Equity sold on 31st Mar 2021 on Exchange to be part of Capital Gain Statement FY 20-21 or FY 21-22

Hi Surana,

This is a common question regarding the timing of capital gains from equity sales, especially around the financial year-end.

What determines the Financial Year for Capital Gains on Equity Sale?

Key point:
For equity shares (and securities listed on recognized stock exchanges), the date of transaction (trade date or bill date) is considered the date of transfer, not the settlement date.

• As per Income Tax Act and SEBI guidelines, capital gains are to be accounted for in the FY in which the transaction date (trade date) falls.

• Settlement date (which is usually T+2 or T+3 days) is relevant for actual payment/delivery but NOT for income recognition.

So, in your case:

• Equity sold on 30th March 2021 → Included in FY 2020-21

• Equity sold on 31st March 2021 → Included in FY 2020-21

Why brokers might say otherwise?

• Some brokers or software might generate reports based on settlement date, which can fall in the next FY (e.g., 1st or 2nd April 2021).

• However, for Income Tax purposes, trade date is authoritative, not settlement date.

What does Income Tax Department say?

• The date of contract of sale or trade date is considered as the date of transfer.

• So, capital gains for shares sold on or before 31st March 2021 are to be reported in FY 2020-21 returns.

In summary:

Advice:

• Use the contract/trade date for all capital gains reporting.

• Ignore settlement date for capital gains tax purposes.

• If your broker’s report uses settlement date, adjust accordingly when filing your tax return.