Overview
Income Tax E-Filing of ITR-2 is applicable to Individuals and Hindu Undivided Families (HUFs) who do not have business or professional income but earn income from capital gains, multiple house properties, foreign income, or specified investments.
ITR-2 exists because income such as sale of shares, mutual funds, property, or foreign assets requires detailed reporting and special tax treatment that cannot be captured in ITR-1. Even salaried individuals must shift to ITR-2 once such income arises.
You should file ITR-2 if you have income from
- Salary or pension along with
- Capital gains (shares, mutual funds, property, crypto / VDAs, bonds)
- More than one house property
- Foreign income or foreign assets
- Being a director in a company
- Holding unlisted equity shares
- Dividend, interest, or other income
You should not file ITR-2 if you have
- Business or professional income (ITR-3 or ITR-4 applies)
ITR-2 is filed electronically through the portal of the Income Tax Department and involves higher disclosure and scrutiny than ITR-1.
Eligibility Criteria for ITR-2
You are required to file ITR-2 if
- You are an Individual or HUF
- You do not have business or professional income
- You have capital gains, foreign income/assets, or multiple house properties
- There is no upper income limit
Even a single capital gain transaction makes ITR-1 invalid.
Income Covered Under ITR-2
ITR-2 allows reporting of
- Salary or pension income
- Income from more than one house property
- Short-term and long-term capital gains
- Sale of listed and unlisted shares
- Mutual fund transactions
- Sale of land or building
- Crypto / Virtual Digital Asset transactions
- Dividend and interest income
- Foreign income and foreign asset ownership
Each category is reported under separate schedules, requiring transaction-level accuracy.
Income Slabs, Section 87A Rebate & Marginal Relief – Key Clarifications
New Tax Regime Slabs (Normal Income Only)
- Upto₹4lakh–Nil
- ₹4lakhto₹8lakh–5%
- ₹8 lakh to ₹12 lakh – 10%
- ₹12 lakh to ₹16 lakh – 15%
- ₹16 lakh to ₹20 lakh – 20%
- ₹20 lakh to ₹24 lakh – 25%
- Above ₹24 lakh – 30%
These slabs do not apply to capital gains.
Section 87A Rebate – Important for ITR-2 Filers
- If taxable normal income ≤ ₹12 lakh, → tax on that normal income is fully rebated
- Capital gains taxed at special rates are not covered
- ₹12 lakh is not a zero-tax slab
- Capital gains tax may still be payable even if total income is below ₹12 lakh
Marginal Relief – Relief if You Slightly Cross ₹12 Lakh
To prevent hardship, Marginal Relief applies under the new regime.
If your income exceeds ₹12 lakh by a small amount
- Your total tax payable is restricted to the excess income
- You will not lose the entire rebate benefit suddenly
- Income: ₹12,05,000
- Additional income over threshold: ₹5,000
- Tax payable is capped near ₹5,000, not slab-based tax
This prevents panic for taxpayers who marginally cross the rebate limit.
Capital Gains Reporting – High-Risk Area
ITR-2 requires transaction-wise disclosure, including
- Date of acquisition and sale
- Cost and sale consideration
- Asset classification
- Set-off and carry-forward of losses
Mismatch with broker data, registrar records, or AIS is a common trigger for notices.
.png){kind=icon}