Photo: iStock
Photo: iStock

Short-term loss needs to be reported in Schedule CG

STCL that is not set off against capital gains in AY19 can be carried forward to be set off against future capital gains in the successive eight assessment years

I am a retired senior citizen having income from pension, dividend, interest on fixed deposits (FDs) and securities, house rent and share trading. Until now, I was filing my tax return on Sahaj form 1. This year I have incurred short-term losses on shares and which I wish to mention in my return. Which tax form will be appropriate for me for assessment year 2018-19?—Dhrub K. Phitkariwala

The correct form to be used for FY18 (i.e. assessment year 2018-19 or AY19) is ITR-2.

The short-term capital loss (STCL) will need to be reported in Schedule CG appropriately. STCL that is not set off against capital gains in AY19 can be carried forward to be set off against future capital gains in the successive eight assessment years. In order to carry forward the loss and utilise it in the forthcoming years, you will need to ensure that the loss is also captured in Schedule CFL of the return form and the tax return is filed within the due date, by 31 July.

I purchased 205 equity shares at 30 per share of face value 10 in 1993. Later on, there was a stock split to face value of 1; thereby my present holding is 2,050 shares. The present market value of the share is 525. If I sell it today, what will be my tax liability?

—Deepak Soni, Kanpur

It is assumed that the shares are currently listed on a recognised stock exchange in India and hence you will pay securities transaction tax (STT) when the shares are sold. You have held the shares for more than 12 months before the sale, so the resultant gains from the sale are treated as long-term capital gains (LTCG). Since you acquired them before 1 October 2004 (when STT became applicable), LTCG from the sale of the shares, to the extent it exceeds 1 lakh will be taxable at 10% (plus applicable cess and surcharge) under Section 112A of the Income-tax Act, 1961. Note that this limit of 1 lakh is in respect of all gains taxable under Section 112A i.e. LTCG on sale of listed equity shares, equity-oriented mutual funds and specified business trusts.

When computing LTCG, the cost of acquisition is deemed to be the higher of the listed price of shares as on 31 January 2018 or the actual cost of acquisition, but such deemed cost of acquisition can’t exceed the actual sale proceeds received by you. You cannot claim an indexation cost of acquisition in this case.

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Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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