ITR filing: How to file income tax if you invest in direct stocks in India?

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ITR filing date: The due date for Income Tax Return (ITR) filing for salaried taxpayers is approaching fast. Therefore, it is advised to file your ITRs on time otherwise you will have to pay a hefty fine or penalty for filing your Income Tax Return after the deadline.  The last date for filing the ITR is July 31 for taxpayers whose accounts don't need to be audited. 

Which ITR form to use in case you have investments in direct stocks?

You should use ITR 2 form in case you have direct stock investments. In case you’re wondering how to proceed, we have you covered. 

How to file Income Tax Return for Stock Market transactions?

Income Tax e-filing step 1: Login to the Income Tax portal. In the Dashboard section click on File Now.

ITR filing step 2: Choose the Assessment Year 2022-23 to file your taxes for the Financial Year 2021-22. Press on Continue. 

ITR filing for stock market transactions: step 3- After selecting the online mode for the filing tax, proceed to select the status as Individual. 

ITR filing for tax on equity shares: Step 4- Choose the relevant ITR form. Assuming you have invested in equities and mutual funds, you will have to choose ITR 2 (in case you don’t have income from business or profession).

Direct stocks income tax: ITR filing Step 5- Next choose the option: Taxable Income is more than the basic exemption limit ( income greater than Rs 2.5 lakh).

Tax for equity shares- ITR filing step 6: Now, you will have a total of 19 schedules to deal with. 

Taxation on equity shares: ITR filing Step 7- Choose the option ‘No’ when asked if you’re opting for the new regime. This will help you to claim deduction under Section 80C, Chapter VI-A, House Rent Allowance etc. 

Tax on equities- ITR filing step 8- Answer the questions in the Deduction section of the Salary Schedule. Next, continue to complete the general section. Choose the appropriate residential status and condition for the status.

ITR e-filing step 9: Fill in the relevant details for Part A and the Salary Schedule, and then provide your confirmation. 

Equity shares taxation Income Tax Filing Step 10: Now, step into the Schedule Capital Gains. In case you incurred both short-term capital gains as well as long-term capital gains in the previous financial year, choose the below options and press continue. 

  1. Equity share or unit of equity oriented Mutual Fund (MF) or unit of a business trust on which STT is paid under section 111A or 115AD(1)(ii) proviso (for FII) (For LTCG)
  2. Equity share in a company or unit of equity oriented fund or unit of a business trust on which STT is paid under section 112A (For STCG)

In case you’re unclear about whether you had short-term and long-term capital gains you can read our article on ‘What is Capital Gains Tax?’  to get clarity. 

Direct stocks income tax: ITR Filing Step 11: Fill in the details of the short-term capital gains. Assuming you sold shares worth Rs 20,000 on Jan 1, 2022. You had purchased these shares on April 15th, 2021 for Rs 15,000. Assuming you had paid about Rs 300 to sell the shares (brokerage or other expenses connected with the transfer). Then, you will have to enter in these details as shown below. You will incur STCG on the amount of Rs 4,700.

Equity shares taxation ITR Step 12: Next, proceed to ‘Add Details’ in the Long-term capital gains section. In the drop down, choose the option ‘Share/ unit acquired after Jan 31, 2018. (there is a different procedure in case the stock was acquired before 31st, Jan 2018). 

Assuming you sold shares worth Rs 20,000 on Jan 1, 2022. You had purchased these shares on April 15th, 2018 for Rs 15,000. Assuming you had paid about Rs 300 to sell the shares (brokerage or other expenses connected with transfer). Then, you will have to enter in these details as shown below. You will incur LTCG on the amount of Rs 4,700.

Equity taxation ITR e-filing Step 13: Assuming you had no set off from the previous year, proceed to add details under ‘ F.’ In this table, assuming both the STCG as well as LTCG were applicable till June 15th, then fill in Rs 4,700 under the tab upto 15 Jun as shown below.  

ITR for equities in India Step 14: Fill in the relevant details in the schedules ‘Income from Other Sources’ and ‘CYLA.’ Then go to the ‘BFLA’ schedule and press ‘Compute Set off.’

Step 15: Fill in all the other schedules and proceed for verification. You can then verify and submit the ITR using Aadhaar- OTP.

  • When do I have to file Income Tax Return?

  • Which ITR form to use in case you have investments in direct stocks?

  • What is the due date for filing ITR in 2022?

  • What happens if you fail to file ITR by the due date?

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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.