ITR Filing FY2025-26: How To Report Capital Gains From Stocks, Mutual Funds, And Property

If a taxpayer has sold shares, mutual funds or any property during the financial year, then the said taxpayer may have earned a capital gain (CG) or incurred a capital loss. These transactions should be reported correctly while filing the Income Tax Return (ITR).

Many taxpayers wrongly believe that since capital gains transactions are already reflected in their demat account statement or bank statement, the tax department will automatically know about them. But the onus is on the taxpayers to report them correctly in the ITR. Proper reporting not only ensures compliance with tax laws but also helps avoid notices from the Income Tax Department (ITD).

“For taxpayers who have sold listed shares or mutual funds, the first document to check is the CG provided by the broker or depository participant. This statement contains details of the taxpayer’s purchase and sale transactions, including the purchase price, sale value, holding period and the resulting short-term or long-term CG or loss. Since most brokers calculate these figures based on available transaction data, this statement serves as a useful starting point while preparing the tax return,” says Harsh Rustagi, Consultant, Nangia & Co LLP.

Before filing the ITR, it is important to verify the transactions reflected in the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS) available on the Income Tax e-filing portal. These statements contain information reported to the ITD by brokers, mutual fund houses, banks and other financial institutions. Taxpayers should reconcile the transactions appearing in their CG Statement with the details available in the AIS and TIS. In case of any missing transaction or mismatch of sale value or other details, such transaction should be reviewed prior to filing the return.

Also, taxpayers should not forget to set off the eligible capital losses brought forward from previous years against the current year's CG wherever applicable. This can help reduce the tax payable, provided the losses were properly reported in earlier ITRs.

“Those who have sold immovable property should also verify that the transaction has been correctly reported in the AIS. Particular attention should be paid to details such as the sale consideration, date of transfer and buyer information. Any inconsistency between the sale documents and the information available with the ITD may result in unnecessary queries or notices later,” says Rustagi.

Another important aspect relates to Tax Deducted at Source (TDS) on property transactions. Where an immovable property is sold for Rs 50 lakh or more, the buyer is generally required to deduct TDS before making the payment to the seller. Many taxpayers mistakenly assume that this amount is an additional tax. In reality, it is merely a tax credit that can be claimed while filing the ITR. Taxpayers should, therefore, verify that the TDS is correctly reflected in Form 26AS and the AIS so that the credit is not missed.

“Also, while reporting CG, taxpayers should remember that the tax payable depends on whether the asset is classified as a short-term or long-term capital asset, making the holding period an important factor. In the case of an immovable property purchased before 23 July 2024, taxpayers may also have a choice between two tax computation methods. They can either pay tax at 20 per cent after claiming the benefit of indexation or opt to pay tax at 12.5 per cent without indexation,” informs Rustagi.

Since the tax liability may differ under the two options, taxpayers should compare both methods and choose the one that results in a lower tax outgo.

It is equally important to preserve purchase documents, contract notes and property records, as these help establish the cost of acquisition, which is essential for computing the taxable gain. Even if the capital gain is relatively small, the transaction should be disclosed in the ITR because the tax department generally receives this information through third-party reporting.

Taxpayers should also check whether they are eligible to claim any CG tax exemptions before filing their ITR. For example, CG arising from the sale of a residential house may qualify for exemption if the gains are reinvested in another eligible residential property, subject to the conditions prescribed under the Income-tax Act.

“Alternatively, taxpayers may also be eligible to claim an exemption by investing the specified amount in Government-notified bonds within the prescribed time limit. Since these exemptions are available only on fulfilment of the prescribed conditions, taxpayers should maintain proper documentation, including purchase deeds, investment proofs, payment receipts and other relevant records, to support their claim in case of any verification by the ITD,” says Rustagi.

The key to accurate CG reporting is proper documentation and timely reconciliation. By reviewing the CG statement, matching it with the AIS, TIS and Form 26AS, and reporting every transaction correctly in the ITR, taxpayers can significantly reduce the chances of errors, delays in processing their return or receiving notices from the tax department.