Filing ITR would be a tiring task for equity/MF investors doing SIP, STP, SWP

The ITR-2 excel utility has 28 pages compared to just 8 pages in ITR-1.

Filing Income Tax Returns (ITRs) is a relatively easy task for salaried individuals having total income up to Rs 50 lakh, income from one house property and income from other sources like interest income, as they need to file the simple ITR-1, provided such a taxpayer is not a director of any company, has not invested in unlisted shares and/or don’t have any income from business or profession.

However, apart from non-fulfillment of any of the above conditions, if a salaried individual redeems his/her equity share(s) – be it a listed share – and/or equity-oriented mutual fund (MF) unit(s), he/she will have to file ITR-2, provided the taxpayer doesn’t have any income from business or profession.

Not only ITR-2 excel utility has 28 pages compared to just 8 pages in ITR-1, but from this year, instead of filling the consolidated capital gain (CG) amount, investors need to fill Schedule 112A for each transaction amounting to long-term capital gain (LTCG) from sale of 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 of the Income Tax Act.

The Schedule 112A page was introduced in July last year during the peak of tax filing session for the Assessment Year (AY) 2019-20 with almost half of the taxpayers already filed their return of income. As a result, Schedule 112A was optional last year and investors were allowed to provide consolidated LTCG on the CG page.

“Earlier investors were given the option for disclosing consolidated LTCG figures on sale of equities/equity-oriented funds, but now it is mandatory for everyone to show detailed breakup of all transactions,” said CA Karan Batra, Founder and CEO of CharteredClub.com.

So, in case you are a salaried individual investing in Equity Linked Savings Schemes (ELSS) for last 15 years through monthly Systematic Investment Plan (SIP), you need to file ITR-2 for AY 2020-21, if you have redeemed a part of your investments during the last Financial Year (FY 2019-20).

In case you have redeemed the ELSS units of the first 10 years, i.e. investments made through 120 monthly SIPs, you need to fill 120 rows in Schedule 112A page. If you have redeemed more equity/equity oriented funds, you need to mention figures of each investment along with corresponding sale values.

So, in case you have redeemed units of 10 equity-oriented funds, in which investments were made monthly SIPs for 10 years, you have to fill 1,200 rows in the Schedule 112A page that contains a table, in which, you have to fill 7 out of 14 columns.

As investments made through Systematic Transfer Plan (STP) are also considered as redemption of the units of the scheme from which funds are transferred to other schemes, investors need to fill each STP in Schedule 112A, if the switch out is from an equity-oriented fund.

After a long investment period, investors – especially retired investors – tend to enjoy regular income through Systematic Withdrawal Plan (SWP) from their investments. However, enjoying regular income through SWP from equities/equity-oriented funds will result into a tiring ITR filing process as each SWP transaction – resulting into LTCG – needs to be entered in Schedule 112A page.

“Providers of Demat Accounts and Asset Management Companies (AMCs) are not providing proper statements which make it all the more complicated,” said Batra.