ITR Form 2 for AY 2025–26: Changes Every Taxpayer Should Know

On May 3, 2025, the Central Board of Direct Taxes (CBDT) issued Notification No. 43/2025, introducing the updated Income Tax Return (ITR) Form 2 for the Assessment Year (AY) 2025–26. This form caters to individuals and Hindu Undivided Families (HUFs) not having income from profits and gains of business or profession. The revised form encompasses several pivotal changes aimed at enhancing transparency, ensuring accurate reporting, and aligning with recent legislative amendments.

1. Capital Gains Bifurcation in Schedule CG

A notable modification in the new ITR Form 2 is the bifurcation of capital gains in Schedule CG. Taxpayers are now required to report capital gains separately for transactions:

  • Before July 23, 2024: Pertaining to gains realized prior to the enactment of the Finance Act, 2024.

  • On or After July 23, 2024: Pertaining to gains realized following the legislative changes.

This segregation facilitates the application of appropriate tax treatments based on the transaction date, ensuring compliance with the updated tax provisions.

2. Conditional Reporting of Share Buyback Losses

The updated form permits the reporting of capital losses arising from share buybacks, subject to specific conditions:

  • Applicability: For transactions executed on or after October 1, 2024.

  • Condition: The corresponding dividend income from the buyback must be declared under the head “Income from Other Sources.”

This measure ensures consistency in reporting and prevents the misuse of loss claims without corresponding income declarations.

3. Enhanced Asset and Liability Reporting Threshold

Previously, individuals and HUFs with total income exceeding ₹50 lakh were mandated to disclose details of assets and liabilities. The revised ITR Form 2 elevates this threshold to ₹1 crore, thereby reducing compliance burdens for taxpayers with income between ₹50 lakh and ₹1 crore.

4. Detailed Disclosure of Deductions

The updated form necessitates comprehensive disclosure of deductions claimed under various sections, including:

  • Section 80C: Investments in instruments like PPF, NSC, and life insurance premiums.

  • Section 10(13A): House Rent Allowance (HRA) exemptions

This granular reporting ensures transparency and facilitates accurate assessment of deductions claimed.

5. Mandatory Disclosure of TDS Section Codes

To enhance transparency and facilitate accurate cross-verification, the revised Schedule TDS mandates the disclosure of specific Tax Deducted at Source (TDS) section codes. Taxpayers must specify the exact section under which TDS has been deducted, such as:

  • Section 194A: Interest other than securities.

  • Section 194C: Payments to contractors.

This requirement aids in reducing mismatches and streamlines the reconciliation process with Form 26AS and the Annual Information Statement (AIS).

6. Additional Noteworthy Changes

  • Legal Entity Identifier (LEI) Details: For transactions exceeding ₹50 crore, the form now requires disclosure of the LEI, aligning with RBI regulations for high-value transactions.

  • Verification via Electronic Verification Code (EVC): Individuals and HUFs liable for audit under Section 44AB can now verify their ITR using an EVC, providing an alternative to digital signature verification.

  • Option to Choose Tax Regime: With amendments in Section 115BAC, the new tax regime is now the default. Taxpayers wishing to opt for the old regime must explicitly choose to do so.

Conclusion

The revisions in ITR Form 2 for AY 2025–26 reflect the CBDT’s commitment to enhancing transparency, ensuring accurate reporting, and aligning tax compliance with recent legislative changes. Taxpayers, especially individuals and HUFs, should familiarize themselves with these updates to ensure timely and accurate filing. For detailed information and to access the official notification, visit the e-Gazette portal.

FAQs

Q1: Who is required to file ITR Form 2?
ITR Form 2 is applicable to individuals and HUFs not having income from profits and gains of business or profession.

Q2: What is the significance of the capital gains bifurcation in Schedule CG?
The bifurcation allows for separate reporting of capital gains before and after July 23, 2024, aligning with changes introduced in the Finance Act, 2024, and ensuring appropriate tax treatment.

Q3: Under what condition can a capital loss on share buyback be claimed?
A capital loss on share buyback can be claimed if the corresponding dividend income from the buyback is reported under “Income from Other Sources,” applicable for transactions on or after October 1, 2024.

Q4: What is the new threshold for mandatory asset and liability reporting?
The threshold has been increased from ₹50 lakh to ₹1 crore of total income, reducing compliance requirements for taxpayers with income between these amounts.

Q5: Why is specifying the TDS section code in Schedule TDS important?
Specifying the exact TDS section code enhances transparency, facilitates accurate cross-verification with Form 26AS and AIS, and reduces mismatches in TDS claims.