ITR-2 updates: Who benefits and who needs to be careful

Experts unpack the new ITR-2 form for AY 2025-26, simpler for many, stricter for those with capital gains, foreign assets, or buybacks

The Income Tax Department announced the revised ITR 2 form for AY 2025 26 this week, reflecting a push for more detailed disclosures and tighter compliance. Here, through insights from tax experts, we explain what ordinary taxpayers need to know and how to navigate the changes.

 

Date based capital gains reporting

 

“The new form separates capital gains before and after July 23, 2024,” explains Dr. Simarjeet Singh, assistant professor of Finance at Great Lakes Institute of Management.She added "post date sales can opt for a flat 12.5 per cent tax rate without indexation, versus the earlier 20 per cent with indexation." 

• Two sets of calculations are now required. 

• Precise record keeping of sale dates is crucial to avoid filing errors.

 

Claiming share buyback losses

 

“Retail investors finally have clarity on buyback losses,” says Amit Bansal, partner at Singhania & Co. He added "from October 1, 2024, capital losses on share buybacks can be claimed only if corresponding dividend income is reported under Schedule OS." 

• Cross reference losses and dividends carefully. 

• Omission can lead to disallowed claims and notices.

 

Higher asset disclosure threshold

 

The reporting bar under Schedule AL has jumped from ~50 lakh to ~1 crore.

 

“This is a relief for upper middle income taxpayers,” notes Dr. Kirti Sharma, associate professor at Great Lakes. "Filers earning up to ~1 crore need not list every asset and liability in detail, freeing them from cumbersome schedules."

 

Detailed deductions and TDS codes

 

·  TDS section reporting: Taxpayers must now state the exact section code (e.g., 192 for salary, 194I for rent) rather than just the deductor name and amount.

 

·  Chapter VI 'A breakdown: Deductions under sections like 80C must specify sub categories (PF, LIC, tuition fees), while 80G donations require the ARN.

 

“These moves signal a shift to verification readiness,” warns SR Patnaik, head of taxation at Cyril Amarchand Mangaldas. “The department’s data 'matching will flag inconsistencies.”

 

Expanded foreign and digital asset reporting

 

·  Schedule FA/FSI: Overseas investments now need more granular details, including Legal Entity Identifiers for high value transactions.

 

·  Virtual digital assets: Trades remain taxed at 30 per cent under section 115BBH, with no set??'off for losses—making exact reporting non 'negotiable.

 

Tips for smooth self filing  Here are detailed, step-by-step tips by Dr. Kirti Sharma. 

 

1. Start Well Ahead: Spread the process over days to reduce fatigue??'induced mistakes. 

2. Gather your documents: Form 16/16A, AIS/Form 26AS, bank statements, capital gains statements and donation ARNs. 

3. Use pre??'fill utilities: The income??'tax portal’s JSON uploader now accommodates most new disclosures. 

4. Compare tax regimes: Run numbers under both old and new regimes before choosing to opt out of Section 115BAC.  SR Patnaik supported the broader idea of being well-prepared and vigilant during self-filing.

 

In sum, the revamped ITR '2 strikes a balance. It lightens the load for many salaried and retired taxpayers by raising thresholds, yet demands greater diligence from those with capital gains, foreign holdings or digital assets. “For straightforward incomes, it remains navigable,” Singh concludes, “but complexity now truly warrants professional advice for anyone with multiple income streams.”