Income tax return filing: What you must know about capital gains from the stock market

Reporting in Income Tax Return
Income from capital gains can be reported in Form ITR-2 or ITR-3.
 
Treatment of loss
Capital loss, whether short-term or long-term, cannot be set-off against income taxable under any other head.
It can be set off only against long-term capital gains.
It cannot be set-off against short-term capital gains.
However, short-term capital loss can be set-off against both long-term or short-term capital gains.
Unabsorbed capital loss can be carried forward for eight assessment years and set off against the relevant capital gains of the subsequent year, only if the return of income is filed on or before the due date.
In case of business loss, it can be set-off against the income taxable under any heads except salary income.
 
 
Business income versus capital gains
As per CBDT guidelines, if assessee himself treats listed shares as stock-in-trade, the income arising from such transfer would be treated as business income.
If the listed shares are held for more than 12 months, the assessee can treat the income arising for their sale as capital gains. 
 
Period of holding
If listed shares and units of equity-oriented funds are sold after 12 months, income shall qualify as long-term capital gains.
For units of mutual funds other than equity-oriented funds, the period of holding has to be more than 36 months to qualify as long-term.
 
Tax rate
Long-term capital gains, arising from sale of listed shares and units of an equity-oriented mutual fund is exempt from tax up to Rs 1 lakh and after which it is chargeable to tax at the concessional rate of 10 per cent.
However, in this case, the benefit of indexation is not available. Also, the tax deductions under sections 80C to 80U and rebate under section 87A cannot be claimed from such gains.
Long-term capital gains arising from units of mutual funds, other than equity-oriented funds, is taxable at the rate of 20 per cent, but indexation benefit can be claimed (except from debt-based funds).
Short-term capital gains arising from sale of listed shares and units of an equity-oriented mutual fund are taxable at the special rate of 15 per cent.
No deduction shall be available under sections 80C to 80U from such gains. Short-term capital gains arising from units of mutual funds (other than equity-oriented funds) are taxable at the slab rates applicable to the assessee.

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