Glitches in ITR processing lead to bloated tax liability on capital gains

Hundreds of taxpayers are believed to have received notices from the income tax (I-T) department whose systems are unable to process the tax returns correctly. This has led to bloated tax liability on capital gains and denial of credit for tax deducted at source (TDS), among other discrepancies.

Senior accountants have drawn the attention of Pramod Chandra Mody, chairman of Central Board of Direct Taxes (CBDT), regarding the errors at the department’s Central Processing Zone (CPC) in Bengaluru, sources told ET.

After years, Indians will be taxed on their long-term capital gains at 10% if such gains are more than Rs 1 lakh. In grandfathering the tax rule, the government had pegged the price of a stock on February 1, 2018, or the actual purchase price, whichever is higher, as the cost in computing the gain. For instance, if a stock is purchased at Rs 500 in 2016 and sold at Rs 900 in March 2019, while the share closed at Rs 800 on February 1, 2018, the gain is Rs 100, not Rs 400. The department’s software system is failing to compute the long-term capital gains (LTCG), particularly gains involving multiple stocks.

Another error in LTCG computation relates to shares acquired between February 1, 2018, and March 31, 2018.#casansaar (Source - Economic Times)