The Central Board of Direct Taxes (CBDT) has officially notified Income Tax Return (ITR) Form ITR‑2 for AY26, under Section 295 of the Income-Tax (I-T) Act, 1961. This amendment to the Income-tax Rules, 1962, makes the revised ITR-2 form applicable from April 1, 2025.

However, to further ease the process, the Income Tax Department has now enabled online filing of ITR‑2 with pre-filled data on the e-filing portal. Additionally, the Excel Utility for ITR‑2 was released on July 11, allowing assessees to prepare and file returns seamlessly in the updated format. These changes ensure greater alignment with the provisions of the I-T Act while making tax compliance simpler and more efficient for taxpayers using ITR‑2.

CA Suresh Surana explains the key changes in ITR-2:

• Reporting of capital loss on share buyback: A new row has been added to Schedule CG to enable the reporting of capital losses arising from payments made by a company to its shareholders for the buyback of its shares, under Section 68 of the Companies Act, 2013. Consequently, such capital losses are now permitted, provided the corresponding dividend income is disclosed under ‘Income from Other Sources’.

• Disclosure of dividend income under section 2(22)(f): A new row has been introduced in Form ITR-2 to specifically capture dividend income arising under Section 2(22)(f), i.e., proceeds received by shareholders from the buyback of shares.

• Bifurcation of acquisition and improvement costs for real estate transfers: In Form ITR-2, resident individuals are now required to provide separate details for the cost of acquisition and cost of improvement in respect of transfers of land and buildings executed either before or on/after July 23, 2024. This change facilitates the application of indexation benefits for such transactions.

• Enhanced asset and liability reporting threshold: Taxpayers whose total income exceeds ₹1 crore are now required to report all assets and liabilities as on the last day of the financial year. Previously, this requirement was applicable to individuals with income exceeding ₹50 lakh.

• Introduction of separate columns for capital gains reporting based on date of realisation: In light of recent amendments made vide Finance Act 2024, effective from July 23, 2024, changes have been introduced to the capital gains tax rates. To ensure accurate reporting and compliance, separate columns have now been added to distinguish between capital gains realised before or on/after July 23, 2024. This differentiation is necessary, as gains from transactions executed before this date will continue to be taxed at the pre-existing rates, whereas gains realised on or after this date will be subject to the revised tax rates.

• TDS schedule update: A new column has been added to Schedule TDS in Form ITR-2 for specifying the relevant section code under which tax has been deducted at source for the assessee.

ITR-3 

ITR-3 form applies to individuals and Hindu Undivided Families (HUFs) with income from profits and gains of business or profession. For AY26, several important disclosure requirements, such as capital gain segregation, deductions, and new threshold reporting limits for assets and liabilities, have been incorporated. 

Rahul Gupta, partner, direct tax, SN Dhawan & CO LLP, breaks down the key changes in ITR-3:

• Higher threshold for assets and liabilities disclosure: The reporting threshold for assets/liabilities has increased from ₹50 lakh to ₹1 crore of total income, reducing the compliance burden for smaller taxpayers.

• Segregated capital gains reporting: The Finance Act, 2024, changed the tax rate and the indexation rule, and therefore, the taxpayer has to report capital gains separately for transactions before and after July 23, 2024.

• Section-wise TDS reporting: For enhancing clarity in credits, taxpayers are now required to report TDS with the specific tax section in which it was deducted.

• Extended deduction disclosures: For AY26, taxpayers are mandatorily required to provide detailed information for claiming deductions such as lender name, sanction date, account number, sanction amount, etc., to claim deduction u/s 24(b) for home loan interest. Similarly, additional disclosure requirements have been introduced for claiming deductions under Section 80C, 80E, and 10(13A)–HRA, which include the employer PAN, landlord details, and policy numbers.

• Extended Virtual Digital Assets (VDA) reporting: Changes have been made in Schedule VDA to include expanded disclosure requirements for incomes from cryptocurrencies and other digital assets.