ITR Filing 2023: Five Things To Bear In Mind When Calculating Capital Gains
Capital gains often involve large amounts of money and it is essential to get the calculation for tax filing right.

Capital gains and the tax to be paid on this income occupies a vital part of the entire tax calculation for many individuals. These gains and the taxes due must be calculated carefully. They often involve large amounts of money and it is essential to get it right. Here are the five most important points to bear in mind:
Claim Your Long-Term Capital Gain Deduction
The Income Tax Act provides a few benefits to taxpayers when it comes to capital gains. One such benefit is the threshold on long-term capital gains earned from equity investments in a year. Long-term gains of up to Rs 1 lakh received from the sale of equity are tax free.
For equity, gains are considered long term if the investment has been held for more than a year.
Classify The Gains Properly
One of the most important classifications to make is between trading and investment gains. If you are undertaking the activity of trading as a business then the classification has to be separate from what you are doing as an investment.
This is usually the biggest cause of conflict with the tax department and hence there are now guidelines that govern the nature of the transactions.
Get The Cost Right
There are times when the investor finds that it is difficult to find out the cost for the asset that they have sold. This usually happens when records of a sale are not kept. This makes it difficult to accurately calculate capital gains.
For equity shares, brokers usually keep records of purchase and sale and they’ll be able to provide an investor with a consolidated calculation of short-, and long-term capital gains.
If the holdings for equity are prior to Jan. 31, 2018, the Fair Market Value on that date can be taken as the base to calculate long-term capital gains. The impact of corporate announcements like bonus share issues should also be taken into account.
For other assets like property, the purchase agreement plus various bills for any improvements made would help in arriving at the right cost.
Match With The Annual Income Statement
The transactions that are done during the year should all be recorded and then shown in the tax return. This is essential because anything missed out will invite action from the tax department. There are details of the sale of shares and property made during the year in the Annual Information Statement (AIS). All of the information within the statement should tally with the actuals before filing the return.
Off Market Deals
Financial transactions that are conducted off market should also be accounted for. In fact, the calculations for these transactions should be done with care and all documentation should be preserved.
(The writer is founder, Moneyeduschool)