Income Tax Return (ITR) filing is a process by which taxpayers file information about their income earned and tax applicable to the income tax department. The department has notified seven various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 for the same.
The applicability of these forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category of the taxpayer - like individuals, HUF, company, etc.
For the uninitiated, any profit or gain that arises from the sale of a 'capital asset' is a capital gain. This gain or profit is charged to tax in the year in which the transfer of the capital asset takes place.
In the case of listed equity shares or mutual funds which are held for more than one year, the gains are long-term in nature and get taxed at a rate of 10 percent. However, there is no tax for aggregate long-term gains up to Rs 1 lakh in a financial year.
So, which ITR form is applicable in this case?
According to Archit Gupta, Founder and CEO, Clear, any LTCG (taxable or tax free) can be claimed through filing ITR form 2, assuming the taxpayer does not have any business income. Business income includes income received from the sale of products or services.
Now, if an assessee has income from a business, they should fill ITR form 3 for reporting capital gains.
Exempted LTCG, as per Kapil Rana, Founder and Chairman, HostBooks, can be reported in the exempt income (EI) schedule of the ITR forms. In the case of companies, the exempted LTCG can be reported in schedule EI of ITR form 6. Other than individuals, HUF or companies, exempted LTCG can be reported in schedule EI of the ITR form 5.