Do I need to show my capital gains from SWP in IT returns even if they are tax free

Thanks for the kind words about Advisorkhoj. Glad that you follow our articles which helps you in taking your financial decision and mutual fund selection.

For retired people like you, SWP is a strong tool to get regular return from your investments. The capital gains (if you are withdrawing after 12 months) arising from SWP withdrawals from Arbitrage, Balanced and Equity funds are totally tax free in the hands of the investors.

You must show all the capital gains – Short term and long term – even if they are tax free, while filing your Income Tax return. The rule is that, first, you will have to show all your income from different sources – like, pension, interest on fixed deposits, interest on postal savings, interest on savings bank account, dividends from shares and mutual funds, rental income, capital gains from shares and mutual funds etc. and so on. Once you have shown the total income/ gains under different heads you can claim exemptions applicable to different income heads and then pay the final tax after adjusting your savings under section 80C of the Income Tax Act 1961.

Therefore, you should show capital gains arising out of the SWP withdrawals even if these are long term in nature and tax free.