Capital Gains ITR: Property, Mutual Funds & Crypto Explained

It was the season of tax filing, and for many, the words "capital gains ITR" brought a mix of anticipation and apprehension. Investors who had seen their "capital gains or loss on mutual funds" grow, and homeowners who navigated the complexities of "capital gains or loss on property," all knew one thing: if their taxable income crossed the basic exemption, ITR-2 was their final destination.

What is ITR-2?

If you're an individual or Hindu Undivided Family (HUF) in India, ITR-2 is your go-to tax form if you have income from these heads:

• Income derived from salary or pension
• Income sourced from more than one house property
• Any income arising out of agriculture exceeding Rs.5,000
• Income exceeding Rs.50 lakh in a financial year
• Any income or losses arising from short-term or long-term capital gains
• Income from other sources

Understanding Capital Gains to file ITR-2

When you sell an asset such as property, shares, or mutual funds, crypto, any profit or loss arising from them is called a capital gain or loss. These gains or loss are categorized as either short-term or long-term, depending on how long you held the asset.

For instance, if you've held a property for over 24 months, its sale profit is a Long-Term Capital Gain (LTCG). This triggers capital gains tax on property at 20%, but you get the benefit of indexation, which adjusts your purchase price for inflation, reducing your taxable amount. Or tax at a lower rate at 12.5% without indexation benefit. You might also claim exemptions by reinvesting in new property or specific bonds.

Similarly, selling mutual funds can lead to capital gains tax on mutual funds, with different holding periods and the type of Mutual funds like equity or, gold or bonds, defining if they're short-term or long-term. Tax on long-term capital gains from equity is exempt up to ₹1.25 lakh in a Financial year, one can plan before selling to remain within the limit.

All cryptocurrency transactions must be reported in the Income Tax Return (ITR). Gains from crypto trading are taxed at a flat rate of 30% and losses cannot be offset or carried forward.

Capital gains tax property sale India:

In 2025, capital gains tax on property in India offers new flexibility for sellers. For properties held over 2 years, you have the option to choose between paying 12.5% tax without indexation or 20% with indexation, with respect to the acquisition date. This allows for tailored tax optimization and is crucial for your capital gains ITR. Selling property after April 1st shifts tax liability to the next financial year, providing more time for tax planning and managing advance tax payments.

How to file ITR for capital gains:

If you have short-term or long-term capital gains or loss, filling ITR-2 online is required.

• Gather Your Documents: Before you start, collect essential paperwork. This includes details of capital gains from selling property (for capital gains tax on property), shares, or mutual funds (for capital gains tax on mutual funds), bank statements, Form 16 (if applicable), and any investment proofs to claim deductions like 80C.
• Understand ITR-2's Structure: ITR-2 has many schedules, but you'll primarily focus on:
• Part A: General Information
• Schedule CG: For all your capital gains income.
• Schedule S, HP, OS, VDA: If you have income from salary, house property, other sources, or virtual digital assets.
• Schedule SI,B TI,B TTI: For special income and tax computation.
• Schedules IT, TDS, TCS, CYLA, BFLA, CFL: For tax payments, deductions, and carrying forward losses.
• Accurately Fill Schedules: Only select the schedules relevant to your income. Double-check every entry against your supporting documents. Incorrect or omitted information can lead to your return being marked defective, or even penalties. Once all details are entered, verify them thoroughly before filing your ITR-2.

How to File ITR-2 Online?

Here's how to file your capital gains ITR online using ITR-2, covering capital gains or loss on property and capital gains tax on mutual funds:

• Log In: Access your e-filing account with PAN and password.
• Start Filing: Navigate to 'e-File' > 'Income Tax Returns' > 'File Income Tax'.
• Select Details: Choose the assessment year, 'Online' mode, and 'Start New Filing'. Select your status (Individual/HUF) and ITR-2.
• Choose Schedules: Select only applicable schedules, especially 'Schedule CG – Capital Gains'.
• Fill and Confirm: Enter details in each selected schedule and 'Confirm' to save.
• Pay Tax (If needed): Review 'Part B TTI'. If tax is due, 'Pay Now'.
• Verify & Submit: After tax payment, 'Proceed to Verification'. Preview, 'Proceed to Validation', and once successful, 'Proceed to Verification' to e-verify your return using one of the available options.

Calculation of LTCG Tax on Property:

• Determine Sale Price: Start with the actual amount you received from selling the property.
• Calculate Indexed Acquisition Cost: Indexed cost= Purchase Price × (CII of Sale year/CII of Purchase year)
• CII stands for cost inflation index which adjust the purchase cost w.r.t inflation.
• Calculate Indexed Improvement Cost: If you made significant renovations, adjust those expenses for inflation too.
• Subtract Selling Expenses: Deduct costs like brokerage, legal fees, advertising, and stamp duty.
• Calculate LTCG: Sale price-(Indexed Acquisition cost+Indexed improvement cost+selling expenses)
• Apply Tax Rate: The final Long-Term Capital Gain is taxed at a flat 20% with indexation benefits.

How to Report and Pay LTCG Tax on Property

• Reporting LTCG: Declare long-term capital gains in Schedule CG of ITR-2 or ITR-3. Provide details like sale value, indexed costs, and any claimed exemptions.
• Advance Tax: If your LTCG tax liability exceeds Rs.10,000, you need to pay advance tax in installments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15.

Penalties for Non-Compliance includes:

• Sections 234B and 234C: Interest for shortfalls or late payments.
• Under-reporting/Concealment: Up to 200% of tax due as penalty.

Exemptions and Deductions for Property:

• Section 54: Reinvest profit from a residential property sale into another residential property within specified duration i.e. before 1 year or 2 years after sale, or 3 years for construction.
• Section 54EC: Invest up to Rs.50 lakh of gains in government-specified bonds (e.g., NHAI, REC) within 6 months, with a 5-year lock-in.
• Section 54F: Reinvest entire sale proceeds (not just gains) from a long-term asset (excluding residential house) into a new residential property.
• Other Strategies: Utilize capital losses to offset gains, and consider the Capital Gains Account Scheme (CGAS) for delayed reinvestment.

Conclusion

Filing your capital gains ITR with ITR-2, especially for capital gains tax on property or capital gains tax on mutual funds, is manageable with proper preparation. Gather all documents beforehand and double-check entries.

Keypoints to note for for property sellers in 2025:

• Holding property over 24 months qualifies for LTCG.
• You can choose between 12.5% (no indexation) or 20% (with indexation) tax rates.
• Utilize Sections 54, 54EC, or 54F for significant tax savings through reinvestment.
• Pay advance tax if your liability exceeds Rs.10,000 to avoid penalties.

To optimize your returns and ensure compliance, file your capital gains ITR easily with Taxspanner now.

Frequently Asked Questions (FAQs)

1. Who should file ITR-2?
   Individuals/HUFs with capital gains, multiple house properties, foreign income, or income above ₹50 lakh.
2. How is property capital gains tax calculated?
   For property held over 24 months, pay 12.5% without indexation or 20% with indexation.
3. How are mutual fund and crypto gains taxed?
   Equity mutual fund LTCG over ₹1.25 lakh taxed at 10%; crypto gains taxed at 30% flat.
4. What documents are needed?
   Form 26AS, sale deeds, capital gains statements, bank statements, and Form 16 if salaried.
5. Can I revise my ITR?
   Yes, you can file a revised return if needed.
6. Is e-verification required?
   Yes, e-verification completes your ITR filing process.