Income reflected in 26AS after I filed my Income Tax Return – How to rectify it now?
I have, at the advice of the team of a broker regarding the bifurcation of the portfolio, agreed to the sale of 115 shares of Reliance Industries amounting to Rs. 2.69 Lakh and the amount is routed in demat account on 28th Sept 2022. The team reinvested the almost proceeds in shares of various other companies through a demat account on the same date, after deducting their commission/ brokerage/charges etc. They also do the trade transactions periodically in the demat account without credit in my Bank account. I have obtained a profit / loss statement from the broker. As per the statement, there are two types of long term gains, Grandfather Gain and Absolute gain of Rs. 1.44 Lakh and Rs 1.78 Lakh respectively. The amount is not utilized/ withdrawn by me. None of the proceeds are credited to my Bank account and trading is done in the demat account only. Now, I am in confusion about income tax liability in respect of sale of above Reliance shares. I request you to guide as to whether I have to pay Income tax on this capital gain of Rs.1.44 lacs & Rs. 1.78 Lakh. Please guide suitably for my liability of IT / any other information relating to above which I am not aware of.
- The receipt of money in the bank account is not at all necessary for taxation of the gain arising from sale of shares. If the earning is there, the amount is taxable even if the same is either reinvested or remained idle in the demat account.
- Earlier, the Long Term Capital Gain (LTCG) arising from sale of shares was exempt from tax. However, the Finance Act-2018 has provided for taxation of the amount of LTCG arising on sale of shares as well. Since the proposal was introduced on 1stFeb 2018 in the Union Budget-2018, it was provided that the LTCG arising till 31.01.2018 will be grandfathered which means that LTCG arising till 01.02.2018 will continue to remain exempt from tax and only appreciation in value after 31.01.2018 will be taxable.
- In your specific case, Rs. 1.44 Lakh appears to be the gain till 31.01.2018. This amount will not be taxable due to grandfathering benefits given under the Income Tax Act-1961.
- Amount of Rs. 1.78 Lakh is the gain which has arisen as a result of appreciation in the value of the shares between 31.01.2018 & the date of sale. This amount would be taxable as LTCG U/s 112A which provides for the taxation @ 10% on income above Rs. 1 Lakh. As a result of this, Rs. 78,000/- would be taxable @ 10% which will be further enhanced by education & health cess of 4% i.e., effective tax would be Rs. 8112/- i.e., 10.40% of Rs. 78,000/-.
I was in need of the housing loan and so I filed my income tax return for the FY 2021-22 on 18th May 2022. At the time of filing my income tax return, I have shown all the income which was getting reflected in the 26AS at that point of time. However, I have now come to know that there are around brokerage incomes of Rs. 2.80 Lakh which was not shown in the ITR. Though the amount was received by me, I have not shown this in my ITR as it was not part of 26AS at that point of time. Do I need to show in my ITR for the FY 2022-23 or I can do it in the FY 2021-22 for which I have already filed the ITR. Please guide as to the alternative option if available.
- It appears that your income of Rs. 2.80 Lakh is pertaining to FY 2021-22 only and so the amount is taxable in the FY 2021-22 only and not FY 2022-23.
- Though the date of filing the revised income tax return is already over, you can still use the option of revising your income tax return by filing an “Updated Return”. If taxpayers miss the last date to revise the income tax return till 31stDecember, they can do it by filing “Updated Return”.
- The Finance Act of 2022 has introduced the concept of “Updated Returns” to allow a longer duration to file the return of income or rectify the errors in filing the return.
- An updated return can be filed within 24 months from the end of the relevant assessment year subject to various terms & conditions. It can be filed even after the expiry of time limits specified for the filing of a belated return or revised return of income. Taxpayers can file the updated for the AY 2021-22 & 2022-23 till 31.03.2024 & 31.03.2025 respectively.
- Updated return can be filed only if it is beneficial to the income tax department. The route of updated return cannot be used by the taxpayers to claim benefits or concessions. Updated return cannot be filed if (a) it is a return of a loss or (b) has the effect of decreasing the total tax liability determined on the basis of return furnished earlier or (c) if it results in refund or (d) increases the refund due on the basis of return furnished earlier.
- Updated return can be filed after the December of the relevant assessment year. If taxpayers could not file any return till 31stDecember, then they will be allowed to file an updated ITR from 1st January onwards.
- A penalty or fee is not levied upon a person who wishes to furnish an updated return. However, they will be required to pay an additional tax in accordance with Section 140B of the Income Tax Act. The taxpayer will be liable to pay 25% of additional tax on the tax dues if ITR-U for FY 2021-22 (AY 2022-23) is filed between 01.01.2023 to 31.03.2024. However, if the ITR-U is filed between April 1, 2024, and March 31, 2025, then 50% additional tax on the tax dues is payable.
- A taxpayer must furnish an updated return in those ITR forms which were notified for the respective assessment year for which an updated return is to be furnished. Such an ITR form will be filed along with the newly notified form ITR-U.
- There are certain categories of taxpayers who are barred from filing the Updated Return. Taxpayers in whose case income tax raid has been carried out or where income tax survey (Other than TDS survey) has been conducted or in case any proceeding for assessment or reassessment or re-computation or revision is pending, etc are not allowed to file the updated return.
- An updated return can be furnished only once. If a person has already filed an updated return, it cannot file the updated return again for the same assessment year at subsequent occasions.