New ITR-2 form notified: The Central Board of Direct Taxes (CBDT) has notified the ITR-2 Form for AY 2025-26, which includes key changes such as separate reporting of capital gains, allowance of capital loss on share buybacks from October 1, 2024, and a raised threshold for reporting assets and liabilities to Rs 1 crore.
The form also mandates reporting of TDS section codes and enhanced disclosures for deductions like 80C and 10(13A).
ITR-2 Form FY 2024-25: Top points
- Capital gains must now be reported separately for transactions before and after July 23, 2024, following changes in the Finance Act, 2024.
- Capital loss on share buybacks will be allowed if corresponding dividend income is disclosed as “Income from Other Sources,” effective from October 1, 2024.
- The threshold for reporting assets and liabilities has been raised from Rs 50 lakh to Rs 1 crore of total income.
- Reporting requirements for deductions under sections like 80C and 10(13A) have been expanded.
- A new column has been introduced under Schedule-TDS to specify the section under which TDS was deducted (e.g., 194I, 194J).
What does the new ITR-2 mean for taxpayers?
Tax experts have expressed mixed opinions on the new ITR-2 form, noting both the simplifications and the added complexity.
CA Ashish Niraj, Partner at A S N & Company Chartered Accountants, welcomed the relief for non-business taxpayers from burdensome disclosure requirements:
“If we see till last year, Schedule AL, which was for assets and liabilities, was applicable if total income exceeded Rs 50 lakhs. But now, it’s applicable if total income exceeds Rs 1 crore. Preparing details of assets and liabilities as of March 31st every year is a tedious task for non-business entities for which ITR 2 is applicable. By increasing the limit to Rs 1 crore, taxpayers in the bracket of Rs 50 lakh to Rs 1 crore will get relief from preparing the details,” he told TOI.
Niraj added that the new TDS reportingrequirement aims to resolve some of the earlier inefficiencies: “Earlier, while entering TDS details in ITR 2, it was not required to mention the section under which TDS was deducted, such as Section 194I, 194J, etc. Now, a separate column is provided for the section. Sometimes, when TDS returns were not filed in time by the deductor or were filed with incorrect particulars, taxpayers used to enter TDS details such as TAN, Name, and amount manually.As there was no ‘section’ column, the tax department faced issues in processing and cross-verifying. Now, this new column will bring clarity in reporting.”
The changes to capital gains reporting also reflect recent shifts in tax policy: “Before July 23, 2024, the Long-Term Capital Gain rate was 20% with indexation. After July 23, 2024, a new rate of 12.5% without indexation was introduced. In the newly notified ITR 2, separate columns are added to report transactions before and after July 23, 2024, separately.”
Niraj also pointed out the government’s tightening of compliance around disability-related deductions:
“In recent years, the department has caught many fake claims for claiming refund or reducing tax liability under Section 80U, 80DD etc for disability. Now, disability certificate details etc. are required.”
CA Gopal Bohra, Partner – Direct Tax at N. A. Shah Associates LLP, explained the updates regarding capital gains taxation: “Considering the two tax rates applicable on capital gains for the FY 2024-25 (i.e. gains accrued up to July 22, 2024, and gains accrued on or after July 23, 2024), CBDT has introduced a split in Schedule Capital Gains to report separately the capital gains where transfer was before July 23, 2024, and where transfer was on or after July 23, 2024.Similarly, separate computation mechanisms are provided in ITR in relation to capital gains from transfer of land or building by resident individuals where such land or building was acquired prior to July 23, 2024. These changes in ITR will help the individual taxpayer to compute the correct tax liability on capital gains while filing the ITR.”
Bohra also explained the impact of the Finance Act (No. 2) of 2024, which will affect share buybacks: “As amended by Finance Act (No. 2) 2024 with effect from October 1, 2024, the buyback receipt will be taxed in the hands of the recipient as dividend under the head ‘Income from Other Sources,’ and the cost of such shares will be allowed as capital loss under the head ‘Capital Gains.’ Accordingly, in ITR-2, separate line items are added under Schedule ‘Capital Gains’ and Schedule ‘OS’ to disclose capital loss on buyback of shares on or after October 1, 2024, and receipt from such buyback taxable as dividend under section 2(22)(f) of the Act,” he told TOI.
Sonam Chandwani, Managing Partner at S Legal & Associates, termed the new form a mixed experience for taxpayers.
“The ITR-2 form for AY 2025-26, feels like a mixed bag compared to last year’s version. The new split in Schedule Capital Gains for pre- and post-July 23, 2024, gains is a smart move to align with the Finance Act’s tax tweaks, but it’s a headache for taxpayers juggling multiple transactions. Allowing capital losses from share buybacks after October 1, 2024, is a win for investors, though tying it to dividend income reporting feels like a bureaucratic trap waiting to trip people up.Bumping the asset and liability reporting threshold to Rs 1 crore is a relief for middle-income filers, sparing them tedious paperwork, but the beefed-up deduction reporting for 80C and 10(13A), plus mandatory TDS section codes, screams overreach. Honestly, while the form tries to balance clarity and compliance, it’s tilting toward complexity, likely forcing salaried folks and HNIs to lean harder on CAs to avoid errors.”
