The ITR-2 AY 2026-27 is the main workhorse form for anyone whose income profile is just a bit too complex for the standard ITR-1 Sahaj, but who does not run a business or profession. If you trade stocks beyond the small ₹1.25 lakh LTCG threshold, hold even a single foreign asset, act as a company director, or have rental income from three or more properties, then this form is exactly for you. If a foreign asset was left out of an earlier return, our FAST-DS 2026 guide explains the one-time disclosure route.
ITR-2 has no income ceiling. It accepts capital gains across every asset class, foreign income with DTAA relief, agricultural income above ₹5,000, and complex ESOP and RSU events. Here is exactly when you need it and how to file it correctly.
Who Must File ITR-2 for AY 2026-27
You must file ITR-2 if you are an individual or HUF and any one of these applies:
- You have capital gains beyond the ITR-1 limits (any STCG, or LTCG exceeding ₹1.25 lakh under Section 112A, or any LTCG from non-equity assets).
- You have foreign income or foreign assets, including a single foreign bank account, foreign equity, vested RSUs, or rental property abroad.
- You are an NRI or RNOR during FY 2025-26.
- You own more than two house properties.
- You are a director in any company.
- You hold unlisted equity shares at any point during the year.
- You have deferred tax on ESOPs from an eligible startup under Section 17(2)(vi).
- Your agricultural income exceeds ₹5,000.
- You are claiming DTAA relief under Sections 90, 90A, or 91.
- You are a legal heir filing for a deceased assessee with complex income.
You cannot use ITR-2 if you have any income from business or profession. That pushes you to ITR-3 (regular books) or ITR-4 (presumptive scheme).
ITR-2 Capital Gains Schedule: The Heaviest Section
The Capital Gains schedule is where most ITR-2 filers spend the bulk of their time. AY 2026-27 retains the post-Budget 2025 framework:
Equity-Oriented Investments (Section 111A / 112A)
| Asset | Holding period | Tax rate (AY 2026-27) |
|---|---|---|
| Listed equity shares (STT-paid) | ≤ 12 months | 20% (STCG, Section 111A) |
| Equity-oriented mutual funds | ≤ 12 months | 20% (STCG, Section 111A) |
| Listed equity shares (STT-paid) | > 12 months | 12.5% on gains above ₹1.25L |
| Equity-oriented mutual funds | > 12 months | 12.5% on gains above ₹1.25L |
The Budget 2024 changes (where STCG was hiked from 15% to 20% and LTCG from 10% to 12.5%) apply from July 23, 2024 onwards. For shares sold between April 1, 2024 and July 22, 2024 (which would have been part of last year’s AY 2025-26), the older rates apply. For FY 2025-26 (the year for which you are filing AY 2026-27), the new rates apply throughout.
Other Assets
| Asset | Holding period | Tax treatment |
|---|---|---|
| Listed bonds, debentures (non-equity) | > 12 months | 12.5% LTCG (no indexation) |
| Unlisted shares | > 24 months | 12.5% LTCG |
| Immovable property | > 24 months | 12.5% (no indexation) or 20% (with indexation, pre-July 2024 acquisitions) |
| Debt mutual funds (acquired after April 2023) | Always | Slab rate, no LTCG benefit |
| Gold, jewellery, art | > 24 months | 12.5% LTCG |
| Cryptocurrency / VDA | Any | Flat 30% (Section 115BBH) |
Tax protection for eligible older property
For a resident individual or resident HUF selling long-term land or a building acquired before 23 July 2024, section 112 limits the tax where the new 12.5% computation exceeds the earlier indexed computation. This protection does not apply to every seller. Retain both workings and use the notified schedule; do not assume an unrestricted indexation election or create an indexed loss for carry-forward.
Schedule FA: The Foreign Assets Trap
Schedule FA applies to residents other than RNORs; it is not required for NRIs or RNORs. For AY 2026-27, the foreign-asset reporting window is the calendar year ending 31 December 2025, not FY 2025-26. Report the fields required for each asset class. Foreign income in the return still follows the applicable FY 2025-26 income and residence rules.
Omitted foreign-asset or foreign-income disclosures can have serious consequences under the Black Money Act. The applicable penalty, statutory exceptions and prosecution provisions depend on the facts; Rs 10 lakh is not a universal per-asset charge.
- Foreign depository accounts (bank accounts).
- Foreign custodial accounts (brokerage accounts).
- Foreign equity and debt holdings.
- Foreign cash value insurance or annuity contracts.
- Financial interest in foreign entities (partnerships, trusts, foundations).
- Immovable property abroad.
- Other capital assets held abroad.
The peak balance during the year, closing balance, gross interest or dividend earned, gross proceeds from sale, and the relevant tax identification number of the foreign jurisdiction must all be reported.
RSUs and ESOPs From Foreign Parents
For foreign-parent RSUs, keep the grant, vesting/allotment, payroll and sale records. Determine salary taxation from the actual taxable event and reconcile the employer’s perquisite computation. For a resident ordinarily resident filer, report foreign holdings for the relevant Schedule FA calendar year; report FY 2025-26 salary and sale gains in their respective income schedules.
ITR-2 Schedules That Trip Up First-Time Filers
| Schedule | What it captures | Common error |
|---|---|---|
| Schedule S | Salary income (multiple employers) | Missing previous employer details on job switch |
| Schedule HP | House property income (each property separate row) | Wrong self-occupied vs let-out classification |
| Schedule CG | Capital gains across all asset classes | Mixing equity STCG into LTCG section |
| Schedule OS | Other income, including savings and fixed-deposit interest | Report taxable interest even where no TDS was deducted; claim any eligible deduction separately |
| Schedule VIA | Chapter VI-A deductions (80C, 80D, 80E etc.) | Claiming deductions in new regime (most disallowed) |
| Schedule TR | Tax relief under DTAA (Sections 90 / 90A / 91) | Missing Tax Residency Certificate |
| Schedule FSI | Foreign source income breakup | Currency conversion using wrong SBI TT buying rate |
| Schedule FA | Foreign assets including every account and every share | Reporting only year-end balance instead of peak |
| Schedule AL | Assets and liabilities (mandatory if income > ₹1 Cr) | Forgetting jewellery, vehicles, second home |
| Schedule 80G | Section 80G donations with donee PAN | Cash donations above ₹2,000 are fully disallowed |
| Schedule TDS / TCS | Tax credits from Form 26AS / AIS | Mismatched TAN entries |
| Schedule SI | Special income taxed at flat rates | Misclassifying STCG 111A as regular income |
ITR-2 Filing Deadline AY 2026-27
| Filing type | Deadline |
|---|---|
| Original return | 31 July 2026 |
| Belated (with late fee) | 31 December 2026 |
| Revised return | 31 March 2027 |
| Updated return (ITR-U) | Within 48 months |
| E-verification | Within 30 days of filing |
Late fee under Section 234F is ₹5,000 (₹1,000 if total income ≤ ₹5L). Interest under Section 234A applies at 1% per month on unpaid tax. Crucially, losses cannot be carried forward if you file ITR-2 after the original July 31 deadline, with the sole exception of house property losses. For traders and investors with realized capital losses, this single rule can cost lakhs in future tax savings.
The NRI Filing Path
NRIs must file ITR-2, never ITR-1. Here are special things to watch:
- Residential status must be correctly determined under Section 6, taking into account the 120-day rule for high-income returnees and the deemed residency rule.
- For treaty relief, establish treaty residence and the relevant article. A non-resident claiming treaty benefits may need a Tax Residency Certificate and Form 10F information. Resident foreign-tax-credit claims have their own Form 67 and evidence requirements; these are different workflows.
- NRE interest exemption depends on the statutory non-resident/FEMA conditions. NRO interest is taxable; bank withholding at the applicable non-resident rate (subject to treaty/certificate relief) is not necessarily the final tax on the return.
- The tax scope depends on residence, receipt and source. NRIs are generally taxed on income received/deemed received in India or accruing/deemed accruing in India. RNORs also need to check foreign business controlled in India or a profession set up in India; do not assume all foreign income is excluded.
- NRI Bank Account validation requires you to pre-validate at least one Indian bank account to receive refunds.
Common ITR-2 Mistakes That Trigger Notices
- Reporting only year-end balance in Schedule FA. The schedule specifically asks for peak balance during the year, which is a critical Black Money Act disclosure.
- Mixing STCG and LTCG figures. Each goes in a separate sub-section of Schedule CG with completely different tax rates.
- Forgetting scrip-wise reporting for Section 112A LTCG. ITR-2 requires ISIN-level detail for the grandfathering computation.
- Claiming HRA in new regime. The new tax regime under Section 115BAC disallows HRA, LTA, and most Chapter VI-A deductions. Opt out via the form’s regime selector if claiming these.
- Reinvestment exemptions: Sections 54 and 54F have their own residential-house and Capital Gains Accounts Scheme conditions. Section 54EC has a separate six-month bond-investment deadline and Rs 50 lakh limit; a CGAS deposit does not substitute for buying the eligible bonds.
- Reporting unrealized losses. Only realized gains and losses go in Schedule CG. Unsold position MTM losses are not deductible.
Prepare a traceable ITR-2 reconciliation
Build one index of your broker reports, bank certificates and any relevant foreign-asset records. Keep each source file and period alongside the figure transferred to the return working. Record unexplained differences separately so they are not hidden in a combined total.
For capital gains, keep the transaction and acquisition records that support the working. Reconcile the relevant income and tax credits with AIS and Form 26AS, using our statement comparison guide to organize the checks. This article does not automatically import broker files or produce a pre-validated ITR-2 return.
Frequently Asked Questions
I sold listed shares with ₹2 lakh gain. Can I still use ITR-1?
No. Once Section 112A LTCG exceeds ₹1.25 lakh, you must file ITR-2.
Are crypto gains reported in Schedule CG?
No. Virtual Digital Asset (VDA) income under Section 115BBH has its own dedicated schedule in ITR-2 and is taxed at a flat 30% with no deductions except acquisition cost.
Do I need to report a foreign mutual fund I hold but didn't sell?
For a resident ordinarily resident filer, a foreign holding during calendar year 2025 can require AY 2026-27 Schedule FA reporting even without a sale. NRIs and RNORs do not complete Schedule FA. Check the asset class and dates.
Can I claim 80C deductions in ITR-2 under the new regime?
No. Section 80C and 80D deductions are generally unavailable in the default new regime. Employer NPS contribution under section 80CCD(2) is a separate permitted deduction, subject to its own limits. Choose the old regime validly if claiming its deductions.
What if I am unsure whether I am a Resident or NRI?
Apply section 6 to the actual travel dates, citizenship/PIO status and income facts. The basic tests, special rules for visits or leaving India for employment, the Rs 15 lakh conditions and deemed-resident/RNOR rules do not apply identically to everyone. Obtain a residence working before selecting the return status.
Related guides:
- 🏠 Master index: ITR Forms AY 2026-27
- 🟢 ITR-1 Sahaj: For Simpler Salary Profiles
- 🟠 ITR-3: If You Also Have Business or Freelance Income
Last reviewed: May 26, 2026 | CBDT Notification: 46/2026
Official reference: Income Tax Department ITR utilities, schemas and validation documents. Select AY 2026-27 and the relevant form.
Official source: Always confirm the official ITR-2 form and instructions at incometax.gov.in.
This guide covers FY 2025-26 / AY 2026-27 under the 1961 Act. Filing dates depend on the taxpayer and audit/transfer-pricing conditions, not only the ITR number. Belated returns are generally due by 31 December 2026 and revised returns by 31 March 2027, or completion of assessment if earlier. Revision is subject to section 234-I; check the current utility for any fee. A later CBDT extension applies only to the cases it covers.
Sources: Finance Act 2026, section 5; AY-specific forms and validations; Notified AY 2026-27 schedules; ITR-2 guidance.
The information and tools on this page are for general information only and are not legal, tax, accounting or financial advice. For advice on your own situation, use the Professional help form on this page.