When an individual sells assets such as shares, mutual funds, property, or virtual digital assets, the resulting profit is classified as capital gains. It must be reported in the Income Tax Return. For most individuals with capital gains income, ITR-2 is required. This guide covers the eligibility criteria, required documents, step-by-step portal filing process, and the revised capital gains tax rates effective from FY 2024-25 under the Finance (No. 2) Act, 2024.
Who Must File ITR-2 for Capital Gains?
ITR-2 is required for individuals and Hindu Undivided Families (HUFs) with capital gains income and no business or professional income. The form covers all categories of capital gains across every asset class.
ITR-2 Eligibility for Capital Gains
| Situation | ITR-2 Required | Alternative Form |
| Sale of listed equity shares | Yes | ITR-3 if business income exists |
| Redemption of equity mutual funds (SIPs included) | Yes | ITR-3 if business income exists |
| Sale of debt mutual funds | Yes | ITR-3 if business income exists |
| Sale of immovable property (land, house, flat) | Yes | ITR-3 if business income exists |
| Sale of virtual digital assets (cryptocurrency) | Yes | ITR-3 if business income exists |
| Sale of gold, jewellery, or bonds | Yes | ITR-3 if business income exists |
| Sale of unlisted shares | Yes | ITR-3 if business income exists |
| No capital gains (salary and house property only, income below Rs. 50 lakh) | No (use ITR-1) | ITR-1 (Sahaj) |
| Capital gains with business or professional income | No (use ITR-3) | ITR-3 |
Individuals who only trade in futures and options (F&O) on stock exchanges must file ITR-3, as F&O income is classified as business income, not capital gains. However, delivery-based share transactions resulting in capital gains require ITR-2.
Essential Documents for Filing
Before starting the filing process, gather the following documents:
• PAN Card and Aadhaar Card
• Form 26AS (consolidated tax credit statement showing TDS, TCS, and advance tax)
• Annual Information Statement (AIS) and Taxpayer Information Summary (TIS)
• Form 16 from employer (if salaried)
• Capital gains statements from brokers (for shares and mutual funds)
• Purchase and sale deeds for property transactions
• Bank statements showing purchase cost and sale proceeds
• Challans for advance tax or self-assessment tax paid
• Proof of exemption claims under Sections 54, 54EC, or 54F (if applicable)
Revised Capital Gains Tax Rates for FY 2024-25
The Finance (No. 2) Act, 2024, introduced significant changes to capital gains taxation effective from July 23, 2024. All assets now follow a unified structure.
| Asset Type | Holding Period for LTCG | STCG Rate | LTCG Rate | Key Change from FY 2023-24 |
| Listed equity shares | Above 12 months | 20% | 12.5% (above Rs. 1.25 lakh) | STCG increased from 15% to 20%; exemption raised to Rs. 1.25 lakh |
| Equity mutual funds | Above 12 months | 20% | 12.5% (above Rs. 1.25 lakh) | Same as listed equity |
| Debt mutual funds | Above 24 months | As per slab | As per the slab | No change; slab rate applies |
| Immovable property | Above 24 months | As per the slab | 12.5% (no indexation) | Indexation benefit removed; flat 12.5% rate |
| Unlisted shares | Above 24 months | As per the slab | 12.5% | Rate reduced from 20% (with indexation) to 12.5% (without) |
| Gold and jewellery | Above 24 months | As per the slab | 12.5% | Indexation removed; rate changed to 12.5% |
| Virtual digital assets | Any holding period | 30% flat | 30% flat | No change; flat 30% irrespective of holding period |
The removal of indexation benefit for property and other non-equity assets is a major change. Previously, taxpayers could adjust the purchase cost for inflation using the Cost Inflation Index (CII), effectively reducing LTCG. From FY 2024-25, the purchase cost is taken at actual value without inflation adjustment, but the tax rate is reduced to 12.5%.
Step-by-Step Filing Process on the E-Filing Portal
Step 1: Log in to the Income Tax Portal
Visit www.incometax.gov.in and log in using your PAN and password. Navigate to e-File, then Income Tax Returns, then File Income Tax Return.
Step 2: Select Assessment Year and ITR Form
Choose AY 2025-26 (for FY 2024-25 income). Select ITR-2 as the form type. Choose the filing mode: Online (prepare directly on the portal) or Offline (download the Excel/JSON utility, prepare offline, and upload JSON).
Step 3: Fill Part A (General Information)
Enter personal details, address, bank account details, and filing status. Select the tax regime (old or new under Section 115BAC). Pre-filled data from Form 26AS and AIS will be available for verification.
Step 4: Complete Schedule Salary, HP, and OS
If you have salary income, enter details from Form 16. For house property income, enter rental income, municipal taxes, and interest on housing loan. For income from other sources, enter interest, dividends, and other applicable income.
Step 5: Fill Schedule CG (Capital Gains)
This is the most critical section for capital gains reporting. Schedule CG is divided into sub-sections for each asset type.
For each asset sale, enter the description of the asset, date of acquisition and date of sale, full value of consideration (sale price), cost of acquisition (purchase price, without indexation from FY 2024-25), cost of improvement (if any), expenses related to transfer (brokerage, stamp duty), and the computed capital gain or loss.
If claiming exemption under Section 54 (reinvestment in residential property), Section 54EC (investment in specified bonds within 6 months), or Section 54F (sale of any asset other than house property), enter the exemption details in the relevant sub-section.
Step 6: Verify Tax Computation
Review the auto-calculated tax liability. Cross-check against TDS credits from Form 26AS, advance tax payments, and self-assessment tax paid. If additional tax is payable, generate a challan and pay before filing.
Step 7: Verify and Submit
Submit the return using Aadhaar OTP, net banking EVC, bank account EVC, demat account EVC, or Digital Signature Certificate. E-verification must be completed within 30 days of filing. An acknowledgment (ITR-V) is generated upon successful submission.
Common Filing Mistakes
| Mistake | Impact | How to Avoid |
| Not reporting small mutual fund redemptions. | Treated as non-disclosure; may trigger notice | Check AIS for all reported transactions |
| Using the wrong holding period | Incorrect STCG/LTCG classification and tax rate | Verify the purchase date from the broker’s statement |
| Claiming indexation benefit for FY 2024-25 sales | Rejected during processing | Use actual cost without indexation |
| Not matching data with AIS/TIS. | Mismatch triggers demand notice. | Download and reconcile before filing. |
| Missing advance tax deadlines for large capital gains | Interest under Sections 234B and 234C | Pay advance tax in quarterly instalments |
| Filing ITR-1 instead of ITR-2 with capital gains | Return rejected | Always use ITR-2 when capital gains exist |
Key Terms
• Schedule CG: The capital gains schedule in ITR-2, where each asset sale is reported with acquisition date, sale date, purchase cost, sale price, and applicable exemptions
• Cost Inflation Index (CII): The index previously used to adjust the purchase cost of assets for inflation when computing LTCG; no longer applicable from FY 2024-25
• Section 54: The Income Tax Act provision allowing exemption from LTCG on sale of residential property if the gains are reinvested in another residential property
• Section 54EC: The provision allowing LTCG exemption if the gains are invested in specified bonds (NHAI, REC) within 6 months of sale, up to Rs. 50 lakh
• Annual Information Statement (AIS): The comprehensive statement on the Income Tax portal showing all financial transactions reported by third parties, used for verification during ITR filing
Reporting Capital Gains in Your ITR?
Ensure accurate reporting of every asset sale with the correct holding period, tax rate, and exemption claims. Use WFYI tools to verify your data against AIS, calculate tax liability, and file your return before the deadline.
| Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for advice specific to your situation. |
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Frequently Asked Questions
Q1: Is ITR-2 required even for small capital gains from mutual fund SIP redemptions?
Yes. Any amount of capital gains from mutual fund redemptions, including SIP redemptions, requires ITR-2 filing. ITR-1 does not have a capital gains schedule and cannot accommodate this income, regardless of the amount.
Q2: Has the indexation benefit been removed for property sales from FY 2024-25?
Yes. From FY 2024-25, the indexation benefit has been removed for all asset classes, including immovable property. LTCG on property is now taxed at a flat 12.5% on the actual gain (sale price minus actual purchase cost without inflation adjustment).
Q3: What is the LTCG exemption limit for listed equity shares?
The LTCG exemption for listed equity shares and equity-oriented mutual funds has been increased from Rs. 1 lakh to Rs. 1.25 lakh per financial year, effective from FY 2024-25. Gains up to this limit are tax-free; gains above are taxed at 12.5%.
Q4: Can capital losses be set off against other income?
Short-term capital losses can be offset against both short- and long-term capital gains. Long-term capital losses can be set off only against long-term capital gains. Capital losses cannot be set off against salary, house property, or other income. Unabsorbed losses can be carried forward for 8 assessment years.
Q5: When is the deadline for filing ITR-2 for FY 2024-25?
The due date for filing ITR-2 for FY 2024-25 (AY 2025-26) is July 31, 2025, for individuals who do not require an audit. Filing after the due date is treated as a belated return, attracting late filing fees under Section 234F and potentially resulting in the loss of carry-forward benefits for certain losses.
