Capital Gains Filing in India: What to Report, Where, and How

Getting the form right matters before anything else. Using the wrong form results in a defective return notice. ITR form eligibility rules are notified annually. Verify the applicable form for the assessment year before filing.

• ITR-1: cannot be used if you have capital gains of any kind. This applies even if gains are exempt.

• ITR-2: for individuals with salary or other income and capital gains, but no business or professional income.

• ITR-3: for individuals with business or professional income alongside capital gains.

All capital gains and losses are disclosed in Schedule CG. This schedule has separate sections for each type of gain, and each must be filled accurately for the correct tax computation:

• Section 111A: STCG on listed equity shares and equity mutual funds

• Section 112A: LTCG on listed equity and equity mutual funds (held 12 months or more)

• Section 112: capital gains on property, gold, and other non-equity assets

• Section 50AA: gains from specified mutual funds (funds investing more than 65% in debt and money market instruments, for investments made on or after April 1, 2023), taxed at slab rate

Entering a gain under the wrong section changes the tax computation. For example, entering LTCG from equity under Section 112 instead of 112A would miss the Rs 1.25 lakh exemption that applies under 112A.

Step 1: Determine the holding period and asset type

Note: From April 1, 2025, Gold ETFs, Silver ETFs, and Overseas Fund of Funds are no longer classified as Specified Mutual Funds. These are now subject to LTCG at 12.5% with a 12-month holding period threshold.

Step 2: Compute cost of acquisition

For eligible assets, you may adjust the cost using the Cost Inflation Index (CII) where indexation is applicable. Note that indexation is no longer available for property purchased on or after July 23, 2024, or for specified mutual fund investments made on or after April 1, 2023. Verify applicability based on the asset type and purchase date.

Step 3: Calculate net gain

Capital Gain = Net Sale Consideration minus Cost of Acquisition. Transfer-related expenses such as brokerage, stamp duty, and registration charges may reduce the sale consideration.

• Capital gains statement from your mutual fund registrar (CAMS or KFintech). This statement includes NAV, purchase date, and FIFO-based gain calculation. DSP mutual fund investors can download their capital gains statement directly from the DSP investor portal.

• Broker contract notes for equity share transactions

• Property purchase and sale deeds with registration details

• Form 26AS and AIS from the income tax portal

• Cost Inflation Index table if indexation applies

Reconcile your broker and fund statements against AIS before entering data. AIS shows what the department already knows. If a transaction in AIS does not appear in your filing, it will trigger a mismatch.

This is one of the most common filing errors. If your equity LTCG is Rs 80,000 and falls below the Rs 1.25 lakh annual exemption, no tax is owed. But the gain must still be entered in Schedule CG under Section 112A. The system computes the exemption automatically after you enter the gross gain. Leaving it blank because no tax is owed is technically a non-disclosure.

Capital losses can be carried forward for up to 8 assessment years and set off against future gains. There is one important condition: the return must be filed before the original due date (typically July 31 for non-audit cases). If you file late, you lose the carry-forward right for that year's losses.

Practical point: if you are sitting on capital losses in a financial year, consider realising them before March 31 to set them off against gains in the same year.

These exemptions apply to LTCG from property and certain other long-term capital assets:

• Section 54: exemption for LTCG on sale of a residential house, when proceeds are reinvested in another residential property

• Section 54F: for LTCG from a non-residential asset reinvested in a residential property

• Section 54EC: exemption up to Rs 50 lakh when LTCG proceeds from a long-term capital asset are invested in specified capital gains bonds within 6 months of the sale. Commonly used for property sales.

Exemptions must be entered in the relevant fields in Schedule CG. The deduction is not automatic and must be explicitly claimed.

Many investors do not realise this. Switching between schemes is treated as a redemption from the source scheme and a fresh purchase in the destination scheme. Capital gains tax applies on the source scheme redemption based on the gain and holding period at the time of switch. This is true even if money never leaves the mutual fund ecosystem.