ITR Filing can turn out to be cumbersome and complicated if you earn income from various sources like salary, house property, capital gains, etc. Individuals making short-term or long-term capital gains are often confused about which ITR form to fill for capital gains. Learn about which ITR filing for capital gains, the required documents, and the process for filing ITR for capital gains through this blog.
Overview
At present, almost seven (7) forms exist to file Income Tax Returns. Choosing the most relevant ITR Form is necessary. Selection of one of these ITR Forms varies from one taxpayer to another depending on the nature and/or source of income earned in the previous financial year. In general, any resident individual, HUF, or any partnership firm having a total income of Rs. 50 Lakhs from salary, rent, home loan interest, interest from banks, dividend or agricultural income, etc., and also have chosen the presumptive taxation scheme under Section 44AD, are eligible to file a return using Form ITR-1 and ITR-4. There is another form of income which is Capital gain. Now, you would be wondering which ITR form to fill for capital gains? If so, let’s clear your confusion in a detailed manner through this blog!
In the case where a resident individual earns capital gains or losses during a financial year, it can only be reported in Form ITR-2 and ITR-3.
In simple words, we say, any salaried person who falls within the taxable salary range is eligible to file returns in ITR-1 and such taxpayers will also have to choose ITR-2 to report the capital gains.
A taxpayer will be needed to file Form ITR 3 if he makes income from business or any profession. However, the ITR-2 Form will be filed by a taxpayer (Individual and Hindu Undivided Families) if he makes income from sources other than profession or business.
Resident individuals generating income from the assets, capital gains, jobs, or any other sources, and also making profit or loss from purchasing and sales of goods, can file Form ITR 2. So, you can now understand that the income tax form for capital gains can be filed through Form ITR 2.
After knowing about the required income tax form for capital gains filing, let’s understand what is capital gain and the key aspects of filing a capital gain income tax return form.
What actually is Capital gain?
Capital gain refers to the difference in the value of a capital asset’s purchase and its sale. In other words, a capital gain occurs when you sell an asset for more than the price that you originally paid for it. Before selling, the asset was held for some time which may be either short-term or long-term.
In general, almost every type of asset you own is a capital asset. They also include some financial activities such as investment in the stock market, bonds, or real estate, or also anything purchased for personal use (like furniture or a boat). The most common capital gains are obtained from the sale of stocks, bonds, precious metals, property, and/or real estate.
Capital gains are often associated with investments mainly stocks, and funds due to their inherent price volatility.
Types of Capital Gains
Capital gains can be further categorized into two types as per their nature. The two forms of Capital gains are:
- Short-term Capital gains: The gains obtained on the sale of assets after holding them for less than or up to a year are short-term capital gains.
- Long-term capital gains: Gains obtained on the sale of assets after holding them for more than one year.
Both types of the aforementioned gains should be reported annually by filling out & submitting Form ITR 2.
What documents are required to file Capital Gain ITR Form?
Several documents are required to file a capital gain ITR Form depending upon the type of capital gains. In short, document requirements for filing capital gains vary as per the type of properties sold which are described below:
- For Filing Capital Gains Tax on Sale of Immovable Property
In case of the sale of immovable property, one needs to have or arrange the following documents before filing ITR for the capital gains realized:
- Sale and Purchase deeds, Improvement Cost details, Transfer expenses with sale value mentioned,
- Full Address of the Property sold
- Buyer’s details including PAN and Aadhaar
- Any supportive documents (if claiming for tax exemption u/s 54 or 54EC)
- For filing Capital Gains Tax on Sale of Mutual or Equity Shares
The documents required for filing ITR form for capital gain on the sale of Mutual or Equity Shares, one should arrange the documents listed below:
Consolidated Capital gain statements or Tax P&L that you can obtain from your broker or can download from the investment app you are using.
- For any other form of Capital gains, you must have a document containing the sale transaction details and also the purchase cost details as required.
Steps to file Income Tax Returns for Capital Gains on the E-Filing Portal
Filing ITR for Capital Gains online requires you to follow certain steps to get it done online. The steps that you need to follow to file capital gains are mentioned below:
- Visit the official portal of the Income Tax department and select Income Tax Returns in the ‘e-File’ section then click on ‘File Income Tax Returns’.
- Select the Assessment Year like 2024-2025, then select ‘Online’ as filing mode.
- Choose Status and then select the Form Type; ITR-2 in this case. Also, select the reason for ITR filing and then click on ‘Continue’.
- Further, you can see 5 types of schedules. Tap on ‘General’ and select ‘Income Schedule’.
- Then, click on ‘Schedule Capital Gains’ and choose the appropriate capital asset type from the list.
- For Short-term Capital gains, click on ‘Add Details’ and enter the consolidated amount you have obtained by selling short-term assets and also the Cost of Acquisition (CoA) in the respective financial year. While in the case of long-term capital gains, enter necessary details like purchase price, transaction dates, ISIN, selling price, etc. in Schedule 112A and then click on ‘Add’.
- After confirming the required schedules as per LTCG & STCG, review Part B TTI.
- After reviewing Part B TTI, you will see the ‘Pay Now’ option in case you have any additional tax liability.
- Afterward, click on ‘Preview Return’.
- Upon reviewing, proceed with the validation.
- On validating and filing, verify the file ITR within 30 days. It can be verified online using Aadhaar OTP, via net banking or mail a printout of the signed ITR-V to the Bangalore branch of the Income Tax Department.
If your source of income also includes capital gains, using Form ITR-2 can help you report this income to the Income Tax Department. Get the required documents prepared and file your capital gain income tax return before the deadline of the respective financial year.
Filing income tax returns can turn out to be challenging if you are not aware of the form that you need to file! If you also earn capital gains from the sale of assets or equity and are confused about which ITR form to fill for capital gains, no worries!
The above blog helps you determine the required income tax form for capital gains filing, the necessary documents, and also step-by-step process to file ITR for capital gains. Go through the complete blog and learn how to file ITR for Capital Gains from shares and other assets easily.
FAQs
Q1: In which form, I can report income from capital gains in ITR?
If you have accrued capital gains or losses throughout a financial year, they can be reported using Form ITR-2 & ITR-3.
Q2: How to fill earnings from house property in ITR-2?
Under the Schedule House Property, the taxpayer can assess, input, or modify information related to the house property (in case of self-occupied, rented out, or deemed rented out). Moreover, providing co-owners information, tenant information, interest, rental figures, and so on.
Q3: Which ITR form should be filed for salary, capital gain, and house property?
Individuals and Non-Resident Indians (NRIs) who earn income from salary, property ownership, capital gains or a few other avenues are needed to submit Form ITR-2. Salaried persons who have made profits/losses from stock transactions may also bring Form ITR-2 into use to file their returns.
Individuals or HUFs with capital gains from assets are needed to file capital gains tax ITR form through Form ITR-2.
Individuals or HUFs with capital gains from assets are needed to file capital gains tax ITR form through Form ITR-2.
Q4: I have made a profit from intraday trading. Do I need to pay tax on it?
The activity of intra-day trading is taken as a speculative business, and therefore, the gain or loss made from it would also be considered speculative gain/loss. The normal tax rates are levied on speculative gain and speculative losses can only be set off against speculative profit.
Q5: How does Form ITR-2 differ from ITR-3?
Individuals and HUFs with income exceeding 50 lakh except business/profession are eligible to file Form ITR 2. On the other hand, individuals & HUFs earning income from business/profession or individuals holding partnerships in firms, are needed to file ITR-3.