What happens if I don't report capital gains on my tax return?

Failing to report capital gains on your tax return can have legal and financial consequences. In India, it is mandatory to report all capital gains and income from such gains in your income tax return. If you do not report capital gains, you may be subjected to the following consequences:

1. Penalty: The Income Tax Department can impose a penalty for nondisclosure or underreporting of income. The penalty amount can vary based on the severity of the noncompliance.

2. Interest on Tax Due: If you fail to pay the tax on your capital gains, the Income Tax Department may charge interest on the outstanding tax amount. The interest is calculated from the due date of filing the return until the actual date of payment.

3. Scrutiny and Assessment: Nondisclosure of capital gains may increase the chances of your tax return being selected for scrutiny or assessment by the Income Tax Department. This can result in a detailed examination of your financial records and potential additional tax liabilities.

4. Legal Consequences: Deliberate nondisclosure or evasion of taxes is a violation of the tax laws and can lead to legal consequences, including fines and prosecution.

To ensure compliance with tax regulations and avoid these consequences, it is important to accurately report all your capital gains on your tax return and pay the applicable taxes within the prescribed timelines. If you have any doubts or uncertainties, it is recommended to consult with a tax professional or chartered accountant for guidance.