The Income Tax Return (ITR) filing season for Assessment Year 2025–26 (Financial Year 2024–25) is here—and for individuals with capital gains, multiple house properties, or foreign assets, the ITR-2 form is often the correct choice. Unlike ITR-1 (Sahaj), which is meant for salaried taxpayers with simpler income streams, ITR-2 caters to resident and non-resident individuals and Hindu Undivided Families (HUFs) who do not earn income from business or profession but have more complex income sources.

Whether you’re a salaried person who’s sold mutual funds or shares, a property investor with rental income from multiple House Property, or an MNC employee with foreign ESOPs—ITR-2 is designed for you.

With updated CBDT notifications, Finance Act 2024 amendments, and recent changes in capital gains tax rules, filing your return correctly is more important than ever. This blog simplifies everything—from law to logic—in a format that’s easy to understand, even if you’re not a tax expert.

Who Can File ITR‑2?

You can file ITR‑2 if:

(a) You are an Individual (Whether Resident or Non-Resident) and HUF, managing salaried income and investments.

(b) You do NOT earn business/professional income.

(c) Your income includes any of these sources:

S. No.	Income Source	Applicable Legal Section(s)
1	Salary / Pension	Sec. 192, Sec. 10(14)
2	Two or more house properties	Sec. 22–27
3	Short/Long Term Capital Gains	Sec. 111A, 112A, 112
4	Dividend / Interest / FD Income	Sec. 56, 80TTA/80TTB
5	Foreign Assets or Income	Sec. 2(14), Schedule FA, FSI
6	Agricultural income > ₹5,000	Sec. 10(1)
7	Director of a company	Sec. 56(2)(vi), Sec. 17(1)(ii)
8	Unlisted equity shares	Sec. 56(2)(x) & Section 2(14) schedule FA

Who Cannot File ITR‑2?

You cannot file ITR‑2 if:

You have business or professional income (e.g., freelancing, consultancy, trade).
You have income in the nature of:
interest
salary
bonus
commission or remuneration, by whatever name called, due to, or received by him from a partnership firm.

Your income computed under presumptive taxation under Sec. 44AD, 44ADA, or 44AE.

In those cases, use ITR‑3 or ITR‑4 (Sugam) per Sec. 139(1).

ITR‑1 vs ITR‑2 – A Comparison Table

S. No.	Feature	ITR‑1 (Sahaj)	ITR‑2	Note/Sections
1	Salary Income	Yes	Yes	Sec. 192
2	One House Property	Yes	Yes	Sec. 22–27
3	Multiple House Properties	No	Yes	Sec. 22–27
4	Capital Gains	No	Yes	Sec. 111A, 112A, 112
5	Foreign Assets/Income	No	Yes	Schedules FA & FSI
6	Agricultural Income > ₹5,000	No	Yes	Sec. 10(1)
7	Director / Unlisted shares	No	Yes	Sec. 56(2), Sec. 2(14)
8	Income Limit	≤ ₹50 lakh	No Upper Limit	N/A

Old vs New Tax Regime (Choose as per Sec. 115BAC)

S. No.	Criteria	Old Regime (Optional)	New Regime (Default from FY 2023–24)
1	Legal Basis	Not under Section 115BAC	Section 115BAC(1A) (Default)
2	Tax Slabs	₹0–2.5L – Nil ₹2.5–5L – 5% ₹5–10L – 20% ₹10L+ – 30%	₹0–3L – Nil ₹3–6L – 5% ₹6–9L – 10% ₹9–12L – 15% ₹12–15L – 20% ₹15L+ – 30%
3	Deductions under Chapter VI‑A	Allowed (Sec. 80C, 80D, 80E, etc.)	Mostly Not Allowed Only 80CCD (2) allowed
4	Standard Deduction (Salary/Pension)	₹50,000 (Sec. 16(ia))	₹50,000 (from FY 2023–24 onwards)
5	Rebate u/s 87A	Available if income ≤ ₹5L (Rebate ₹12,500)	Available if income ≤ ₹7L (Rebate ₹25,000)
6	HRA, LTA, Home Loan Interest (Sec. 24)	Allowed (HRA, LTA, 24(b): ₹2L interest)	Not Allowed
7	Who Should Opt?	High deductions (80C, home loan, HRA users)	Simpler taxpayers, fewer deductions, consistent income
8	Regime Switch (before due date)	Can be chosen yearly (Sec. 139(1) return)	Auto-default if no selection

Due Date & Legal Provisions

S. No.	Activity	Due Date	Section
1	Self-Assessment Tax Payment	31 July 2025	Sec. 234A
2	Filing ITR (non-audit)	15 September 2025	Sec. 139(1), Sec. 234F
3	Revised Return Deadline	31 December 2025	Sec. 139(5)

Late Filing Penalty – As Per Section 234F

S. No.	Total Income for AY 2025–26	Penalty Amount (If filed after due date)
1	Income up to ₹5,00,000	₹1,000
2	Income more than ₹5,00,000	₹5,000

Note: The due date for ITR-2 (non-audit cases) is 15 September 2025. Filing after this date but before 31 December 2025 attracts the above penalties.

Capital Gains Rules (Secs 111A, 112A & 112) – Effective 23 July 2024

The Finance (No. 2) Act, 2024, and related clarifications from the PIB/CBDT notified significant changes—effective 23 July 2024—impacting how short-term and long-term capital gains are taxed.

What’s Changed? Capital Gains Before vs After 23 July 2024

S. No.	Capital Asset	Before 23 July 2024	On or After 23 July 2024	Section Reference
1	STCG on Listed Shares/MFs	15% (with STT)	20% flat	Sec. 111A (amended)
2	LTCG on Listed Shares/MFs	10% on gains > ₹1 lakh	12.5% flat on gains > ₹1.25 lakh, no indexation	Sec. 112A (amended)
3	LTCG on Property / Gold / Bonds	20% with indexation	Option: 12.5% (no indexation) or 20% (with indexation)	Sec. 112 (modified)
4	CGAS Scheme (Sec. 54 relief)	Exemption allowed under Sec. 54, 54EC, etc.	Still allowed, but must declare withdrawal timelines	Sec. 54, 54F, 54EC
5	Threshold for LTCG Exemption	₹1,00,000	₹1,25,000	Sec. 112A

Key Highlights & Clarifications

STCG, applicable if asset held less than 12 months (equity), or less than 36/24 months (other assets).
LTCG threshold raised from ₹1 lakh to ₹1.25 lakh for equity/MF.
For non-equity financial assets, taxpayers may choose between the new 12.5% flat rate or 20% with indexation.
Indexation benefit is discontinued for equity and mutual fund gains sold on or after 23 July 2024.

Documents Checklist

PAN & Aadhaar
Form 16/16A (Sec. 192)
AIS / Form 26AS / TIS
Capital gain computation reports (Schedule CG)
Foreign asset/income proofs (Schedule FA, FSI)
Rent receipts, property loan documents
ESOP/RSU details (Resident taxpayers) under Sec. 56, FA
Section‑wise TDS section codes

How To File ITR‑2 (Step-by-Step Sequence)

Log in at incometax.gov.in and go to e‑File › ITR › AY 2025–26
Select ITR‑2
Select Tax Regime (Section 115BAC checkbox)
Fill:
- Part A: Personal & residential status (Sec. 6)
- Schedule Salary, House Property, CG, 112A, Other Sources, PTI, FSI, FA
Provide TDS section codes in Schedule TDS
Validate using offline JSON utility Ver. 1.3 (released 23 July 2024)
Preview return
Pay SAT if applicable
E‑Verify (OTP / Netbanking / DSC)

Common Mistakes to Avoid

Filing ITR-1 despite eligibility for ITR‑2
Not splitting capital gains before/after 23 July 2024 (Sec. 111A/112A/112)
Forgetting foreign asset disclosures (Schedules FA/FSI)
Claiming deductions in new regime incorrectly
Mismatch of TDS section codes
Not e-verifying return (Invalid return under Sec. 139)

Example:

Mr. A Aged 35, salaried individual, FY 24–25:

Salary: ₹14 lakh
FD Interest: ₹30,000
LTCG mutual fund sold on 15 July 2024 (before cutoff)
LTCG equity sold on 20 August 2024 (after cutoff)
Two rented houses (₹3 lakh income)
Foreign ESOP (unvested)

ITR‑1? No

ITR‑2? Yes, due to multiple incomes, foreign asset, capital gains across dates.

Schedules in ITR-2 – What to Fill and When?

The ITR-2 form contains several schedules based on your income sources, deductions, and assets. Here’s a simplified guide:

S. No.	Schedule Name	Use When…	Legal Reference
1	Schedule S	You have salary/pension income	Sec. 17, Sec. 10(14)
2	Schedule HP	You own one or more house properties	Sec. 22 to Sec. 27
3	Schedule CG	You sold shares, land, gold, mutual funds, crypto, etc.	Sec. 45, Sec. 111A, 112, 112A
4	Schedule 112A	You have LTCG from equity shares or units (Sec. 112A)	Sec. 112A
5	Schedule FA	You have foreign assets like ESOPs, shares, bank accounts	Rule 114H, Sec. 139(1)(e)
6	Schedule FSI	You earned income outside India	Sec. 90, Sec. 91
7	Schedule TDS/TCS	TDS or TCS was deducted during the year	Sec. 194A, 194K, 206C
8	Schedule VI-A	You are claiming deductions under 80C to 80U	Chapter VI-A
9	Schedule AL	Total income exceeds ₹1 crore (Assets & Liabilities)	Sec. 139(1), Rule 12(2)

Deductions Available in ITR-2 (Only in Old Regime)

If you opt for the Old Tax Regime, you can claim deductions under Chapter VI-A:

S. No.	Deduction Section	Description	Max Limit (₹)
1	Sec. 80C	LIC, PPF, ELSS, Principal on home loan	₹1,50,000
2	Sec. 80D	Health insurance premium (self/family)	₹25,000–₹1,00,000
3	Sec. 80E	Interest on education loan	No limit
4	Sec. 80G	Donations to charities	50% or 100%
5	Sec. 80TTA	Savings account interest (non-senior citizens)	₹10,000
6	Sec. 80TTB	Savings + FD interest (senior citizens only)	₹50,000
7	Sec. 24(b)	Interest on home loan (self-occupied)	₹2,00,000

Not available in New Tax Regime (Sec. 115BAC) except:

₹50,000 Standard Deduction
80CCD (2) – Employer NPS contribution
Rebate under Sec. 87A (up to ₹7 lakh)

Foreign Assets & Income – Strict Rules Apply

If you are an Indian Resident and Ordinarily Resident (ROR), you must disclose:

S. No.	Type of Foreign Asset	Where to Report	Example
1	Foreign bank accounts	Schedule FA	HSBC UK, DBS Singapore
2	Foreign stocks or ETFs	Schedule FA	Apple, Tesla, Google
3	Unvested ESOPs from foreign MNCs	Schedule FA	RSUs granted by Google, Amazon
4	Rental income from property abroad	Schedule FSI	Apartment in Dubai or London
5	Dividends or capital gains abroad	Schedule FSI	Income from US-listed mutual funds

Black Money Act, 2015 mandates strict penalties for non-disclosure. Foreign assets must be disclosed even if:

You didn’t earn income from them
They are dormant or inherited

TDS and TCS – Match Before Filing

Always reconcile your return with:

Form 26AS – Tax deducted/collected
AIS (Annual Information Statement) – Income + investments
TIS (Taxpayer Info Summary) – Pre-processed summary

S. No.	Action	Tool to Use
1	View TDS on salary and interest	Form 26AS
2	View dividend or rent income	AIS
3	Validate broker-reported capital gains	AIS / TIS
4	Check self-assessment tax	Challan 280 / AIS

Mismatch between AIS and return is a common reason for tax notices.

Common Errors to Avoid in ITR-2

S. No.	Mistake	Result
1	Choosing ITR-1 instead of ITR-2 (wrong form)	Defective return under Sec. 139(9)
2	Not splitting capital gains (before/after 23 July)	Incorrect tax rate application
3	Claiming 80C in New Regime	Return becomes invalid
4	Missing foreign asset disclosure	Penalty under Black Money Act
5	Not e-verifying return	Return is treated as not filed
6	Entering wrong TDS section code	TDS credit not reflected

Can You Revise or Rectify the Return?

Yes. If you made an error, you can revise or rectify the return:

Type of Correction	Section	Deadline
Revised Return	Sec. 139(5)	31 December 2025
Rectification (after processing)	Sec. 154	Within 4 years from order date

After Filing – What Comes Next?

S. No.	Step	Action Required
1	E-Verify ITR	Use Aadhaar OTP, Netbanking, or DSC
2	Check status on portal	Login > Dashboard > Filed Returns
3	Respond to CPC emails if flagged	Track under “Pending Actions”
4	Refund processed	View refund status in AIS or bank account

Refunds are generally processed within 15–45 days, depending on volume and portal accuracy.

Conclusion – Filing ITR-2 the Smart Way

Filing ITR-2 isn’t just about filling in numbers—it’s about aligning your income with the right disclosures, tax regimes, and capital gain schedules. With the Finance Act, 2024 and the 23 July 2024 updates, taxpayers need to be extra vigilant, especially when dealing with capital gains, foreign assets, or multiple properties.

Whether you’re a salaried employee selling equity, a property owner earning rental income, or a professional with ESOPs in a foreign company—ITR-2 is your ideal form. Make sure to:

Choose your tax regime wisely (Old vs New)
Classify gains correctly based on sale date (before/after 23 July 2024)
Reconcile Form 26AS, AIS, and TIS
Declare all foreign assets and CGAS usage
File before 15 September 2025 to avoid penalties
Always e-verify your return to complete the process

As compliance tightens and cross-verification tools like AIS and TIS evolve, taxpayers must embrace accuracy, transparency, and timeliness. Use the official ITR-2 utility, double-check your deductions, and consult a tax advisor if your situation involves cross-border assets or high-value capital gains.

Remember, ITR filing isn’t just a legal obligation—it’s an annual health check of your finances.

Frequently Asked Questions (FAQs)

Q1. I earn capital gains from mutual funds and have salary income. Should I file ITR-1 or ITR-2?

A1. You must file ITR-2. ITR-1 is only for salaried individuals with no capital gains.

Q2. What happens if I forget to report my foreign stock investments in ITR-2?

A2. Non-disclosure of foreign assets may attract penalties under the Black Money Act, 2015. Always report foreign holdings in Schedule FA.

Q3. Can I choose between the old and new tax regime every year in ITR-2?

A3. Yes, if you have no business/professional income, you can switch regimes each year before filing under Sec. 139(1).

Q4. What is the deadline to revise ITR-2 for AY 2025–26?

A4. You can revise your return under Sec. 139(5) up to 31 December 2025.

Q5. I sold shares before and after 23 July 2024. How do I report them?

A5. Split the capital gains and apply correct tax rates—15%/10% before 23 July, and 20%/12.5% thereafter. Use Schedule CG and 112A.

Q6. Do I need to file ITR-2 if I have two house properties but no capital gains?

A6. Yes, ITR-1 allows only one house property. For two or more, ITR-2 is mandatory.

Q7. How do I claim TDS credit in ITR-2?

A7. Use Schedule TDS, match entries with Form 26AS and AIS, and mention correct section codes (e.g., 192, 194A).

Q8. What if I forget to e-verify my ITR-2?

A8. If not e-verified within 30 days, your ITR will be treated as not filed. Use Aadhaar OTP, net banking, or DSC to e-verify.

Disclaimer: This guide is prepared based on the Finance Act, 2024 and CBDT guidelines as available till July 2025. For complex cases or updates post-publication, always refer to official notifications or consult a professional.

References & Source Links

Written by Mahboob Gaddi and Farman Ahmad | Founders, Lawgical Search

How to File ITR-2 for AY 2025–26 – Capital Gains, Foreign Assets, Multiple Properties & July 2024 Updates

Introduction – Understanding ITR-2 for AY 2025–26?