Budget 2024 Updates
Earlier, the government removed the indexation benefit on the sale of immovable property. However, the amendment of Finance Bill 2024 introduced a rollback of this rule.
As per the latest amendment, for any immovable property acquired before 23rd July 2024, the taxpayers will have the option to choose between two LTCG computation methods -
- 12.5% tax rate, without indexation
- 20% tax rate with indexation benefit.
The taxpayers can compute their tax based on both these methods and select the one that reduces their tax burden.
In other words, now taxpayers will be able to claim the benefit of indexation if they choose to pay tax at 20%. They will also get the opportunity to save tax by choosing the method of computing taxes.
However, there are certain exceptions to this amendment -
- Indexation benefit is only available on immovable property like land and buildings.
- It is available only to individuals and HUFs and not to firms or companies.
- It can be considered only for tax calculation and not for determining amount of investment or loss to claim exemption or carry forward.
Long-term capital gains
- Exemption on LTCG has been increased from Rs.1 lakh to Rs.1.25 lakhs per annum.
- LTCG rate on all financial as well as non-financial assets has been increased to 12.5%.
Short-term capital gains
- STCG on specified financial assets will be charged at 20%.
- STCG on other non-financial assets will be taxed at applicable slab rates.
- Unlisted bonds and debentures, debt mutual funds, and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates.
- To know more about it, contact our tax experts
ITR Form 2, also known as ITR-2, is an income tax return form used by HUF (Hindu Undivided Families) and individuals in India to file their taxes with the Income Tax Department. It is for those who have income from various sources but not from business or profession.
Here's a list of income of those who are eligible to file ITR-2:
- Salaried or Pensioned Individuals: If your income exceeds ₹50 lakhs.
- Capital Gains: If you earn capital gains from the sale of shares, mutual funds, immovable property, or virtual digital assets.
- Rental Income: If you receive rental income from multiple house properties.
- Agricultural Income: If your agricultural income exceeds ₹5,000.
- Foreign Assets or Income: If you have foreign assets or earn foreign income.
- Directors: If you are a director in any company, whether foreign or domestic.
- Unlisted Equity Shares: If you hold unlisted equity shares in any company, foreign or domestic.
- Brought Forward Losses: If you have any brought forward losses or losses to carry forward under any head of income.
- Other Sources: If you earn income from other sources like horse racing, lottery winnings, etc.
Important Note: If you are earning from a business, profession, or partnership firm, you are not eligible to file the ITR-2 form. File your ITR
- Inclusion of Long-Term Capital Gains (LTCG) in ITR-1 and ITR-4
Previously, taxpayers with any LTCG were required to file more complex forms like ITR-2 or ITR-3. Now, individuals with LTCG up to ₹1.25 lakh from listed equity shares or equity mutual funds under Section 112A can file using the simpler ITR-1 (Sahaj) or ITR-4 (Sugam) forms, provided there are no carried forward losses.
- Segregation of Capital Gains Based on Transaction Date
The updated ITR forms now require taxpayers to report capital gains separately for transactions executed before and after July 23, 2024. This change aligns with the revised capital gains tax rules introduced in the Union Budget 2024, which, among other things, reduced the LTCG tax on real estate to 12.5% without indexation from the previous 20% with indexation.
- Reporting of Buyback Proceeds as Deemed Dividends
From October 1, 2024, proceeds received from the buyback of shares by domestic listed companies are to be treated as deemed dividends. The updated ITR forms require these proceeds to be reported under 'Income from Other Sources.' Additionally, the capital gains schedule should reflect zero sale proceeds, allowing the cost of acquisition to be claimed as a capital loss, which can be carried forward for up to eight assessment years.
- Enhanced Capital Gains Reporting in ITR-7
For trusts, NGOs, and other institutions filing ITR-7, there is now a requirement to disclose capital gains separately for transactions before and after July 23, 2024. This change ensures accurate tax calculations in light of the revised capital gains tax rules.
- Increased Threshold for Asset and Liability Reporting
In the ITR-2 form, the threshold for mandatory reporting of assets and liabilities has been raised to ₹1 crore. This adjustment aims to reduce the compliance burden for taxpayers with assets below this threshold.
A Brief Overview of Capital Gains
Capital gains refer to the profit earned from the sale of capital assets like stocks, real estate, mutual funds, or bonds. These gains are taxable under the Income Tax Act and are classified into:
- Short-Term Capital Gains (STCG): When assets are sold within a short holding period (varies by asset type).
- Long-Term Capital Gains (LTCG): When assets are held for a longer duration before selling, often taxed at concessional rates.
Taxation on capital gains depends on factors like holding period, asset type, and applicable exemptions under sections like 54, 54F, and 54EC.
Want to optimize your capital gains tax? Tax2win experts can help
If you earn income through the sale of equity (Stocks), you must file an income tax return every year. Here's how to do it online through the Income Tax department portal:
Step-by-Step Guide:
- Step 1: Visit the official ITD (Income Tax Department) website and log in with your credentials.
- Step 2: Go to "e-File" > "Income Tax Returns" > "File Income Tax Returns."
- Step 3: Choose the assessment year, your filing status, and the appropriate ITR form. Select "Taxable income is more than basic exemption limit" as the reason for filing.
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Step 4: Under "Income Schedule," select "Schedule Capital Gains" and choose the type of equity asset you sold.
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Capital Gains Types:
- Short-Term Capital Gains (STCG): Taxed at 15% under Section 111A. Click "Add Details" and enter the total sale amount and cost of acquisition for short-term assets in the financial year.
- Long-Term Capital Gains (LTCG): Taxed at 10% under Section 112A, but exempt up to Rs. 1 lakh. Provide details for each stock sold, including ISIN number, selling price, purchase price, and transaction dates. Click "Add" for each scrip (stock).
- Review and Download: Once you've filled in all the necessary schedules, confirm them, review Part B TT1, and preview your return. Download the ITR for further processing.
- Verification: On the declaration tab, provide the required details and proceed to validation. Finally, verify your ITR filing electronically or by sending a signed ITR-V hard copy to the Income Tax Department within 120 days.
Tired of complex tax filing on the Income Tax official Portal? File your ITR 2 with Tax2win's AI-powered portal for a hassle-free experience. Need help? Choose our expert tax assistance.
What are the Documents Required to File ITR 2 with Capital Gain?
When you file ITR 2 with capital gains, you need sets of general documents with additional documents for your capital gain. Here’s the list of documents you will need:
- Stamp Duty Documents: Sales and purchase deeds, improvement cost details, etc., if the capital gain is from land or buildings.
- Securities Transaction Documents: P&L statement from a broker, stock ledgers, contract notes, trading statements, etc., if the capital gain is from securities.
- Other Capital Assets Documents: Improvement cost, details of expenses incurred while transferring capital assets, cost of purchase, etc., if the capital gain is from other capital assets.
Also, you should have:
- Aadhaar Card
- PAN Card (Permanent Account Number)
- TDS Certificates
- Challan of Paid Taxes
- Bank Account Details
- Original Return Details (if filing a revised return)
- Notice-Related Details (if filing in response to any notice)
Make sure you have all the relevant documents ready before filing your ITR-2 Form to report capital gains.
The due date for filing ITR is 31st July and it is fast approaching. File your ITR before it's too late to avoid penalties. If you need assistance with e-filing, our Online CAs are experts in accurately filing ITRs to maximize your refund. Book an eCA now!
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