The Income Tax Department has made significant changes in the ITR-2 form for the financial year 2024-25 (assessment year 2025-26). This form is for people who do not earn from business or profession but have income from salary, property, capital gains, or other sources. Many middle-class and upper-middle-class taxpayers use this form every year.
This time, the rules and format of ITR-2 have changed in many ways. These changes are essential if you earn income from house rent, mutual funds, shares, or are an NRI or director in a company.
Let us understand in simple words what’s different this time, who needs to file ITR-2, and how these changes will affect ordinary taxpayers.
Who Should File ITR-2 Form This Year?
Not every taxpayer needs to file an ITR-2. It is for those who earn from special sources other than business or profession. These include:
- Salary or pension income
- Income from one or more house properties (like rent)
- Capital gains (from sale of shares, mutual funds, property, etc.)
- Income from other sources like lottery, horse racing, legal betting
- Agricultural income of more than Rs. 5,000
- If you are an NRI or RNOR (Resident but Not Ordinarily Resident)
- If your total income is more than Rs. 50 lakh
- If you are a director in a company
- If you hold shares in unlisted companies
Also, if you earn long-term capital gains above Rs. 1.25 lakh from listed shares or mutual funds, then ITR-2 is required.
Even if you are eligible for ITR-1, you can still file ITR-2. But remember, ITR-1 is easier. So, only use ITR-2 if your income type demands it.
What Are the New Changes in ITR-2 for FY 2024-25?
The new form brings several changes. These will affect how you report capital gains, deductions, and total assets. Let us explain the 5 significant changes straightforwardly.
1. Capital Gains Must Be Shown Based on New Timeline
From 23 July 2024, the tax rate on capital gains has changed under the new rules of the Finance Act 2024. So now, while filing ITR-2, you must mention if your capital asset was sold before or after this date.
This will help the department know under which rule the gain must be taxed. For example, if you sold mutual fund units after this date, a different tax rate may apply than before.
2. Share Buyback Loss Can Now Be Adjusted
Earlier, if you had any loss from share buyback, you could not claim it against capital gains. But now, if the buyback date is on or after 1 October 2024, and you have already shown the dividend received from it as income, then the capital loss can be adjusted.
This is helpful for stock market investors who lost money in buybacks. You can now reduce your total tax burden by setting off this loss.
3. Change in Asset Reporting Limit (Schedule AL)
In earlier years, if your income was more than Rs. 50 lakh, then you had to fill Schedule AL, which asks for details of your assets and liabilities like house, car, jewelry, etc.
Now, this limit has been increased to Rs. 1 crore. So, if your total income is between Rs. 50 lakh and Rs. 1 crore, you no longer need to report your assets in the form.
This is a significant relief for high-income individuals who are not yet in the ultra-rich category.
4. More Detailed Disclosure for Section 80 Deductions
Earlier, deductions like 80C, 80D, 80CCD, and HRA (Section 10(13A)) were mentioned in short form. In the ITR-2 form, you must give clear and full details of your investments and expenses made under these sections.
This includes things like:
- How much you invested in LIC, PPF, ELSS
- Medical insurance premium paid under 80D
- Employer and employee contribution to NPS under 80CCD
- Rent paid, and an exemption claimed under HRA
The reason for this change is to bring more transparency. The tax department wants to check whether your claimed deductions match your proofs.
5. Must Mention TDS Section Code
Till now, you only needed to mention who deducted TDS (Tax Deducted at Source) and how much was deducted. But from this year, it is also mandatory to mention the TDS section code under which the deduction was made.
For example:
- Section 192 for salary
- Section 194A for bank interest
- Section 194J for professional fee
This will help the tax department to track your income better and match it with Form 26AS and AIS (Annual Information Statement).
New Relief in ITR-1: You Can Show Small Capital Gains
A positive update is that the ITR-1 form can now show long-term capital gains up to Rs. 1.25 lakh from listed equity shares or mutual funds.
So, if you only earned small profits from mutual fund sales or the share market, and everything else matches the ITR-1 conditions, you don’t need to switch to ITR-2.
Earlier, even Rs. One of the capital gains used to shift you to ITR-2, but now, small investors can stay with the easier ITR-1 form.
Why These Changes Matter to You
These changes directly affect your tax filing if you invest in stock markets, mutual funds, or own a second house. Also, many salaried people earning over Rs. 50 lakh now get a break from asset reporting. Investors in buyback shares now have a way to reduce their taxes. And those claiming deductions must now be more accurate.
The government is moving towards a system where income and investments are cross-verified digitally. That is why more detailed reporting is being introduced.
Filing ITR on time with correct details is now not just a tax rule; avoiding future notices and saving money is smart.
Source: Income Tax Department, Finance Act 2024
