Income Tax Return Updates (ITR-2,3 &5) for AY 2025–26

ExpressITR || Income Tax Return Updates (ITR-2,3 &5) for AY 2025–26

Income Tax Return (ITR) Updates for AY 2025–26 (Applicable to ITR-2, ITR-3, and ITR-5 Forms)

1. Separate Reporting of Capital Gains Based on Transaction Date

Effective Assessment Year 2025–26, capital gains must now be reported separately based on the date of transaction in relation to 23rd July 2024:
  1. Transactions executed before 23rd July 2024: To be reported under the category "Before 23rd July 2024".
      
      
  1. Transactions executed on or after 23rd July 2024: To be reported under the category "On or After 23rd July 2024".
      
       


2. Treatment of Capital Loss on Share Buybacks

As per the amendment effective 1st October 2024, capital loss arising from share buybacks can be claimed only if the associated dividend income is disclosed under "Income from Other Sources", in accordance with Section 2(22)(f) of the Income Tax Act.

Key Points:
  1. Separate reporting has been enabled for such capital losses and the corresponding dividend income under the capital gains section.
       
  1. The sale proceeds from the buyback are automatically captured under Other Sources > Dividend Income (excluding income under Section 2(22)(f)).
      
  1. The purchase cost of the buyback shares will be treated as a capital loss.
      
  1. Both the sale amount and purchase cost are considered independently for accurate tax treatment.

3. Revised Capital Gains Tax Computation

A. Sale of Immovable Property (Land/Building) on or after 23rd July 2024

In the case of Long-Term Capital Gains (LTCG) arising from the sale of immovable property on or after 23rd July 2024, tax is computed to determine the final tax liability:


      

Computation Process:
  1. Calculate Tax Without Indexation: Applicable tax rate: 12.5%
  2. Calculate Tax With Indexation: Applicable tax rate: 20%
  3. Determine the Excess Amount: The excess is the difference between the two tax computations (without indexation minus with indexation). This excess amount will be exempted from the 12.5% tax liability.
Illustrative Example:
  1. Without Indexation (12.5%): ₹2,00,000
  2. With Indexation (20%): ₹1,18,429
  3. Excess Amount: ₹2,00,000 – ₹1,18,429 = ₹81,571
  4. Final Tax Payable: ₹2,00,000 – ₹81,571 = ₹1,18,429
NotesImportant Note:
If the indexed computation results in a capital loss, such loss will be treated as Nil and cannot be carried forward to subsequent financial years.
A detailed annexure is provided as part of the computation sheet to transparently reflect the revised tax calculation and its impact.

B. Listed Securities / Zero-Coupon Bonds (Where STT is Not Paid) – Transaction Before 23rd July 2024

For transactions involving listed securities or zero-coupon bonds, where Securities Transaction Tax (STT) has not been paid and the sale occurred before 23rd July 2024, the tax treatment has been amended in line with Section 112(1) of the Income Tax Act.
      
These capital gains must now be reported under the category: ‘Listed Security – STT Not Paid’.
In the computation section, hover your mouse cursor to view the excess amount calculation.

      
      

Computation Method:
  1. Compute 20% tax on the indexed capital gain
  2. Compute 10% tax on the non-indexed capital gain
  3. The excess amount, calculated as the difference between the two tax values, is deducted from the indexed tax amount to determine the final tax payable.
Illustrative Example:
  1. Indexed Capital Gain: ₹28,066 → Tax @ 20% = ₹5,613
  2. Non-Indexed Capital Gain: ₹30,000 → Tax @ 10% = ₹3,000
  3. Excess Amount = ₹5,613 – ₹3,000 = ₹2,613
  4. Final Tax Payable = ₹5,613 – ₹2,613 = ₹3,000
This method ensures correct tax reporting by effectively aligning indexed and non-indexed tax treatments, and providing relief through adjustment of the excess differential.

4. Enhanced Threshold for Disclosure of Assets and Liabilities

The threshold for mandatory disclosure of assets and liabilities under Schedule AL has been revised:
  1. Previous Threshold: ₹50 lakh
  2. Revised Threshold: ₹1 crore
      

This revision applies to individuals and entities filing ITR-2, ITR-3, and ITR-5.

These changes introduced in the ITR forms for AY 2025–26 are aimed at improving transparency, aligning tax treatment with legislative amendments, and simplifying complex capital gains calculations.

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