Starting in FY 2026-27, the Income Tax Department will automatically pre-fill capital gains data in the Annual Information Statement (AIS) using transaction records from depositories. While this reduces manual calculations for standard equity trades, investors must verify the pre-filled information, especially for off-market transfers and corporate actions, to avoid inaccurate tax filings.
The Income Tax Department has introduced a new system to automate the reporting of capital gains, shifting the responsibility of data calculation from the taxpayer to financial intermediaries. Starting in the financial year 2026-27, depositories such as NSDL and CDSL, along with Registrar and Share Transfer Agents, will report transaction details through specific filings known as SFT-2517 and SFT-2518. These records will flow directly into the Annual Information Statement (AIS), which taxpayers use during their filing process.
A significant change is the centralized application of the First-In, First-Out (FIFO) method. Previously, investors holding the same shares across multiple brokerage accounts had to manually track their buy and sell dates to calculate their tax. The new system will now aggregate trades under a single Permanent Account Number (PAN) to determine the holding period and categorize gains as short-term or long-term. This automation also handles the complex math for grandfathering assets acquired before February 1, 2018, by applying standard fair market value calculations.
Despite the automation, investors need to be cautious. The pre-filled data in the AIS serves as a baseline for filing, but it is not a final submission. A critical area of concern is off-market transactions, such as gifts, inheritances, or employee stock ownership plan (ESOP) vesting. In these instances, the system might display a 'NIL' cost basis because it lacks the original purchase details. If investors submit this data without updating the cost basis, they could inadvertently report an incorrect profit and pay more tax than necessary.
Additionally, the reporting system does not cover all types of assets. Physical share certificates, certain sovereign gold bonds, and unlisted private placement shares remain outside the scope of this new reporting regime. Investors must continue to report these assets manually. Furthermore, corporate actions like bonus shares or stock splits may not always be reflected perfectly in the system, requiring careful cross-checking.
The most effective approach for taxpayers is to review the AIS line-by-line against their own transaction records before submitting their income tax return. Relying solely on the pre-filled figures without checking for discrepancies could lead to inaccurate tax liability or potential inquiries from the tax department. The key monitorable for investors moving forward will be the accuracy of the data linked to their PAN, particularly for non-standard transactions that do not originate from standard market sales.