How to File ITR 2 Form with Capital Gains Income?

Every taxpayer with total taxable income that is above the basic exemption limit must mandatorily file income tax returns (ITRs). However, the income tax return form that taxpayers must use will vary depending on the nature of income earned.

For instance, individuals and Hindu Undivided Families (HUFs) with income from capital gains must file their tax returns in form ITR-2. In this article, we will briefly explore this particular income tax return and look into how to file ITR-2 online.

What is ITR-2?

ITR-2 is one of the many types of income tax returns issued by the Indian Income Tax Department (ITD). This tax return must be used only by individuals and Hindu Undivided Families (HUFs) with the following sources of income.

• Income from salary or pension
• Income from more than one house property
• Income from short-term or long-term capital gains
• Income from other sources
• Income from agriculture exceeding ₹5,000
• Income exceeding ₹50 lakh in a financial year

A Brief Overview of Capital Gains 

Now, before we explore how to fill ITR-2 for capital gains income, let us first try to understand the concept of capital gains.

The term capital gains refers to the profits from the sale of a capital asset. As per the Income Tax Act of 1961, a capital asset is defined as any kind of property (whether movable or immovable) or security (like shares, mutual funds, bonds or debentures) held by the assessee.

Now, capital gains are further classified into two types: long-term and short-term.

Long-term capital gains are profits from the sale of a capital asset held for more than 36 months (more than 12 months in the case of listed securities and more than 24 months in the case of unlisted securities and immovable property).

Meanwhile, short-term capital gains are profits from the sale of a capital asset held for less than 36 months (less than 12 months in the case of listed securities and less than 24 months in the case of unlisted securities and immovable property).

Read More AboutWhat is Capital Gain Tax?

Note: From July 23, 2024, the holding period for determining long-term and short-term capital gains has been changed. The holding period limit for determining long-term capital assets is now 12 months for listed securities and 24 months for all other assets.

How to Fill the ITR-2 Form?

If you are a taxpayer with short-term or long-term capital gains income, it is important to know how to fill ITR-2 online. Here is a step-by-step guide to help you understand the process.

Step 1: Gather the Required Documents 

Filling ITR-2 for capital gains income requires careful attention to detail. To ensure that you do not make any mistakes or omit material information, it is advisable to first gather all of the relevant supporting documents before starting the process. Some of the key documents you need to fill out ITR-2 for capital gains income include the following:

• Details of capital gains from the sale of property, shares, mutual funds or other assets
• Bank statements for the entire financial year
• TDS and TCS certificates
• PAN and Aadhaar card
• Form 16 from your employer (if you are employed and have salary income)
• Details of investments that qualify for section 80C deductions (if you are filing ITR-2 for capital gains under the old income tax regime)

Step 2: Understand the Structure of ITR-2

ITR-2 is an extensive income tax return with as many as 35 different schedules, each pertaining to different income sources. Some of the key schedules that you can find in ITR-2 for capital gains are as follows:

• Part A: General Information
• Schedule S: Salary Income
• Schedule HP: House Property Income
• Schedule CG: Capital Gains Income
• Schedule VDA: Income from the Sale of Virtual Digital Assets
• Schedule OS: Income from Other Sources
• Schedule SI: Special Income
• Part B TI: Computation of Income
• Part B TTI: Computation of Tax
• Schedule IT: Details of Tax Payments
• Schedule TDS: Details of Tax Deducted At Source
• Schedule TCS: Details of Tax Collected At Source
• Schedule CYLA: Details of brought forward past year losses and current year losses to be carried forward
• Schedule BFLA: Details of brought forward past year losses and current year losses to be carried forward
• Schedule CFL: Details of brought forward past year losses and current year losses to be carried forward

Step 3: Enter the Details in the Schedules 

When filling out ITR-2 for capital gains, remember to only select the schedules applicable to you and proceed to fill out all of the fields listed under the section.

Make sure to refer to your supporting documents for the right values at every step of the process. Entering wrong values or omitting certain fields could lead to the income tax return being marked as defective. Additionally, the Income Tax Department may even levy penalties or initiate legal proceedings against you for not accurately disclosing your income (even if it was inadvertent).

Once you have entered all of the details in the schedules, make sure to verify them once before proceeding to file the ITR-2 for capital gains.

How to File ITR-2 Online? 

Now that you have an idea of how to fill ITR-2 for capital gains, let us look at the process you need to follow to file the return online.

• Step 1: Log into your income tax e-filing account using your PAN and password.
• Step 2: Under the ‘e-File’ tab, click on ‘Income Tax Returns’ and then on ‘File Income Tax’. 
• Step 3: Select the relevant assessment year from the drop-down menu and choose ‘Online’ as the mode of filing.
• Step 4: Click ‘Continue’ and then on ‘Start New Filing’.
• Step 5: Select your status from the three options: individual, HUF or others and click ‘Continue’.
• Step 6: Select ITR-2 from the drop-down list and click ‘Proceed With ITR-2’.
• Step 7: Select all of the schedules that apply to you from the list and click ‘Continue’. If you only have income from capital gains, select only ‘Schedule CG – Capital Gains’ and proceed.
• Step 8: All of the schedules you selected will appear as a list. Click on each schedule and fill in the fields. Once you are done with a schedule, click ‘Confirm’ to save the information.
• Step 9: After you have entered all of the information in the schedules, review Part B TTI to check if you have any additional tax to be paid. If so, you will see a ‘Pay Now’ option. Click on it to make the additional tax payment online.
• Step 10: Once you have cleared your tax liability, return to ITR-2 for capital gains and click on ‘Proceed to Verification’.
• Step 11: Preview the return once and click on ‘Proceed to Validation’ once you are satisfied.
• Step 12: Once you see the ‘Validation Successful’ message, click ‘Proceed to Verification’.
• Step 13: Select one of the three e-verification options to complete the income tax return filing process.

Also, Know More About E-Filing Income Tax Returns

Conclusion

With this, you must now know how to file ITR-2 online. Although it can seem complex at first sight, the process becomes manageable once you are aware of the process. Now, it is important to remember to have all required documents handy before initiating the process. This way, you can make the process smooth and seamless. Furthermore, make sure to double-check your entries after filling out each schedule to avoid errors.

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