How to Be Ready for Your Income Tax Return for the Financial Year 2024-2025 with Your Capital Gains Updated

As a mutual fund investor in India, staying abreast of the latest tax regulations is crucial for accurate and timely income tax return (ITR) filing. The financial year 2024-25 has introduced several changes, especially concerning capital gains taxation. This guide aims to simplify these updates and help you prepare your ITR effectively.

Understanding Capital Gains Taxation for Mutual Funds

Capital gains from mutual funds are categorized based on the holding period:

• Short-Term Capital Gains (STCG): For equity-oriented funds, if units are held for less than 12 months, gains are considered short-term.

• Long-Term Capital Gains (LTCG): If units are held for more than 12 months, gains are considered long-term.

Key Updates for FY 2024-25:

1. Revised Tax Rates:

• STCG: Tax rate increased from 15% to 20% for equity-oriented mutual funds.

• LTCG: Tax rate increased from 10% to 12.5% for gains exceeding ₹1.25 lakh.

2. Exemption Limit:

• The exemption limit for LTCG has been raised from ₹1 lakh to ₹1.25 lakh.

3. Debt Mutual Funds:

• For investments made on or after April 1, 2023, gains are treated as short-term and taxed as per the investor’s income slab, regardless of the holding period.

Filing Your Income Tax Return: Choosing the Right ITR Form

Selecting the appropriate ITR form is essential:

• ITR-1 (Sahaj): For individuals with income up to ₹50 lakh, including salary, one house property, and other sources. Now includes LTCG up to ₹1.25 lakh.

• ITR-2: For individuals with income from multiple house properties, capital gains, or foreign assets.

Reporting Capital Gains Accurately

Ensure accurate reporting of capital gains:

• Segregate Gains: Differentiate between STCG and LTCG based on holding periods.

• Transaction Dates: Note the date of purchase and sale to determine the applicable tax rate.

• Dividend Income: Report any dividend income received, as it is taxable as per your income slab.

Additional Considerations for Mutual Fund Investors

1. TDS on Dividends:

• TDS at 10% is applicable on dividend income exceeding ₹5,000 in a financial year.

2. Asset and Liability Reporting:

• The threshold for reporting assets and liabilities in ITR-2 has been raised to ₹1 crore.

3. Capital Loss on Share Buybacks:

• Capital loss on share buybacks is allowed if corresponding dividend income is disclosed as “Income from Other Sources,” effective from October 1, 2024.

Preparing for ITR Filing: A Step-by-Step Approach

1. Gather Investment Statements:

• Collect statements from mutual fund houses detailing your transactions for the financial year.

2. Calculate Capital Gains:

• Use the statements to compute STCG and LTCG, considering the revised tax rates and exemption limits.

3. Choose the Correct ITR Form:

• Based on your income sources and capital gains, select the appropriate ITR form.

4. Report Accurately:

• Ensure all income, including dividends and capital gains, is reported correctly to avoid discrepancies.

5. File Before Deadline:

• The due date for filing ITR for FY 2024-25 is July 31, 2025.

Checklist: Income Tax Return Filing for FY 2024-2025 for Mutual Fund Investors

Also read: How to Get Empowered: A Money Roadmap to Living a More Joyful and Meaningful Life with 10 Transformative Strategies

Objective: Ensure accurate and compliant filing of income tax returns with a focus on capital gains and mutual fund investments.

Capital Gains Taxation for Mutual Fund Investors (FY 2024-25)

Key Highlights:

• STCG on Equity-Oriented Funds: Increased from 15% to 20% for units sold on or after July 23, 2024.

• LTCG on Equity-Oriented Funds: Taxed at 12.5% for gains exceeding ₹1.25 lakh, effective from July 23, 2024.

• Debt-Oriented Funds: Gains are taxed as per the investor’s income slab, regardless of the holding period.

• Indexation Benefit: Removed for all mutual fund categories.

• Holding Periods:

• Equity-Oriented Funds: >12 months for LTCG.

• Debt-Oriented and Other Funds: >24 months for LTCG.

Filing Your Income Tax Return:

• ITR-1 (Sahaj): Suitable for individuals with income up to ₹50 lakh, including salary, one house property, and other sources. Now includes LTCG up to ₹1.25 lakh.

• ITR-2: Applicable for individuals with income from multiple house properties, capital gains, or foreign assets.

Sources:

• Economic Times

• ClearTax

• HDFC Bank

• AMFI India

Important Contacts and Platforms:

• Income Tax Department Portal: https://www.incometaxindia.gov.in

• CAMS (Mutual Fund Transactions): https://www.camsonline.com

• AMFI Tax Corner: https://www.amfiindia.com

• Form 26AS (TDS Reconciliation): https://www.incometaxindiaefiling.gov.in

• Consult a CA or Tax Advisor: Connect with a CA for personalized tax planning and accurate filing.

Conclusion

Staying informed about the latest tax regulations is vital for mutual fund investors to ensure compliance and optimize tax liabilities. By understanding the changes in capital gains taxation and accurately reporting income, you can navigate the ITR filing process for FY 2024-25 with confidence.

Credits and References:

The content and data in this article are compiled from credible and authoritative sources to ensure accuracy and relevance for mutual fund investors in India for the financial year 2024-2025. The following sources were referenced:

1. Economic Times:

• Explained: How Your Mutual Fund Investments Will Be Taxed in Financial Year 2025

2. Live Mint:

• ITR Filing for FY 2024-25: What Has Changed and What You Need to Know

3. ClearTax:

• Taxation on Different Mutual Funds in India

4. Times of India:

• New ITR-2 Form Notified for Income Tax Return Filing AY 2025-26: What’s New

5. AMFI India:

• Tax Corner for Mutual Fund Investors

6. Income Tax Department, Government of India:

• Official Notifications and Circulars for AY 2025-26

The above sources have been utilized to provide up-to-date, accurate, and comprehensive guidance on income tax filing for mutual fund investors in India, specifically focusing on capital gains, dividend taxation, and ITR form selection.

Disclaimer: Always consult a qualified Chartered Accountant, Income Tax Accountant, or financial advisor to interpret tax regulations accurately and tailor them to your specific financial circumstances.

Disclaimer and Disclosure:

The information provided in this article is for informational purposes only and should not be construed as legal, tax, or financial advice. While every effort has been made to ensure the accuracy and completeness of the content, tax laws and regulations are subject to change, and individual circumstances may vary.

Important: The content is intended to provide a general understanding of the income tax return filing process for mutual fund investors in India for the financial year 2024-2025. Readers are strongly advised to consult their Income Tax Accountant, Chartered Accountant (CA), or a certified financial advisor to evaluate their specific financial situation, assess applicable tax implications, and ensure accurate reporting of capital gains and other income.

This checklist is a general guideline for mutual fund investors. Tax laws are subject to change, and individual financial situations vary. Consult your CA, financial advisor, or tax consultant to ensure compliance and optimal tax planning.

Disclosure: The author, Taresh Bhatia, is a Certified Financial Planner (CFP) and founder of The Richness Academy. This article does not endorse or recommend any specific financial products or investment strategies. The information is based on publicly available data and the latest updates from the Income Tax Department, but it may not reflect the most current legislative changes or individual taxpayer circumstances. Readers are responsible for verifying all information with their professional tax advisors before making any financial decisions.

For personalized tax planning and investment advice, reach out to a qualified tax consultant or financial advisor.