details in the ITR form. - **Capital Gains:** Enter detailed information about STCG and LTCG in Schedule CG. - **Dividend Income:** Enter the total amount of dividend received in Schedule OS.
2. **Profit or Loss Computation:** - **Professional Income:** Report professional income separately in the respective section of the ITR form (e.g., Schedule BP for business/professional income). - **Overall Income:** Sum up all sources of income including capital gains, professional income, and dividends to determine the total taxable income.
3. **Calculate Tax Liability:** - **Tax Computation:** Compute the total tax liability based on the aggregated income, applicable deductions, and rebates. - **Pay Tax:** If there’s any tax payable, ensure to pay it before filing the return.
### **4. Consider Using Tools and Software**
**Automated Solutions:** - **Tax Filing Software:** Use tax filing software or services that integrate with brokerage accounts and can automate the process of calculating and reporting capital gains, dividends, and other income. Many software solutions provide tools for importing transaction data and generating reports.
**Professional Help:** - **Consult a Tax Advisor:** For complex portfolios or significant transactions, consider consulting a tax advisor or accountant to ensure accurate reporting and compliance with tax regulations.
### **Summary:**
1. **Determine Holding Period:** Use transaction dates or software tools to categorize shares as STCG or LTCG. 2. **File ITR:** Report STCG and LTCG in Schedule CG, and dividend income in Schedule OS. 3. **Prepare Return:** Calculate total taxable income, report income from all sources, and pay any applicable taxes.
Accurate reporting ensures compliance and helps avoid issues with tax authorities. If in doubt, seek assistance from a professional to navigate complex tax scenarios effectively.
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