From Tax to Mutual Funds, Here's How to Report Your Tax Return

When submitting your annual tax return, other things need to be recorded besides income from wages. If you're an investor, it's essential to know that your investments must also be reported. However, the reporting rules for each type of investment can vary as not all of them are subject to taxation.

Whether you own stocks or mutual funds, you must understand the precise tax obligations before filing your tax return. In this article, we'll look at the rules and regulations governing the taxes of these two popular investment instruments. So, let's get started and learn more.

Taxation Rules for Stock and Mutual Fund Investments

The taxation rules for equities and mutual funds vary. Stocks are the only ones liable to taxes. Mutual fund investors, on the other hand, are exempt from paying taxes. Here's why.

1. Stock Taxation Rules

Stock investors are classified as taxpayers who must pay income tax. When you invest in stock instruments, you can receive money through dividends or stock ownership. There are also profits from capital gains.

These are considered taxable income, so you must report them in the annual tax return (SPT). The Income Tax rate for stocks is regulated in the Undang-Undang Harmonisasi Peraturan Perpajakan (UU HPP), which has been in effect since October 2021. The tax rates are as follows:

• A final tax rate of 0.1 percent of the gross stock sales on the stock exchange applies to individual and corporate investors

• 10 percent of the gross dividend income is charged as Income Tax on individual investors

• 15 percent of the gross dividend income is levied as Income Tax on corporate investors

• 30 percent of the gross dividend income is levied as Income Tax on corporate investors who do not have a Taxpayer Identification Number (NPWP)

2. Mutual Fund Taxation Rules

Mutual funds, unlike stocks, are not taxed. Therefore their investments are tax-free. This is because monies invested in mutual funds are gathered from the general public and handled by an Investment Manager. The Investment Manager is the one who must pay taxes on the pool of funds invested.

As a mutual fund investor, you no longer have to pay taxes on your gains. Yet, while filing your yearly tax return, you must still record your mutual fund ownership as an asset.

How to Report Stock Taxes

When an investor earns revenue, they must record it on the SPT. If the shares owned are sold, the proceeds are considered taxable income. However, if the shares have not been sold and remain in the portfolio, they are not taxed but must still be recognized as assets on the SPT. Here is guidance for filing the tax.

1. Download Tax Withholding Receipt

Usually, income tax on stock sales is deducted immediately by the stock exchange. The transaction report contains documentation of tax deductions. If you trade online, you may get the report via the application.

2. Filing Income Data in the Annual Tax Return Form

While completing the form, the Income column must include revenue from stock sales. Tax data from stock exchange sales might be recorded in the following sections:

• Form 1770: in "Attachment III section A", enter it in column point 3 in the "Stock Sales in the Stock Exchange" section

• Form 1770 S dan 1770 SS: in the "Income Subject to Final or Final Income Tax", then select the option "Stock Sales on the Stock Exchange" in the Source/Type of Income column

If the revenue is derived through dividends rather than stock transactions on the stock market, tax information is entered in the section:

• Form 1770: in "Attachment III part A", filled in column point 14 part "Dividends"

• Form 1770 S dan 1770 SS: in the section "Income subject to Final or Final Income Tax", then in the Source / Type of Income column, select the option "Dividends".

3. Filing Stock as Assets

Stocks that have not been sold can be recorded as assets. You can fill in stock assets data in the following sections:

• Form 1770: in "Attachment IV part A", fill in the asset code, asset name, year of acquisition, acquisition price, and description

• Form 1770 S dan 1770 SS: fill in the "Asset" section, by entering the asset code, asset name, year of acquisition, acquisition price, and description

Stocks that are deemed assets are coded 032 on the form. But, if there are stocks that you plan to resell soon, then you should use code 031 as Stocks Bought for Resale.

How to Report Mutual Funds Taxes

As previously stated, income from mutual funds is not taxed, but it is still recognized as an asset on the yearly tax return. The amount entered in the SPT was the total price of the mutual funds when you acquired them.

Your mutual funds may rise in value over time. Nevertheless, the return on investment does not need to be recorded because only the initial amount invested when purchasing the mutual funds is considered an asset.

For example, you purchase mutual funds with a capital of 5 million rupiah. The portfolio then expands, and you receive a return of 100,000 rupiah, bringing the total to 5.1 million rupiah.

Therefore, you only need to disclose the starting capital of Rp 5 million in the tax form. The return on investment does not have to be indicated in the SPT form.

The instructions below will walk you through how to fill up mutual fund data in your tax return.

1. Filling in Mutual Fund as Assets

Mutual funds can be recorded in the 1770 SS form for taxpayers with an annual income of no more than 60 million rupiah or the 1770 S form for taxpayers with a yearly income above 60 million rupiah per year.

Fill in the mutual funds held in the Assets column. Code 036 is the asset code for mutual funds. You must fill in information such as asset code, asset name, year of acquisition, acquisition price, and description.

2. Filling in Mutual Fund as Non-Taxable Income

If you sold mutual fund units, the ultimate return on investment must be declared as nontaxable income. Unlike in the asset section, you only need to indicate the return on investment, not the starting investment amount.

The section "Income not subject to tax" is found on Form 1770 SS or 1770 S. Fill in the column "Other Income Not Subject to Tax" in that part with the return on investment from the sale of mutual fund units.

Because there is no tax deduction, reporting mutual fund investments is simpler than reporting stock investments on the annual tax return. If you have stock or mutual fund assets, you must immediately disclose them on your yearly tax return!