ITR 2: Who Should File, Applicability & How to File ITR 2 Online? (2026 Guide)

ITR 2 is a detailed income tax return form for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession. While the simpler ITR 1 form handles basic salary and interest, this form is the standard for those with more diverse financial portfolios. If you own multiple properties, invest in the stock market, or hold foreign assets, this is the form you must use for the Assessment Year (AY) 2026-27.

Filing the correct form is the first step toward tax compliance. Mistakes in choosing between ITR 1 and ITR 2 can lead to defective return notices from the Income Tax Department. For Indian business owners and high-net-worth individuals, understanding the nuances of this form ensures a smooth filing process and faster refund processing.

What is ITR 2?

The ITR 2 form is a comprehensive tax return document used by taxpayers who earn income from various sources but exclude any profits or gains from a business or a profession. It serves as a middle ground between the simplified Sahaj form and the more complex ITR 3 form meant for business owners.

For the Financial Year (FY) 2025-26, the Income Tax Department has updated the schedules to include better reporting for capital gains and foreign assets. If your financial profile includes selling shares, redeeming mutual funds, or receiving dividends from foreign companies, this form provides the necessary structure to report these accurately.

Key Components of the Form

• Part A: General information including personal details and filing status.

• Schedules: Specific sections for salary, house property, capital gains, and other sources.

• Schedule FA: Mandatory for reporting foreign assets and income.

• Schedule AL: For reporting assets and liabilities if total income exceeds ₹50 lakh.

Who Should File ITR 2?

Determining who should file ITR 2 depends on your residential status and the nature of your income. It is not just about how much you earn, but where that money comes from.

1. Individuals with Total Income Exceeding ₹50 Lakh

If your total taxable income for the financial year is more than ₹50 lakh, you are automatically ineligible for ITR 1. Even if your only source of income is salary and one house property, the high-income threshold mandates the use of this form. This requirement allows the department to track high-value assets through Schedule AL.

2. ITR 2 for Salaried Individuals

While most salaried employees use ITR 1, you must switch to this form if:

• You have more than one house property.

• You are a director in a company (listed or unlisted).

• You hold unlisted equity shares at any time during the year.

• You have deferred tax on ESOPs received from an eligible startup.

3. ITR 2 Capital Gains

Any taxpayer who has realized capital gains from the sale of assets must file this form. This includes:

• Short-term or long-term gains from equity shares or mutual funds.

• Sale of immovable property like land or a building.

• Gains from Virtual Digital Assets (VDA) like cryptocurrency.

• Sale of gold, bonds, or other capital assets.

4. ITR 2 for NRI (Non-Resident Indians)

NRIs and Resident But Not Ordinarily Residents (RNOR) cannot file ITR 1. If an NRI has any income in India—such as rental income, interest from NRO accounts, or capital gains from Indian stocks—they must use this form. The TDS on property sales by non-residents has seen stricter monitoring in the latest 2026 budget updates, making accurate filing even more critical.

ITR 2 Applicability Conditions

The ITR 2 applicability extends to several specific scenarios that require detailed disclosure. If any of the following conditions apply to you for FY 2025-26, you must prepare to file this form.

Multiple House Property Income

If you own and earn rent from two or more houses, ITR 1 is not an option. You must report details of each property, including municipal taxes paid and interest on a Home Loan, in the dedicated house property schedule. This is common for individuals using a Loan Against Property to expand their real estate portfolio.

Agricultural Income

While agricultural income is exempt from tax, it must be reported for “rate purposes” if it exceeds ₹5,000. Taxpayers with significant farm income are required to provide details of the land and location in this form.

Foreign Income and Assets

If you are a resident of India and hold any asset outside the country—such as a bank account, stock in a US company, or a house abroad—you must file this form. The 2026 Budget introduced a 6-month disclosure window for those who may have missed reporting small foreign assets in the past.

Income from Other Sources (Special Rates)

Standard interest and dividends can go in ITR 1, but if you have “winnings” from lotteries, crossword puzzles, or horse racing, you need the specialized schedules of this form to calculate tax at the correct flat rates.

ITR 2 Eligibility Summary Table

*Note: Minimal LTCG up to ₹1.25L under Section 112A may be allowed in ITR 1 under specific conditions, but ITR 2 is safer for investors.

Difference Between ITR 1 and ITR 2

The difference between ITR 1 and ITR 2 lies primarily in complexity. ITR 1 is a “one-page” return for the average wage earner. In contrast, ITR 2 is a multi-page document that tracks the movement of capital and high-value investments.

If you have a CIBIL score that reflects high financial activity, such as multiple Business Loans or Overdraft facilities used for personal investments, your income profile likely demands the detailed reporting found in this form.

Documents Required for Filing ITR 2

Before you start the ITR 2 online filing process, ensure you have the following documents ready:

1. Form 16: Issued by your employer for salary details.

2. Form 26AS & AIS: To verify TDS and high-value transactions.

3. Capital Gains Statement: Provided by your stockbroker or mutual fund house.

4. Bank Statements: For interest income and Overdraft interest details. Use our guide to download bank statements easily.

5. Home Loan Interest Certificate: To claim deductions on house property.

6. Foreign Asset Details: Statements of overseas accounts and stock holdings.

7. Aadhaar and PAN: Must be linked to avoid an “inoperative” status.

How to File ITR 2 Online? (Step-by-Step)

The how to file ITR 2 online procedure has been streamlined on the e-filing portal. Follow these steps for the ITR 2 filing guide 2026:

Step 1: Log in to the Portal

Visit the official Income Tax Department website. Use your PAN or Aadhaar as the User ID.

Step 2: Select the Assessment Year

Go to ‘e-File’ > ‘Income Tax Returns’ > ‘File Income Tax Return’. Select Assessment Year 2026-27 and the mode of filing as ‘Online’.

Step 3: Choose the Correct Status

Select your status as ‘Individual’ or ‘HUF’. The system will then ask you to select the ITR form; choose ITR 2.

Step 4: Validate Pre-filled Data

The portal will pre-fill data from your Form 16 and AIS. Review your salary, interest, and tax payments carefully.

Step 5: Fill in Capital Gains and House Property

• Enter details of property sales and purchase dates.

• For share trading income, upload the broker’s Excel template if supported, or enter summarized gains.

• Provide Construction Finance or Home Loan interest details if applicable.

Step 6: Disclose Foreign Assets

In Schedule FA, enter details of foreign bank accounts and equity. Ensure the “Peak Balance” during the year is accurately reported to comply with the Black Money Act.

Step 7: Tax Computation and Payment

The system will calculate your total tax liability. If you have a shortfall, pay the “Self-Assessment Tax” online via Net Banking or UPI.

Step 8: E-Verify the Return

Your filing is incomplete without verification. Use Aadhaar OTP or Net Banking to e-verify immediately.

Important Updates for ITR 2 FY 2025-26

The ITR 2 form FY 2025-26 includes several changes that taxpayers should note:

• Revised Capital Gains Rates: Following the 2024 and 2025 amendments, ensure you use the 12.5% rate for long-term gains on assets sold after the cutoff dates.

• Buyback Income: Income from share buybacks is now taxable in the hands of the shareholder as “Income from Other Sources.”

• MSME Reporting: If you are a director in an MSME Sector company, ensure your DIN and unlisted shareholdings are updated.

Common Mistakes to Avoid

• Wrong Form Selection: Filing ITR 1 when you have capital gains from Machinery Loans asset disposal or stocks.

• Missing Schedule FA: Residents failing to report foreign stocks (like Google or Apple shares).

• Incorrect Bank Details: Ensure your bank account is pre-validated to receive your Tax Refund.

• Ignoring AIS: Discrepancies between your return and the Annual Information Statement will trigger a notice.

Frequently Asked Questions (FAQs)

1. Can I file ITR 2 if I have only salary income?

Yes, you can file this form even if you only have salary income, especially if your income exceeds ₹50 lakh or you are a director in a company. However, if your income is below ₹50 lakh and you meet other ITR 1 criteria, the simpler form is recommended.

2. Is ITR 2 for share trading income?

Yes, ITR 2 for share trading income is mandatory if you have capital gains (STCG or LTCG) from stocks and mutual funds. If you treat trading as a business (intraday or F&O), you must use ITR 3 instead.

3. How do I report foreign income in ITR 2?

You must report it in the ‘Schedule FSI’ (Foreign Source Income) and ‘Schedule TR’ (Tax Relief) to claim benefits under the Double Taxation Avoidance Agreement (DTAA). Also, ensure the assets are listed in ‘Schedule FA’.

4. What is the difference between ITR 1 and ITR 2 for NRIs?

NRIs are not eligible to file ITR 1. They must use ITR 2 to report any Indian income, regardless of the amount.

5. Do I need a balance sheet for ITR 2?

No, a balance sheet is not required for this form. However, if your income exceeds ₹50 lakh, you must provide a list of your assets and liabilities in Schedule AL.

6. Can I claim home loan interest in ITR 2?

Yes, you can claim interest on a Home Loan or a Loan Against Property used for home construction/renovation under the ‘House Property’ head.

Conclusion

Filing your income tax return ITR 2 India doesn’t have to be a stressful experience. By keeping your Project Loan documents, capital gains statements, and Bank Statements organized, you can navigate the ITR 2 online filing process with confidence. Whether you are an NRI or a resident with a Cash Credit facility for personal investments, following the ITR 2 instructions latest updates is the best way to ensure compliance.

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