ITR 2 Form: Eligibility & Step-by-Step Filing Guide for AY 2025-26

The Income Tax Return -ITR 2 form is a comprehensive tax filing document designed specifically for individuals and Hindu Undivided Families (HUFs) who earn income from sources like salary, capital gains, house property, and other sources, but don’t have income from business or profession. For the Assessment Year 2025-26 (Financial Year 2024-25), the Central Board of Direct Taxes (CBDT) has introduced several important changes to the ITR-2 form, reflecting amendments made in the Finance Act, 2024. Understanding the intricacies of ITR-2 is crucial for eligible taxpayers to ensure accurate filing and compliance with tax regulations.

Also Read-ITR-3 Form: How to File ITR-3 Online

ITR-2 serves as a comprehensive reporting mechanism for taxpayers with diverse income sources beyond just salary, including multiple properties, investments yielding capital gains, and foreign income. The form’s structure is designed to capture detailed information about various income streams, deductions claimed, and tax credits, enabling the Income Tax Department to assess tax liability accurately.

Key Eligibility Criteria and Filing Information for ITR-2.

Latest Updates in ITR-2 for Assessment Year 2025-26.

The CBDT has notified significant changes in the ITR-2 form for AY 2025-26, aligning with the Finance Act, 2024. According to the official notification released on May 5, 2025, taxpayers must now navigate several new reporting requirements and benefit from certain relaxations:

Enhanced Capital Gains Reporting Requirements.

The most notable change requires taxpayers to report capital gains separately for transactions executed before and after July 23, 2024. This bifurcation is essential due to the structural changes introduced in the taxation of capital gains. The modified Schedule CG now features dedicated sections for each time period, ensuring proper application of relevant tax rates and indexation benefits.

Capital Loss on Share Buybacks.

Starting October 1, 2024, a significant policy shift allows taxpayers to claim capital losses on share buybacks, provided they report the corresponding dividend income under “Income from Other Sources.” This change represents a correction to earlier inconsistencies in the treatment of buyback proceeds and associated losses.

Increased Threshold for Asset and Liability Disclosure.

The income threshold for mandatory reporting of assets and liabilities (Schedule AL) has been significantly increased from ₹50 lakh to ₹1 crore. CA Ashish Niraj, Partner at A S N & Company Chartered Accountants, welcomed this change, noting: “Preparing details of assets and liabilities as of March 31st every year is a tedious task for non-business entities. By increasing the limit to ₹1 crore, taxpayers in the bracket of ₹50 lakh to ₹1 crore will get relief from preparing these details.”

Expanded Deduction Reporting Fields.

The revised form now provides more detailed fields for reporting deductions under key sections such as 80C, 10(13A), and others. This enhancement aims to ensure more precise classification of exemptions and investments, reducing the scope for errors or ambiguities.

Mandatory TDS Section Code Reporting.

A new column has been added in Schedule-TDS requiring taxpayers to specify the exact section under which Tax Deducted at Source (TDS) was applied, such as 194I for rent or 194J for professional fees. This addition enhances traceability and accuracy in tax credit claims.

Who Should File ITR-2? Comprehensive Eligibility Guidelines.

ITR-2 form is applicable to taxpayers who fall within the following categories:

Eligible Taxpayers for ITR-2.

1. Individuals with varied income sources: Those earning from salary, pension, house property (one or multiple), capital gains, and other sources including interest and dividends.
2. Non-eligible for ITR-1: Taxpayers who don’t meet the simplified criteria for ITR-1, such as those with income exceeding ₹50 lakh from traditional sources.
3. Company directors: Individuals serving as directors in any company must file using ITR-2, regardless of their income level.
4. Investors in unlisted shares: Those who have invested in unlisted equity shares at any point during the financial year.
5. Foreign income earners: Residents with income from foreign sources or possessing assets located outside India.
6. Non-residents and not ordinarily residents: All NRIs and individuals classified as “not ordinarily resident” under Indian tax laws.
7. Agricultural income exceeding ₹5,000: Those with agricultural income above the ₹5,000 threshold.
8. Capital gains transactions: Investors with short-term or long-term capital gains from property, securities, or other investment assets (with a new exception for those with LTCG under Section 112A up to ₹1.25 lakh, who can now use ITR-1).
9. Lottery or gambling winners: Taxpayers with income from winnings of lottery, horse races, gambling, or similar sources.

New Inclusion for AY 2025-26.

A welcome change for small investors: Taxpayers with long-term capital gains (LTCG) under Section 112A up to ₹1.25 lakh from listed equity shares or equity mutual funds can now file using ITR-1, provided they have no capital losses to carry forward. This relaxation benefits small investors who previously had to use the more complex ITR-2 form despite minimal capital gains transactions.

Who Cannot File ITR-2? Important Exclusions.

Understanding who is not eligible to use ITR-2 is equally important for taxpayers. The following categories must use alternative ITR forms:

1. Business income earners: Individuals or HUFs with income from business or profession must file using ITR-3 or ITR-4 (for presumptive income).
2. Partnership firm income: Those receiving income in the form of interest, salary, bonus, commission, or remuneration from a partnership firm.
3. Income clubbed from ineligible sources: Taxpayers whose clubbed income (from spouse, minor child, etc.) falls into the above categories.

Essential Documents Required for Filing ITR-2.

Proper documentation is crucial for accurate ITR-2 filing. Gather the following documents before starting the process:

1. Form 16: Issued by your employer, containing salary details and TDS information.
2. Form 16A: TDS certificates for interest earned on fixed deposits or other income sources where tax was deducted.
3. Form 26AS: Comprehensive tax credit statement available on the e-filing portal, showing all TDS deductions against your PAN.
4. Bank statements: Complete bank statements for all accounts held during the financial year, showing interest earned and other income.
5. Investment proofs: Documents supporting tax-saving investments under Section 80C and other deductions.
6. Rent receipts: If claiming House Rent Allowance (HRA) benefits.
7. Capital gains statements: For share transactions, property sales, or other investment disposals, including date of acquisition, sale consideration, and cost of improvement.
8. Previous year’s ITR: Particularly important if carrying forward losses from earlier years.
9. Proof of foreign income/assets: For taxpayers with income from abroad or foreign assets.
10. Fixed Deposit receipts: To calculate interest income accurately.

Understanding the Structure of ITR-2 Form.

The ITR-2 form is organized into various sections and schedules, each designed to capture specific information about income, deductions, and tax liability. Key components include:

General Information Section.

This section requires basic personal details like name, PAN, address, contact information, and filing status (whether original, revised, or in response to notice).

Income Schedules.

• Schedule S: Details of salary or pension income
• Schedule HP: Income from house property (rental or deemed rental income)
• Schedule CG: Computation of capital gains (now split for pre/post July 23, 2024)
• Schedule OS: Income from other sources like interest, dividends, and lottery winnings

Tax Computation Schedules.

• Schedule CYLA: Current year loss adjustment
• Schedule BFLA: Set-off of brought forward losses
• Schedule CFL: Carry forward of losses for future years
• Schedule VIA: Deductions available under Chapter VI-A
• Schedule SI: Income taxable at special rates

Asset and Tax Payment Schedules.

• Schedule AL: Assets and liabilities (now required only if income exceeds ₹1 crore)
• Schedule FA: Foreign assets and income
• Schedule IT/TDS/TCS: Details of advance tax payments, TDS and TCS

Step-by-Step Guide to Filing ITR-2 Online for AY 2025-26.

Filing ITR-2 through the Income Tax Department’s e-filing portal is a straightforward process if you follow these steps systematically:

Step 1: Log in to the Income Tax e-Filing Portal.

Visit the official Income Tax e-filing website (www.incometax.gov.in) and log in using your PAN as the user ID and your registered password.

Step 2: Navigate to the e-Filing Section.

After logging in, click on “e-File” in the top menu, then select “Income Tax Return,” followed by “File Income Tax Return.

Step 3: Select the Assessment Year and Filing Mode.

Choose “Assessment Year 2025-26” from the dropdown menu and select “Online” as your filing mode. Click “Continue” to proceed.

Step 4: Choose ITR-2 Form.

The system might suggest the appropriate form based on your previous filings or income profile. Verify and select “ITR-2” if applicable to your situation.

Step 5: Fill Personal Information.

Verify pre-filled personal details including name, address, and contact information. Make necessary corrections if required.

Step 6: Enter Salary Income Details.

Input your salary details as per Form 16. The portal offers a pre-fill option that can auto-populate this information from Form 26AS, but always verify for accuracy.

Step 7: Report House Property Income.

If you own property that generates rental income or have a housing loan, enter these details in the House Property section, calculating the annual value and allowable deductions.

Step 8: Report Capital Gains.

This section requires particular attention due to the new bifurcation requirement:

• Separately report transactions before and after July 23, 2024
• Classify gains as short-term or long-term based on holding period
• For share transactions, provide ISIN details and acquisition dates

Step 9: Enter Income from Other Sources.

Include interest from savings accounts, fixed deposits, dividends, and any other income not covered in previous sections.

Step 10: Claim Deductions.

Provide details for all eligible deductions under Chapter VI-A, including:

• Section 80C (investments in PPF, ELSS, life insurance premiums, etc.)
• Section 80D (health insurance premiums)
• Other applicable deductions under sections 80G, 80TTA, etc.

Step 11: Verify Tax Credits.

Enter details of tax already paid or deducted, including:

• TDS on salary (as per Form 16)
• TDS on other income (as per Form 16A)
• TCS (Tax Collected at Source)
• Advance tax and self-assessment tax payments

Step 12: Select Tax Regime.

Choose between the old and new tax regimes. For AY 2025-26, remember that the new tax regime is the default option with significant benefits. According to data from the Press Information Bureau, about 72% of taxpayers opted for the New Tax Regime for AY 2024-25.

The Finance Act, 2025 introduced major changes, including:

• Nil tax liability for total income up to ₹12 lakhs (previously ₹7 lakhs) in the new regime
• Standard deduction of ₹75,000 available in the new regime (compared to ₹50,000 in the old regime)

Step 13: Review Tax Computation.

Carefully verify the automatically calculated tax liability, ensuring all incomes, deductions, and tax credits have been properly accounted for.

Step 14: Submit and Verify Your Return.

After confirming all details:

1. Click on “Preview” to review your complete return
2. Proceed to validation to check for any errors or inconsistencies
3. Submit your return
4. Complete the verification process using any of the available methods:
   • Aadhaar OTP (most convenient)
   • Net banking
   • Bank account-based verification
   • Demat account
   • Digital Signature Certificate (DSC)

Common Mistakes to Avoid When Filing ITR-2.

To ensure smooth processing of your return and prevent notices from the tax department, avoid these common errors:

1. Not linking Aadhaar with PAN: This linkage is mandatory and failure to do so may result in your return being considered invalid.
2. Incorrect bank account details: Ensure your bank account is pre-validated on the e-filing portal, especially for refund claims.
3. Misreporting capital gains: With the new bifurcation requirement, ensure transactions before and after July 23, 2024, are correctly segregated.
4. Incomplete disclosure of income: All income sources, including interest from savings accounts and small dividends, must be reported.
5. Not reporting foreign assets: Complete disclosure of foreign income and assets is mandatory for residents.
6. Claiming inadmissible deductions: Under the new tax regime, most deductions except those specifically allowed are not available.
7. Missing the verification deadline: Your return must be verified within 30 days of filing to be considered valid.

According to the Press Information Bureau data, approximately 1.09 crore taxpayers filed ITR-2 for AY 2024-25, representing about 14.93% of all returns filed. The filing peaked on July 31, 2024 (the due date), with over 69.92 lakh ITRs being filed on that single day.

Frequently Asked Questions About ITR-2.

Q1: Can I file ITR-2 if I have business income?

No, individuals or HUFs with income from business or profession cannot use ITR-2. They must file using ITR-3 or ITR-4 (for presumptive income schemes).

Q2: I have sold shares and made capital gains. Which ITR form should I use?

If you have capital gains from the sale of shares and no business income, you should file ITR-2. However, if your only capital gain is LTCG under Section 112A up to ₹1.25 lakh and you have no capital losses to carry forward, you can now use ITR-1 from AY 2025-26.

Q3: I own multiple properties. Can I file ITR-1?

No, if you have income from more than one house property, you must file ITR-2, regardless of your income level.

Q4: I am a non-resident Indian with income in India. Which form should I use?

As an NRI with Indian income but no business/profession income, you should file ITR-2. ITR-1 is not available for non-residents.

Q5: What happens if I miss the July 31, 2025 deadline for filing ITR-2?

You can still file a belated return until December 31, 2025, but you may have to pay a late filing fee under Section 234F, and certain benefits like the ability to carry forward losses (except house property loss) will be lost.

Q6: Do I need to report my agricultural income in ITR-2?

Yes, if your agricultural income exceeds ₹5,000, you must report it in ITR-2, although agricultural income remains tax-exempt.

Q7: Is the standard deduction available in both old and new tax regimes for AY 2025-26?

Yes, standard deduction is available in both regimes, but the amounts differ: ₹75,000 under the new regime and ₹50,000 under the old regime.

Q8: Can I claim House Rent Allowance (HRA) exemption in the new tax regime?

No, HRA exemption is not available under the new tax regime. If you want to claim HRA benefits, you would need to opt for the old tax regime.

Q9: I have income from salary and rental property, but my total income is less than ₹50 lakh. Which form should I use?

If you have income only from one house property (along with salary), you can use ITR-1. If you have multiple house properties or other income sources like capital gains, you must use ITR-2 regardless of your total income.

Q10: How do I file ITR-2 if I’ve sold a house during the financial year?

You need to report this under Schedule CG (Capital Gains) in ITR-2, specifying the sale consideration, cost of acquisition (with indexation if applicable), and expenses on transfer to calculate your capital gain or loss.

Understanding the ITR-2 form and its filing requirements is essential for accurate tax compliance. With the significant changes introduced for AY 2025-26, especially regarding capital gains reporting and the increased threshold for asset disclosure, eligible taxpayers should carefully review the updated form and requirements before filing their returns.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.