how-to-file-itr-2-form-for-income-from-capital-gains

Every individual needs to file their taxes in the specified IT return form. Taxpayers need to file ITR for capital gain by submitting ITR Form 2 to the Income Tax Department. However, if your total income for a financial year includes income generated from business or profession, you will be required to file ITR-3 as the income tax return for capital gains. If your income source is salary, sale of foreign assets or property, etc., you are eligible to file ITR-2. Read on to learn how to file the capital gain ITR form.  

Budget 2024 Latest Updates

Budget 2024 has passed the following amendments effective from FY 2024-25 - 

• For classifying assets into long-term and short-term, there will only be two holding periods: 12 months and 24 months. The 36-month holding period has been removed.
• The holding period for all listed securities is 12 months. All listed securities with a holding period exceeding 12 months are considered Long-Term. The holding period for all other assets is 24 months.
• The taxation of Short-Term Capital Gain for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust has been increased to 20% from 15%. Other financial and non-financial assets which are held for short term shall continue to attract the tax at slab rates.
• For the benefit of the lower and middle-income classes, the limit on the exemption of Long-Term Capital Gains on the transfer of equity shares or equity-oriented units or units of Business Trust has increased from Rs.1 Lakh to Rs.1.25 lakh per year. However, the rate at which it is taxed has increased from 10% to 12.5%. The exemption limit to Rs.1.25 lakhs has been increased for the whole of the year, whereas the tax rate changed on 23rd July 2024.
• The tax on other assets is reduced from 20% to 12.5% with effect from 23rd July 2024. On the other hand, the indexation benefit that previously was available on the sale of long-term assets has now been eliminated. However, the Government has given taxpayers an option to compute taxes on real estate transactions purchased before 23rd July 2024 either at 12.5% without indexation or at 20% with indexation. 

Eligibility Criteria to File ITR-2 Form

If you fulfil the following criteria, then it is mandatory to file the ITR-2 form:

• Any Indian individual or member of the HUF (Hindu Undivided Family)
• Salaried or pensioned individuals having income exceeding Rs.50 lakhs.
• Individuals earning capital gains from the sale of shares, mutual funds, immovable property, and virtual digital assets.   
• If you earn rental income from multiple house properties
• If you earn more than Rs.5,000 from agricultural income
• If you have foreign assets or generate a foreign income
• If you are a director in any company (Foreign or domestic)
• If you hold an unlisted equity share in any company (Foreign or domestic)
• If you have any brought forward loss or loss to be carried forward under any head of income
• Individuals earning income through other sources like horse racing, lottery winning, etc.

Note: If you are earning from a business, any profession, partnership firm, etc., you are not eligible to file an ITR-2 form.

Documents Required to File ITR-2 Form

Check out the essential documents required for filing the ITR-2 form:

• Aadhaar Card
• PAN (Permanent Account Number)
• TDS certificates / Form 26AS
• Form 16 if you are a salaried Individual
• AIS/TIS statement from Income tax portal
• Challan of the paid taxes
• Bank account details
• Original return details (if you are filing for a revised return)
• Notice-related details (if you are filing in response to any notice)

Documents Required For Filing Capital Gain ITR Form:

1. For Sale of Immovable Property :
   • Sales and purchase deeds, improvement cost details, transfer expenses showing the sale value, purchase value and any cost of improvement.
   • Full Address of the Property.
   • Details of the buyer, like PAN and Aadhaar.
   • Necessary supporting document if you claiming exemption u/s 54 or 54EC
2. For Sale of Mutual funds, Equity shares or Virtual Digital Assets:
   • For the Sale of Mutual funds, you can generate consolidated capital gain statements from CAMs and Kfintech.
   • For the Sale of Equity shares, you can check with your broker for a capital gain statement or Tax P&L
   • For the sale of Virtual Digital Assets, you can generate Transaction report or Profit and Loss report from the respective exchanges
3. For any other types of capital, you must have a document showing the sale consideration and the purchase cost details as required.

Steps to File Income Tax Returns for Capital Gains on the E-Filing Portal

You can log in to the official portal of the income tax department and file your ITR for capital gains by following these steps: 

Step 1: Select Income Tax Returns from ‘e-File’, and then click on ‘Income Tax Returns’ and select ‘File Income Tax Returns’.

Step 2: You need to select the assessment year, for instance, 2024-2025, and select ‘Online’ as the mode of filing.

Step 3: Next, select the form type (ITR-2) after choosing the status.

Select the reason for ITR filing and click on ‘continue’

Step 4: On the next page, you can find 5 types of schedules. Click on ‘General’ and select ‘Income Schedule’. 

Step 5: Click on ‘Schedule Capital Gains’ and select the appropriate capital asset type from the list.

Step 6: If you want to file for STCG, click on ‘Add Details’ and enter the consolidated amount you have obtained from selling short-term assets and the Cost of Acquisition in a given financial year. However, for long-term capital gains, you need to enter details like purchase price, ISIN, transaction dates, selling price, etc., in Schedule 112A and click on 'Add'.

Step 7: After confirming the required schedules based on LTCG and STCG, you need to review Part B TTI.

Step 8: Once you have reviewed Part B TTI, If there is any additional tax liability, you will get a ‘Pay Now’ option through which you can make tax payments.

Step 9: Proceed with Click on ‘Preview Return’.

Step 10: Once reviewed, proceed with the validation 

Step 11: Once it is validated and filed, you need to verify the filed ITR within 30 days. You can verify it online using Aadhaar OTP, via net banking or mail a printout of the signed ITR-V (Acknowledgement form) to the IT department’s Bangalore branch.

Final Word

So, now you know how to file long-term capital gain in ITR-2, the documents required, and much more. You can follow the steps mentioned above to file the ITR for both long-term and short-term capital gains without any hassles. Ensure entering the correct data in the required fields to avoid mistakes.