ITR-2 with Capital Gains — Complete Filing Guide AY 2026-27

If you sold stocks, mutual funds, property, or gold in FY 2025-26, you need to file ITR-2. This guide covers the complete process — from understanding capital gains tax rates to filling Schedule CG correctly.

Who Must File ITR-2?

File ITR-2 if you have:

• Capital gains from any asset (stocks, MF, property, gold, bonds)
• Income above ₹50 lakh
• Two or more house properties
• Foreign assets or foreign income
• Directorship in a company
• Unlisted equity shares
• NRI or RNOR status

New for AY 2026-27: ITR-1 now allows LTCG up to ₹1.25L from listed equity/equity MFs. If your LTCG is within this limit and you have no other ITR-2 triggers, you can use ITR-1.

Capital Gains Tax Rates for FY 2025-26

Listed Equity Shares and Equity Mutual Funds

Section 87A rebate: LTCG from listed equity is NOT eligible for Section 87A rebate under the new regime. Even if your total income is below ₹12L, you must pay 12.5% on LTCG above ₹1.25L.

Debt Mutual Funds (purchased after April 1, 2023)

All gains are taxed at your income tax slab rate, regardless of holding period. No LTCG/STCG distinction.

Property (Land and Buildings)

Important change from FY 2024-25: Indexation benefit has been removed for property sold after July 23, 2024. LTCG on property is now taxed at 12.5% without indexation.

Exception: For property purchased before July 23, 2024, you can choose between:

• 12.5% without indexation
• 20% with indexation (if this results in lower tax)

Gold and Other Assets

How to Calculate Capital Gains

For Listed Equity Shares

STCG = Sale price - Purchase price (for shares held less than 12 months)

LTCG = Sale price - Cost of acquisition (for shares held 12+ months)

For shares purchased before January 31, 2018, the cost of acquisition is the higher of:

• Actual purchase price
• Fair Market Value (FMV) as on January 31, 2018

This is called the grandfathering provision.

For Mutual Funds

Use the capital gains statement from your AMC or broker. It shows:

• Units sold
• Purchase NAV and date
• Sale NAV and date
• STCG and LTCG amounts

Most brokers (Zerodha, Groww, Kuvera) provide a consolidated capital gains statement for all your MF investments.

For Property

STCG = Sale price - Purchase price - Improvement costs - Transfer costs

LTCG = Sale price - Purchase price - Improvement costs - Transfer costs (no indexation from FY 2024-25)

Transfer costs include brokerage, stamp duty, registration charges.

How to Fill Schedule CG in ITR-2

Schedule CG has multiple sub-sections:

A: Short-Term Capital Gains

A1: STCG on equity shares/equity MF (Section 111A) — taxed at 20% A2: STCG on other assets — taxed at slab rate

B: Long-Term Capital Gains

B1: LTCG on equity shares/equity MF (Section 112A) — taxed at 12.5% above ₹1.25L B2: LTCG on other assets (Section 112) — taxed at 12.5% (without indexation)

C: Deductions Under Section 54 Series

If you sold property and reinvested in another property or bonds, you may be eligible for exemption:

Step-by-Step: Filing ITR-2 with Capital Gains

Step 1: Gather Capital Gains Statements

• Stocks: Download from your broker (Zerodha, HDFC Securities, etc.)
• Mutual funds: Download from CAMS, KFintech, or your broker
• Property: Calculate from sale deed and purchase deed
• AIS: Download from IT portal to cross-check

Step 2: Segregate STCG and LTCG

For each asset class, separate:

• Short-term gains (taxed at 20% for equity, slab rate for others)
• Long-term gains (taxed at 12.5%)

Step 3: Apply Section 87A Rebate Correctly

Under the new regime:

• Section 87A rebate (up to ₹12L income = zero tax) does NOT apply to LTCG from listed equity
• It DOES apply to STCG from listed equity (Section 111A)
• It applies to all other income

This is a common mistake — many taxpayers incorrectly apply the 87A rebate to LTCG from equity.

Step 4: Fill Schedule CG

Enter each transaction or the summary from your capital gains statement. The portal allows you to import data from your broker's statement in some cases.

Step 5: Claim Section 54 Exemptions (if applicable)

If you sold property and reinvested, fill the relevant section and attach proof of reinvestment.

Common Mistakes in ITR-2 Capital Gains

1. Not reporting LTCG below ₹1.25L — Even if no tax is payable, LTCG must be reported in Schedule CG
2. Wrong holding period — Check the exact purchase and sale dates
3. Applying 87A rebate to LTCG from equity — Not allowed under new regime
4. Missing grandfathering for pre-2018 shares — Use FMV as on January 31, 2018 as cost
5. Not reconciling with AIS — AIS shows all capital gains; mismatches trigger notices

Deadline for ITR-2

July 31, 2026 for FY 2025-26 (AY 2026-27).

Frequently Asked Questions

Do I need to report LTCG if it is below ₹1.25L?

Yes. You must report all capital gains in Schedule CG, even if no tax is payable. The ₹1.25L exemption reduces your taxable LTCG, but the gross LTCG must still be disclosed.

Can I set off capital losses against capital gains?

Yes. STCL can be set off against STCG and LTCG. LTCL can only be set off against LTCG. Unabsorbed losses can be carried forward for 8 years.

What if I have both equity and property capital gains?

Report them in separate sub-sections of Schedule CG. Each asset class has different tax rates and exemptions.

Is there a surcharge on capital gains?

Yes. Surcharge applies on income above ₹50L. However, for LTCG under Section 112A (equity), the surcharge is capped at 15% regardless of income level.

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