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How to File ITR 2 Form with Capital Gains

30 December 2021
4 minutes

The ITR form that taxpayers have to use for filing income tax returns will depend on their residential status and total income obtained from different sources. HUFs and individuals with income other than those under the ‘Profit and Gains from Business or Profession’ head have to use ITR Form 2 for filing IT returns. 

Taxpayers with income from salary, property, capital gains, foreign assets and others are eligible to file ITR 2. The following sections cover the steps to file ITR 2 form for those earning capital gains.

Steps to File ITR 2 with Capital Gains

Individuals receiving capital gains through the sale of equity have to file IT returns every year. One can do it online via the official Income Tax department portal. Here’s a step-by-step guide for the same.

Step 1: First, one has to visit the official website of the Income Tax department and log in with the necessary credentials. 

Step 2: Then, they need to follow this path: e-File> Income Tax Returns> File Income Tax Returns. 

Step 3: Now, individuals have to select the assessment year, choose the status and select the type of form. After that, they need to select ‘Taxable income is more than basic exemption limit’ as the reason for ITR filing.

Step 4: The next page will show 5 different types of schedules. Taxpayers have to select ‘General’ and click on ‘Income Schedule’. After that, they have to tap on ‘Schedule Capital Gains’ and then choose the type of capital assets from the provided list. 

Step 5: Capital gains are of two types — short-term capital gains and long term capital gains. Short-term capital gains arising from the sale of listed equity shares are taxed at 15% under Section 111A. If one’s total taxable income, excluding STCG, is below the minimum taxable income of Rs. 2.5 lakh, the shortfall will be adjusted with the STCG. The rest of STCG will be taxed at 15% with 4% cess. 

To report STCG, one has to click on ‘Add details’. Then they have to provide the consolidated amount obtained from the sale of short-term assets along with COA (Cost of Acquisition) in a particular FY. 

Step 6: Long-term capital gains (LTCG) are subject to taxation under Section 112A. The tax rate on LTCG one receives from the sale of equity and equity-related instruments is 10%. However, LTCG is not taxable up to a limit of Rs. 1 lakh.  

Long-term capital gains earned from the sale of listed shares, mutual funds, etc., were free from taxation until FY2017-18. 

For long-term capital gains, individuals have to provide scrip-wise details while they file ITR 2. This will include ISIN, selling price, purchase price, date of different transactions and more. 

After providing these details in ‘Schedule 112A’, one has to click on ‘Add’. 

Step 7: Once the necessary schedules are ‘Confirmed’, individuals have to review Part B TTI and then tap on ‘Preview Return’. Now they have to download the ITR and proceed with the declaration.

Step 8: On the declaration tab, taxpayers need to provide specific details and tap on ‘Proceed to Validation’. After validation, the ITR filing has to be verified. Individuals can verify electronically or by sending a signed ITR-V printout to the Income Tax Department office in Bangalore. 

Note that one should verify within 120 days of filing ITR. 

Taxpayers looking to file ITR 2 with capital gains can follow the above steps for a hassle-free experience. Keep in mind that it is crucial to enter accurate data in each section and verify them before submitting the ITR form

FAQs on ITR 2

What is ITR 2? 

ITR 2 form is one of the forms available for taxpayers to pay their Income Tax Returns. For the ease of filing ITR, the income tax department has categorised different forms on the basis of different incomes. 

The ITR-2 Form is for individuals and HUFs that are not engaged in any profession or business. 

Who should file ITR 2?

The form is for those individuals and HUFs who receive earnings apart from the income from ‘Profits and Gains from Business or Profession’. 

Hence, individuals who earn income from the below-mentioned sources have to file ITR using this form:

  • Salary
  • Pension
  • Income generated from house property
  • Foreign income/ foreign assets
  • Capital gains
  • Income from other sources
  • Loss on sale of investment
  • A resident who is not ordinarily resident as well as a non-resident
  • Agricultural income exceeding Rs 5,000
  • Director in an unlisted and listed company

Those taxpayers and HUF who have income from business or profession and taxpayers eligible for ITR-1 do not have to file ITR-2. 

What Documents are required to file ITR 2

  • Bank statements
  • Savings certificates
  • DS certificate
  • Previous year’s ITR
  • Interest statement of interest paid in the financial year
  • Capital gains/loss statement
  • Balance sheet
  • Profit and loss statement
  • Audit reports, if applicable
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