When ₹ 10 Kicks You Out of ITR-1: Filing Errors You Must Avoid
Query 1]
I regularly read the articles in The Hitavada and filed all my returns previously on this information. I am a salaried person with income from bank interest. I have invested a small amount in SBI mutual fund last year as the closing date was extended. They advised me to park the amount in SBI overnight fund for some days and then redeem and invest in another fund. In this process I got ₹ 10/- short term capital gain. In ITR form 1 there is no provision for short term then where I have to mention that or there is no need to mention in ITR as a small amount. Please advise me. [Balkrushna Bhoskar – bbhoskar@gmail.com]
Opinion:
Mr. Bhoskar, first of all, thank you for being a loyal reader. Your ₹ 10 gain may be humble, but your honesty deserves applause! Many taxpayers ignore such “micro-gains,” but you’ve rightly asked the question that reflects true tax discipline. Now, to answer your query step-by-step:
1.ITR-1 or ITR-2 – That is the Question:
ITR-1 cannot be used if you have any capital gains — short-term or long-term — even if the amount is as small as ₹ 10/-. The Income Tax Return (ITR) instructions clearly mention that if a taxpayer has any capital gains, they should opt for ITR-2 or other relevant forms. So, even ₹ 10 of STCG disqualifies you from using ITR-1.
2.Where to Report ₹ 10 Short-Term Capital Gain in ITR-2:
In ITR-2, you can report your Short-Term Capital Gain under the Schedule CG section. Since the gain of ₹ 10 has come from redemption of a mutual fund (a non-equity fund like an Overnight Fund), it is taxable at your slab rate, and not at the concessional 15% rate applicable to equity funds. You should fill:
- Type of Asset: From sale of mutual fund units (non-equity oriented)
- Date of Acquisition & Date of Sale: As per your investment transaction
- Full Value of Consideration (Redemption Amount) and Cost of Acquisition
- The resultant Capital Gain = ₹ 10/-.
Even though it’s a nominal gain, the law requires full disclosure.
3.₹10 Only? Really Worth It?
We get it — ₹10 doesn’t even buy a vada pav these days. But tax compliance is less about the number and more about the nature of income. Here’s why you should report it:
- AIS (Annual Info Statement) picks up even small MF transactions.
- TIS (Taxpayer Info Summary) will likely reflect it too.
- Any mismatch may lead to ITR processing issues or scrutiny.
Golden Rule: “When in doubt, disclose. When not in doubt, still disclose.”
4.What if You’ve Already Filed ITR-1?:
The due date of income tax return which was 31st July for majority of the taxpayers has been extended to 15th September for the FY 2024-25. If you’ve already filed ITR-1 by mistake then the return can be revised anytime before 31st December. You won’t be penalized if you revise your return within time.
Conclusion: Don’t Ignore the Small Stuff:
In taxation, it’s the small things done right that avoid big troubles later. Even a minor ₹ 10/- gain can be a trigger for mismatch if not properly reported. So, switch to ITR-2, disclose your STCG in Schedule CG, and file a clean and correct return. Thank you, Mr. Bhoskar — your query proves that tax awareness in India is growing byte by byte!
Query 2]
Estimated income of my wife from pension + interest + dividend in FY 2025-26 is 12 Lakh. She is expected to get LTCG of ₹ 2.20 Lakh excluding permissible exemption of Rs 1.25 lakh from sale of mutual fund units. Will she have to pay only capital gain tax or her income will be clubbed for tax calculation?
Opinion:
1.Clubbing? Not in This Case!:
The concept of clubbing of income comes into play when:
- One spouse gifts money to the other, and
- The receiving spouse invests that amount and earns income from it.
However, clubbing does NOT apply when: - The income arises from the recipient spouse’s own earnings, or
- From assets purchased with their own funds, even if he/she is a homemaker or retired.
So, if your wife’s investment in mutual funds was made from her pension, interest, earlier savings, or own account, her income will be taxed in her own hands — not clubbed with yours.
2.LTCG on Mutual Funds – Tax Math Simplified:
LTCG on equity-oriented mutual funds (held >12 months) is not taxable up to ₹ 1.25 lakh/year. Gains above ₹ 1.25 lakh are now taxable at 12.50% (plus cess and surcharge).
Tax in Her Case:
- Total LTCG: ₹ 2.20 lakh
- Exempt under Section 112A: ₹ 1.25 lakh
- Taxable LTCG: ₹ 95,000
- Tax @12.50%: ₹ 11,875/-
- Add 4% Health & Education cess: ₹475
- Total Tax: ₹12,350 approx.
3. What About Her ₹12 Lakh Regular Income?
For taxpayers under the new tax regime, income up to ₹ 12 lakh is tax-free, thanks to the enhanced rebate under Section 87A (₹ 60,000 now!). So if she opts for the new regime, her pension, interest, and dividends will be tax-free. She only needs to pay ₹12,350 on LTCG. Everything else – tax-free and tension-free!
Final Words:
From ₹10 gains to ₹12 lakh incomes, these queries show that when it comes to taxes, no detail is too small. Whether it’s choosing the right form or dodging clubbing confusion, the key is: report right, sleep tight. Stay compliant, stay curious — and keep those smart questions coming!
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
