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On 22nd July 2020, The Securities and Exchange Board of India (SEBI) have signed Memorandum of Understanding (MOU) with The Central Board of Direct Taxes (CBDT) for the sharing of data. The MoU of CBDT and SEBI has come in force from the date of signing itself. Let us understand what is this MOU and what tax payers should be aware of now:

Key features of CBDT and SEBI MOU :

• Data sharing on automatic and regular basis
• Exchange of other information on request or suo moto basis
• Periodically review of the data exchange status
• Steps to improve the effectiveness of the data-sharing mechanism

Let us understand the basics now:

1. What is the MOU?

Memorandum of Understanding (MOU) is an agreement between the two or more parties that have taken decisions and agreed to enter into a contract. It is made when the parties have outlined the rights and obligations during the initial discussions. However, it is not a legally binding contract.

2. What should taxpayers be aware of now?

a. Correct data of Capital Gains Report Should be Submitted :

Submitting the details of trading, gains, and the taxes thereupon is still the most neglecting or rare part in the Income-tax returns (ITRs).To make the disclosure of such gains easier, last year, the income tax department had introduced Schedule 112A in the relevant ITRs. In this disclosure, the taxpayers have to fill the details of the sale of equity shares, unit of an equity-oriented fund or a business trust on which STT (under section 112A) is paid.

b. Giving Correct ISIN Codes in ITR :

From FY 18-19 it has been mandatory by the CBDT to provide ISIN Code of shares on which long term capital gains or long term capital loss is claimed. Many times due to lack of exact information taxpayers were putting random numbers in this field, in future we guess this would be automatically traced by the department and crossed checked and if found wrong it would be questioned to taxpayer.

c. Not giving Share transaction Information:

It is a general trend by many taxpayers especially pensioners or senior citizen persons to not give full information of share transactions and only giving pension information or giving only consolidated information of shares bought and sold amount and not scrip wise details, this wont be possible in future as CBDT will have ready information from SEBI about your share holdings and transactions and hence systems will cross check the same.

d.Correct classification of Mutual Funds and its transactions:

As you all know SEBI also monitors mutual funds and hence obviously it is having all the data of mutual fund transactions. Even if it is compulsory to report the gains from equity and debt mutual funds, many people ignore this. Hence forth due to continuous data exchange CBDT will be having data of which PAN no or taxpayer has sold and MF and were they a debt or equity MF. Many taxpayers ignore this fact that debt and equity MF are taxed differently and hence must be accordingly reflected in your ITR, if in future this classification is made wrong then the systems of CBDT will immediately highlight the same and intimate the authorities.

Now, to bring more transparency related to the capital gains/ losses on shares and MF the CDBT and SEBI MOU for exchange the data on a regular and automatic basis will bring more stringent cross checks on given information by taxpayer.
Therefore, now taxpayers need to be cautious about their income under the head capital gain on shares, mutual funds also. They have to keep a record of (DEMAT statements) of buying and selling of stock, mutual funds and other traded securities and proper classification of the same, so they could give correct data to department.

Also Read: Official MOU Press ReleaseGST RegistrationCompany Registration


The CBDT and SEBI MOU will help to enhance cooperation and synergy between SEBI and CBDT. Overall, the move has been taken to increase the tax department’s scrutiny, inspection, investigation of stock market transactions to curb the tax evasions.

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