You can download the Tax P&L Report from Zerodha Console.
The report includes details of segment-wise trading – scrip name, buy value, sell value, buy price, sell price, realized profit, and trading expenses.
This Tax P&L Report can be used to prepare P&L A/C to report it in the Income Tax Return.
However, the trader must take care of the following things where the treatment as per Income Tax may differ.
- Expenses
The Tax P&L Report covers transfer expenses that are directly related to trading transactions.
In the case of Capital Gains from Equity Delivery and Equity MF/ETF, you can only deduct transfer expenses such as brokerage, turnover fees, transaction charges, GST, stamp duty, etc.
In the case of Intraday and F&O, you can also claim other expenses – such as internet expense, legal fee, subscription expenses, depreciation, etc which are not covered in Tax P&L Report.
- Buy Back Gains
When a company buys back shares issued by it from an existing shareholder, it results in capital gains for the shareholder. Such buyback gains would be included in the Tax P&L Report.
As per a recent amendment in Budget 2019, the gains from buy-back are exempt in the hands of the individual since the company is now liable to pay the buyback tax under Section 115QA. This amendment is applicable to all the buybacks after 5th July 2019. Therefore, buyback gains before 5th July 2019 are taxable for the trader and the ones after 5th July 2019 are exempt.
If such buyback gains have been included under Capital Gains in Zerodha, you can omit the buyback gains and report them under Exempt Income in the ITR.
- Calculation of Long Term Capital Gains under Section 112A
LTCG on the sale of securities (on which STT is paid), bought on or before 31st Jan 2018 should be calculated using the Grandfathering Rule. As per this rule, the Cost of Acquisition is computed after considering the FMV as on 31st Jan 2018 as per Section 112A.
Zerodha provides the FMV as on 31st Jan 2018 and the taxable Long Term Capital Gains in the ‘Tradewise Exit-Entry’ tab of the Tradewise Tax P&L Report. Thus, the LTCG should be calculated as per the grandfathering rule using the FMV of each trade in the Tradewise Tax P&L Report.
- Transfer In/Out
If you moved your portfolio from another broker to Zerodha or vice versa, your brokers will have partial data (either buy-side or sell-side depending on transfer in or out). Most brokers including Zerodha let traders enter such missing data. However, there are high chances of missing out Capital Gains arising out of such transfers.
- Devolvement
Devolvement means that the option contract will get converted into a futures contract of the same underlying. As per the Zerodha Support thread, the RMS team (at their discretion) can square-off of open positions upon Failure to produce the margin. Any gains/losses arising from such trades will be included in the Tax PnL report – marked as “DEVOLVED”
- Reversals
As per the Zerodha thread, Reversal trades are alleged to be non-genuine trades. All reversals will be included in Tax PnL report – marked as “REVERSALS”. In most cases, reversals are punched in on a cost basis & hence do not carry any tax consequences. However, sometimes the reversals for short deliveries are not entered on a cost basis, the gain or loss in such cases must be included under Capital Gains in the Income Tax Return.
All of the above conditions are considered when you file your Tax Return using Quicko. However, reporting may vary depending on your specific situation, hence it’s always advisable to consult a tax professional when in doubt.