How to File ITR-2 for Capital Gains for FY 2023-24

Filing income tax returns correctly is essential for compliance and accurate tax reporting. For the Financial Year (FY) 2023-24, individuals earning capital gains need to use Form ITR-2. This form is suitable for those whose income includes capital gains from sources such as the sale of property, stocks, or other assets. If your income includes business or professional income, you would need to file ITR-3 instead. Read on to understand how to file your ITR-2 and stay up-to-date with the latest tax regulations.

Recent Budget 2024 Updates

Budget 2024 introduced significant changes affecting capital gains taxation from FY 2024-25:

• Tax Rates Adjustments: The tax rate for Short-Term Capital Gains (STCG) on listed equity shares, equity-oriented mutual funds, and business trust units has increased to 20% from 15%. Other short-term assets continue to be taxed at slab rates.
• Increased Exemption Limit: The exemption limit for Long-Term Capital Gains (LTCG) from equity shares and similar assets has risen from Rs.1 lakh to Rs.1.25 lakh annually. However, the tax rate on these gains has been adjusted from 10% to 12.5%.
• Reduced Tax Rate for Other Assets: The tax rate for other long-term assets has been reduced to 12.5%, effective from 23rd July 2024. Taxpayers have the option to choose between a 12.5% tax rate without indexation or a 20% rate with indexation for assets purchased before 23rd July 2024.

Eligibility to File ITR-2

You must file Form ITR-2 if you meet any of the following criteria:

• Indian Individuals or HUF Members: Individuals or Hindu Undivided Families (HUFs) need to file ITR-2.
• High Income Earners: Salaried or pensioned individuals with income exceeding Rs.50 lakh.
• Capital Gains: Individuals earning capital gains from selling shares, mutual funds, property, or digital assets.
• Rental Income: Those receiving rental income from multiple properties.
• Agricultural Income: Individuals with agricultural income exceeding Rs.5,000.
• Foreign Assets/Income: Taxpayers holding foreign assets or generating foreign income.
• Company Directors: Individuals who are directors in any company, domestic or foreign.
• Unlisted Equity Shares: Those holding unlisted equity shares in any company.
• Carry Forward Losses: If you have any carry-forward losses from previous years.
• Other Sources: Individuals with income from sources like horse racing, lottery winnings, etc.

Required Documents for Filing ITR-2

Gather the following documents before filing ITR-2:

• Aadhaar Card
• PAN (Permanent Account Number)
• TDS Certificates / Form 26AS
• Form 16 (for salaried individuals)
• AIS/TIS Statement from the Income Tax Portal
• Tax Payment Challans
• Bank Account Details
• Original Return Details (if filing a revised return)
• Notice Details (if responding to any notices)

Documents Specific to Capital Gains:

• For Sale of Immovable Property: Sales and purchase deeds, details of improvements, transfer expenses, the property’s address, buyer’s PAN and Aadhaar, and any exemption claims under sections 54 or 54EC.
• For Sale of Mutual Funds, Equity Shares, or Digital Assets: Consolidated capital gain statements from CAMS or from brokers for mutual funds, capital gain statements or Tax P&L from brokers for equity shares, and transaction or profit and loss reports from exchanges for virtual digital assets such as cryptocurrency.

Steps to File ITR-2 for Capital Gains

Follow these steps on the Income Tax e-filing portal:

1. Log In: Access the portal at www.incometax.gov.in and log in.
2. Select Form: Go to ‘e-File’ > ‘Income Tax Returns’ > ‘File Income Tax Returns’.
3. Choose Assessment Year: Select the assessment year (e.g., 2024-2025) and choose ‘Online’ as the filing mode.
4. Form Type: Pick ITR-2 and specify your filing status.
5. Complete Schedules: Click on ‘General’ and then ‘Income Schedule’. Next, select ‘Schedule Capital Gains’ and input details based on the asset type (STCG or LTCG).
6. Enter Details: For STCG, add details of short-term assets and acquisition costs in schedule 111A for listed securities. For LTCG, enter purchase price, transaction dates, and selling price in Schedule 112A for listed securities. For other types of STCG/LTCG choose proper schedules.
7. Review and Pay: Confirm the details in Part B TTI. If additional tax is due, you’ll be prompted to pay. Don’t forget to fill the challan details in Tax Paid schedule before submitting your ITR.
8. Preview and Validate: Review the return, click on ‘Preview Return’, and then validate.
9. E-Verify: Verify the return within 30 days using Aadhaar OTP, net banking, or by mailing a signed ITR-V to the CPC Bangalore.

Final Thoughts

Ensuring the sale values are matching with AIS is the key.

Filing your ITR-2 correctly ensures compliance and accuracy in reporting capital gains. Follow the outlined steps and ensure all information is accurate to avoid issues. If you have any doubts or need assistance, consider consulting a tax professional to guide you through the process.

Frequently Asked Questions

Q1: What is the deadline to file ITR-2 for AY 2024-25 (FY 2023-24)?
According to Section 139(1) of the Income-tax Act, the deadline to file your income tax return for AY 2024-25 is July 31, 2024.

Q2: Do I need to fill out all the schedules in the ITR-2 Form?
No, you only need to complete the schedules that are relevant to your income and asset profile. Any mandatory fields not filled out will trigger validation errors at the end of the process.

Q3: I have multiple trades in equity shares and mutual funds. Should I list every transaction individually in my ITR form?
For short-term capital gains, you can enter the consolidated sale value and purchase value without detailing each transaction. For long-term capital gains, you need to provide individual transaction details for shares or mutual funds purchased before January 31, 2018, in Schedule 112A. For assets purchased after that date, you can enter the consolidated values.

Q4: How can I import all my capital gains from mutual funds and stocks into my ITR form?
Currently, you must manually enter all capital gains details on the Income Tax portal. Alternatively, you contact us to prepare your ITR form.

Q5: What is the processing time for ITR-2?
ITR-2 processing is handled by the Central Processing Center (CPC), which is an automated system. Processing times can range from 1 month to 10 months, depending on the specifics of each case.

Q6: Who is not eligible to file ITR-2?
Individuals or Hindu Undivided Families (HUFs) with income from business or professional sources are not eligible to file ITR-2. Instead, they should use Form ITR-3.

Q7: Can a government employee file ITR-2?
Yes, the eligibility to file ITR-2 is based on income sources and not on employment status. Government employees can file ITR-2 if their income includes capital gains, rental income, or other qualifying sources.