I had invested Rs 20 lakh in MFs. I got Rs 90,000 as swp on this fund in this financial year. Shall i file ITR II or ITR I?

Ans: For FY 22-23, ITR forms yet to be notified and some major changes are expected. So wait till April 2023. For FY 21-22, person with salary, interest and dividend can use ITR 1 (subject to other conditions like income should be less than 50 lacs, person should be resident etc).

Ans: In case person is earning income from mutual fund (which was kept as investment), ITR 2 is required to file for showing income from capital gain.

Ans: Yes, you are required to file a tax return on ITR-2 for the financial year if you have received income from SWP (Systematic Withdrawal Plan) on your mutual fund investment. SWP income is considered as capital gains and needs to be reported in your income tax return.

Reporting SWP Income in ITR-2
In ITR-2, you need to report SWP income under the head "Income from Capital Gains." Here's how to report it:

Calculate Capital Gains: Determine the capital gains on your mutual fund investment from which you received the SWP income. Capital gains can be either short-term or long-term, depending on the holding period of the mutual fund units.

Select the Appropriate Schedule: In ITR-2, navigate to Schedule CG (Capital Gains). Here, you need to fill in the details of your capital gains from different sources, including mutual funds.

Enter Details of Mutual Fund Transactions: Provide details of the mutual fund investment from which you received the SWP income. Include information such as the name of the mutual fund, sale consideration (amount received through SWP), and cost of acquisition.

Calculate Taxable Capital Gains: Calculate the taxable capital gains by deducting the cost of acquisition (purchase price) from the sale consideration (SWP amount). Depending on the holding period, apply the applicable tax rates for short-term or long-term capital gains.

Enter Taxable Capital Gains in ITR-2: Enter the taxable capital gains in the relevant section of Schedule CG. Ensure accurate reporting to avoid any discrepancies.

Additional Considerations
Tax Implications: SWP income from mutual funds is subject to capital gains tax. Short-term capital gains (STCG) are taxed at your applicable income tax slab rate, while long-term capital gains (LTCG) are taxed at 10% without indexation if they exceed Rs. 1 lakh.

Tax Deduction at Source (TDS): If TDS has been deducted on your SWP income, ensure that you claim credit for the same while filing your tax return. Mention the TDS details in the appropriate section of ITR-2.

Conclusion
Filing a tax return on ITR-2 is mandatory if you have received SWP income from your mutual fund investment. Ensure accurate reporting of capital gains from SWP in Schedule CG of ITR-2 to comply with income tax regulations. If you have any doubts or require assistance, consult a tax professional or Certified Financial Planner (CFP) for guidance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: As a Certified Financial Planner, I'd advise you to file ITR-2 for this scenario. ITR-2 is applicable for individuals and Hindu Undivided Families (HUFs) who have income from capital gains or more complex sources like multiple properties or foreign income. Since you've sold short-term mutual funds, which fall under the category of capital gains, and earned a gain of Rs. 3000, it's appropriate to use ITR-2 to report this income.

Additionally, ITR-2 allows for the disclosure of income from salary, house property, capital gains, and other sources, making it suitable for individuals with diverse income streams. Ensure you accurately report all relevant details of your mutual fund transactions and any other income you may have earned during the financial year.

Consulting with a tax advisor or accountant can provide further clarity and ensure you file your taxes correctly, maximizing your tax efficiency while staying compliant with regulations.