Filing ITR for Long-Term Capital Gains: Step-by-Step Guide

ITR filing for long term capital gain is one of the necessary parts of annual filing. ITR for long term capital gains can be filed by following certain steps. In case of filing itr for long term capital gain, form ITR-2 is filed if a taxpayer is an individual or HUF. Dive into this blog to understand, ‘how to file ITR for long term capital gain?’

BRIEF SUMMARY

Overview

The government charges tax on the people who earn money over a specified amount. It is believed that the people investing their money in equity mutual funds have good income and savings after spending on their expenses. In this condition, the government also collects tax on the income earned from these investments. The tax levied on such investment is called Capital Gains Tax. This tax is further categorized into two different forms; short-term and long-term. The tax rates on short-term and long term capital gains differ from each other. Learn about how to file ITR for long term capital gain with this step-by-step guide on ITR filing for long term capital gain.

Each taxpayer has to file ITR for capital gain every year with the help of ITR Form 2. In case your total income for a financial year includes income made from business/profession, you need to file ITR-3 as the income tax return for capital gains. However, if your source of income is salary or, the sale of foreign property or assets, you need to file ITR-2.

In other words, HUFs and individuals with income excluding those under the ‘Profit & Gains from Business of Profession’ head must use ITR Form 2 to file their IT returns.

Taxpayers generating income from the sources i.e. salary, property, foreign assets, capital gains, and others, will have to file ITR 2.

Understanding Long-Term & Short-Term Capital Gains

Capital assets include stocks, bonds, precious metals, jewelry, and real estate. The capital gain on selling these assets will be taxable. The tax amount that one has to pay on capital gains depends on the duration for which one has held the asset before selling it. Based on this factor, capital gains are classified into two forms; short-term and long term capital gains.

Long-term capital gains are yielded from assets that are held for more than one year before they are sold. The tax levied on long-term capital gains is 0%, 15%, or 20% according to the graduated income thresholds. A majority of taxpayers report a 15% or lower tax rate on long-term capital gains.

On the other hand, short-term capital gains are obtained from selling assets after holding them for less than a year. On short-term capital gains, the tax rates are comparatively high and can go up to 37% in 2023.

What are the sources of Long-term Capital gains?

Some of the primary activities that can help you generate long-term capital gains are listed below:

Sale of Property
Sale of Agricultural land
Investment in Mutual Funds
Investment in Stocks

A few other activities may be added to the aforementioned list. If you obtain capital gains from these activities, you need to file ITR for capital gain on property.

Documents Required for Filing Capital Gain ITR Form

Similar to other compliance, ITR filing for long-term Capital gains also requires a certain set of documents while filing ITR. The documents required for Filing ITR for Capital Gain are as below:

For Sale of Immovable Property

Sale & Purchase deads, improvement cost details, purchase value & any cost of improvement, transfer expense showing the sale value
Full Address of the Property
Buyer details i.e. PAN and Aadhaar Card
Essential supporting document in case you are claiming exemption under Section 54 or 54EC

For Sale of Mutual Funds or Equity shares

Taxpayers are required to generate consolidated capital gain statements from CAMs and Kfintech.
For Equity Shares sale, you can check with your broker for a capital gain statement or Tax P&L.

In case of any other type of capital, taxpayers must have a document outlining the sale consideration and the purchase cost details as required.

Step-wise Process of ITR filing for long term capital gain

People receiving capital gains through selling equity must file ITR each financial year. With the advent of digitization, filing tax on capital gains can be done via the official Income Tax Department portal. Follow the below-mentioned steps to file ITR 2 on capital gains:

Step 1: Visit the official website of the Income Tax department and log in with the necessary credentials.

Step 2: Afterward, go to e-File, then Income Tax Returns and select File Income Tax Returns.

Step 3: Now, you have to select the Assessment year, Status, and also Type of form. After that, they need to select the option ‘Taxable income is more than the basic exemption limit’ from the dropdown menu as the reason for ITR filing.

Step 4: On the next page, you will see 5 different types of schedules. Select ‘General’ and then click on ‘Income Schedule’. Afterward, you have to tap on ‘Schedule Capital Gains’ and then choose the type of capital assets from the provided list.

Step 5: The Long-term capital gains are taxable under Section 112A. The tax rate charged on long-term capital gains received from selling equity and equity-related instruments is 10%. However, LTCG is not taxable to up to Rs 1 Lakh.

Filing long-term capital gains, people have to provide their scrip-wise details while filing the ITR 2 Form. Such details include ISIN, purchase price, selling price, date of different transactions, etc.

Step 6: After ‘Confirming’ the necessary schedules, individuals have to review Part B TTI. After that, click on ‘Preview Return’. After that, download the ITR and proceed with the declaration.

Step 7: Long-term capital gains (LTCG) are subject to taxation under Section 112A. The tax charged on long-term capital gains that you receive from the sale of equity and equity-related instruments is 10%. However, long-term capital gains is not taxable up to Rs 1. lakh.

Step 8: You have to provide specific details and then click on ‘Proceed to Validation’. After validating details, the ITR filing on long term capital gains has to be verified. Taxpayers can verify electronically or they also have the option to send a signed ITR-V printout to the Income Tax Department office in Bangalore.

It’s important to note that the taxpayers can verify their provided details within 120 days of ITR filing.

Individuals having long-term capital gains are needed to file ITR-2 every year. Follow the step-by-step process of filing ITR for salaried persons with capital gains to ensure hassle-free and timely annual return filing. Seeking professional guidance in filing itr for business income and capital gain is always advisable.

ITR filing for long term capital gain is necessary for the taxpayers who make earnings from assets like properties, agricultural land, mutual funds, and stocks after holding them for at least more than a year. In the case of being an individual or HUF, the ITR-2 Form is filed for filing ITR for capital gain on property.

With the above-mentioned stepwise guide on ‘how to file ITR for long term capital gain’, you can file ITR for capital gain on property. However, taking experts’ guidance is always advisable to efficiently file this annual return.

Conclusion

FAQs

Q1: What is the due date to file ITR-2 for AY 2024-25?

According to Section 139 (1) of the Income Tax Act 31 July 2024, the due date for ITR filing for long term capital gain is July 31, 2024.

Q2: How long does ITR 2 take in its processing?

ITR-2 Form processing is done by the Central Processing Center (CPC). It is an automated processing centre in which it may take between 1 month to 10 months in processing of ITR 2 form.

Q3: What is ITR 2?

The ITR 2 Form is one of the important forms available for taxpayers to pay their ITR. However, different forms should be filed based on different incomes. The ITR 2 Form is mainly for individuals and HUFs who are not involved in any kind of professional or business.

Q4: What documents are required for filing ITR 2 for capital gains?

Several documents are needed for filing ITR 2 form for capital gains which main include;

Bank Statements
DSC or Digital Signature Certificate
ITR of Previous Year
Capital Gains/Loss Statement
Balance Sheet
Saving certificate
Profit & Loss Statement
Reports of Audits, if required

Some other supporting documents may be required but not necessarily.

Q5: What are the changes in ITR-2 Form from previous years?

In ITR-2 of AY 2021-22, the taxpayers had the option to choose the new tax regime under section 115 BAC. However, the option for choosing a new tax regime under section 115BA will be available only till the due date of filing of return under section 139 (1).

One thought on “How to file ITR for Long term Capital gain?”

Easy to understand and a great guide. I will definitely share this highly useful article with my friends.

How to file ITR for Long term Capital gain?