Why the Urgency?
For salaried individuals, the deadline to file Income Tax Returns (ITR) for the Financial Year 2025-26 (Assessment Year 2026-27) is July 31, 2026. While your employer provides a Form 16 for salary income, you are solely responsible for reporting gains
from any other sources, including the stock market. Collating details of all your share and mutual fund transactions from April 1, 2025, to March 31, 2026, can be time-consuming. Starting today gives you ample time to gather the necessary documents, verify the data, and avoid the frantic rush that often leads to mistakes. Missing the deadline can result in a penalty of up to ₹5,000 and interest on any unpaid tax.
Understanding Your Equity Gains
Profits from selling shares or equity mutual funds are called capital gains and are taxed based on the holding period. If you sell an asset after holding it for 12 months or less, the profit is a Short-Term Capital Gain (STCG). If you hold it for more than 12 months, it's a Long-Term Capital Gain (LTCG). For the recently concluded financial year, STCG from listed equities is taxed at a flat rate of 20%. For LTCG, the first ₹1.25 lakh of gains in a financial year is tax-free. Any gain above this threshold is taxed at 12.5%. It's crucial to correctly classify your gains to calculate your tax liability accurately.
How to Find and Calculate Your Gains
Your stockbroker is your best friend here. Log in to your trading accounts and download the 'Capital Gains Statement' or 'Tax P&L Report' for the period from April 1, 2025, to March 31, 2026. Most brokers provide these reports, which neatly categorise your transactions into long-term and short-term, and often calculate the gains or losses for you. If you use multiple brokers, you will need to download a report from each one and consolidate the information. These statements are the primary documents you'll use to fill in the 'Schedule Capital Gains' (Schedule CG) in your ITR form, which will likely be ITR-2 for most salaried investors.
The Crucial Step: Verify with AIS
The Income Tax Department has its own record of your financial transactions, called the Annual Information Statement (AIS). This statement compiles data from various sources, including stock exchanges and your brokers. You must log in to the income tax e-filing portal and download your AIS to cross-check the information with your broker's statements. While the AIS is comprehensive, it may sometimes have discrepancies or miss details like acquisition costs. Your broker's statement, based on your actual transactions, should be treated as the primary source, but ensuring it reconciles with the AIS helps prevent future tax queries.
Don't Forget Your Losses
Reporting is mandatory even if you've made a loss. In fact, it's beneficial. Capital losses can be 'set off' against capital gains to reduce your taxable income. A short-term capital loss can be set off against both short-term and long-term gains. However, a long-term capital loss can only be set off against long-term gains. If you can't use all your losses in the current year, you can carry them forward for up to eight assessment years, but only if you file your ITR by the July 31 deadline. This makes timely filing essential for loss-making investors too.
