ITR filing 2025: ITR-2 notified for tax filing in FY2024-25; check who all should opt for it

ITR filing: The Central Board of Direct Taxes (CBDT) released the Income Tax Return form-2, or ITR-2, for the fiscal year 2024-2025 on Monday, following the recent notification of ITR forms 1, 3, and 5. ITR-2 is particularly relevant for a large number of taxpayers, particularly salaried employees and pensioners, and will be applicable retrospectively from April 1, 2025.

Individuals with salary or pension income, or those earning income from more than one house property, can file their income tax return using ITR-2. Notably, any income from capital gains or losses from property or other investments, whether long-term or short-term, must be reported in this form.

The recent update by CBDT specifies that the new ITR-2 is applicable only if the total income exceeds Rs 1 crore. This change will provide relief to individuals with annual incomes between 50 lakh and 1 crore, as they will no longer be required to prepare a schedule of assets and liabilities.

"CBDT notifies ITR-Form 2 for AY 2025-26 vide Notification No. 43/2025 dated 03.05.2025. Key updates:   
🖋️ Schedule-Capital Gain split for gains before/ after 23.07.2024 (post changes in Finance Act, 2024)  
🖋️Capital loss on share buyback allowed if corresponding dividend income is shown as income from other sources (post 01.10.2024)  
🖋️Asset & liability reporting limit raised to ₹1 crore of total income
🖋️Enhanced reporting for deductions [80C,10(13A)], etc.
🖋️TDS section code to be reported in Schedule-TDS," the Income Tax department noted. 

 

Key details of ITR Form 2

> Capital gains bifurcation:
New fields in Schedule-Capital Gains to separately report gains before and after July 23, 2024, in line with changes introduced in the Finance Act, 2024.

> Buyback loss claim allowed:
Capital loss on buyback of shares can now be claimed if the related dividend income is reported under "Income from Other Sources" (applicable for transactions after October 1, 2024).

> The ITR 2 form for the assessment year 2025-26 (FY 2024-25) offers taxpayers the option to calculate long-term capital gains (LTCG) for properties transferred after 23rd July 2024 at either 20% with indexation benefit or 12.5% without indexation. This change provides taxpayers with flexibility in determining the most advantageous tax treatment, particularly for land and building transfers.

> Asset & liability threshold raised:
Mandatory reporting of assets and liabilities only if total income exceeds ₹1 crore, up from the earlier limit.

> Detailed deduction reporting:
More granular disclosure required under sections like 80C (e.g., PPF, LIC) and 10(13A) (HRA exemption), enhancing transparency.

> TDS section code disclosure:
The latest form now requires taxpayers to specify the section under which TDS has been deducted for a particular transaction. In the past, only the details of the entity deducting the TDS and the amount deducted were necessary to report. However, with the updated ITR-2 form, taxpayers must now include the specific section under which the TDS was deducted, for example, 194C or 194J.

> Additionally, significant changes have been implemented in the capital gains schedule of the recently released ITR-2 form. Specifically, taxpayers must now provide details of capital gains transactions conducted throughout the year in Schedule CG, located within Part A of the ITR-2 form.

> The ITR-2 also includes enhanced reporting requirements for foreign assets through schedules FA (Foreign Assets) and FSI (Foreign Source Income). Additionally, Schedule VDA mandates transaction-wise reporting of virtual digital assets, which are taxed at 30% under Section 115BBH. Furthermore, the form now requires disclosure of Legal Entity Identifier (LEI) for specified high-value transactions.

ITR-2 form is suitable for?

ITR-2 is designed for salaried taxpayers who are also investors in equity shares and mutual funds. Salaried individuals must use ITR-2 instead of ITR-1 if they own more than one house property, have assets located outside India, or if their total income exceeds Rs 50 lakh.

This form can be filed by individuals or Hindu Undivided Families (HUFs) who are not eligible to use ITR-1 (Sahaj). Taxpayers who do not have income from profits and gains of business or profession, as well as income from interest, salary, bonus, commission, or remuneration from a partnership firm, can also use ITR-2.

ITR-2 is suitable for those who wish to club the income of another person, such as a spouse or minor child, with their own income if the additional income falls under any of the aforementioned categories.

ITR-1 vs ITR-2 

ITR-1 (Sahaj) – For Simple Income Profiles

Eligibility: Resident individuals (excluding Not Ordinarily Resident)

Total income up to Rs 50 lakh

Income sources:

Salary or pension

Income from one house property

Other sources (e.g., interest)

Agricultural income up to Rs 5,000

Ineligible if:

You are a director in a company

Held unlisted equity shares during the year

Have foreign assets or income

Income includes capital gains (except LTCG up to Rs 1.25 lakh from listed equities)

Total income exceeds Rs 50 lakh

Key Updates for AY 2025–26:

Now allows reporting of long-term capital gains (LTCG) up to Rs 1.25 lakh from listed shares and mutual funds, simplifying filing for small investors.

Enhanced reporting for deductions under sections like 80C and 10(13A).

Detailed TDS information required, including section-wise breakdown.

ITR-2

Eligibility:

Individuals and Hindu Undivided Families (HUFs)

Income sources:

Salary or pension

Income from more than one house property

Capital gains (short-term and long-term)

Foreign assets or income

Agricultural income exceeding ₹5,000

Other sources, including lottery winnings

Applicable for residents, Non-Resident Indians (NRIs), and Resident Not Ordinarily Residents (RNORs)

Ineligible if:

You have income from profits and gains of business or profession

Key Updates for AY 2025–26:

Capital gains must be reported separately for transactions before and after July 23, 2024, in line with changes from the Finance Act, 2024.

Capital loss on share buybacks allowed if corresponding dividend income is disclosed as "Income from Other Sources," effective from October 1, 2024.

Asset and liability reporting threshold increased from Rs 50 lakh to Rs 1 crore of total income, reducing compliance burden for many taxpayers.

Mandatory reporting of TDS section codes in Schedule-TDS for better classification.

Enhanced disclosure requirements for deductions under sections like 80C and 10(13A).