ITR-2
ITR-2 is the income tax return form applicable to individuals and HUFs who have capital gains income, foreign assets, or more than one house property, but who do not have income from business or profession.
ITR-2 is the standard return form for equity investors, mutual fund investors, and individuals with salaried or other non-business income who have realised capital gains during the year. It supersedes ITR-1 (Sahaj), which is only for simpler income profiles — salaried taxpayers with one house property and no capital gains. Any individual who has sold shares, redeemed mutual fund units, transferred real estate, or received ESOPs must file ITR-2 at minimum.
The capital gains section (Schedule CG) within ITR-2 captures short-term and long-term gains separately, further broken down by asset type — listed equities, equity mutual funds, debt mutual funds, real estate, gold, and others. Each category has different tax treatment, and ITR-2 is structured to compute taxes correctly across all these sub-categories. Taxpayers with Section 111A STCG (20%) and Section 112A LTCG (12.5%) gains report them in designated sub-schedules.
ITR-2 also contains Schedule FA (Foreign Assets) for disclosing overseas investments, bank accounts, and financial interests — mandatory for individuals who hold foreign stocks (including US ETFs or direct equity via LRS), and non-compliance attracts penalties under the Black Money Act and FEMA. NRIs filing Indian returns for India-sourced capital gains also typically use ITR-2 or ITR-3.
The AIS (Annual Information Statement) data now pre-fills portions of ITR-2 with transaction-level data reported by brokers, exchanges, and mutual fund houses. While this simplifies data entry, taxpayers must verify each pre-filled entry against their own records, as errors in reported data (e.g., wrong acquisition cost, missing purchase transactions) will lead to inflated tax liability if not corrected before submission.
For taxpayers who also have F&O trading income, intraday equity profits (treated as speculative business income), or any other business/professional income, ITR-2 is not appropriate — they must file ITR-3. Choosing the wrong ITR form is treated as a defective return by the income tax department, which issues a notice under Section 139(9) requiring the taxpayer to file the correct form within a specified period.