ITR filing: How to correctly report capital gains, CGAS withdrawal, buybacks

Mint

14-07-2025

NEW DELHI
:
The income tax department has finally released the utilities for income tax return (ITR) forms 2 and 3, allowing individuals with capital gains, cryptocurrency investments, and business income to file their tax returns for 2024-25.
Because of the delay in releasing these forms, the Central Board of Direct Taxes (CBDT) has extended the ITR filing deadline for the current assessment year from 31 July to 15 September.
However, despite the extension, both taxpayers and tax professionals are facing significant difficulties due to the delay, said Prakash Hegde, a Bengaluru-based chartered accountant.
Currently, only the offline Excel utilities for forms 2 and 3 are available, which means those who prefer filing their returns online will have to wait further. 'Many taxpayers, especially senior citizens and non-residents, are eager to file their returns to claim refunds. Tax professionals, meanwhile, are trying to shift focus to audit cases, whose deadline is 30 September, but are still catching up on pending ITR filings," Hegde noted.
Even if you file ITR online, preparing your tax return based on the offline utilities would help. 'Taxpayers can download the latest utility and review the instructions for each schedule carefully to ensure they are well prepared," said Bhawna Kakkar, chartered accountant and founder, Kakkar & Co., Chartered Accountants.
More disclosures
Ashish Karundia of Ashish Karundia & Co. said the key changes are bifurcation of capital gains made before and after 23 July, capital loss on buyback transactions done after 1 October 2024, increase in the filing mandate of Schedule AL (assets and liabilities) to ₹1 crore, enhanced reporting of deductions such as house rent allowance, 80C, etc., and Schedule TDS (tax deducted at source) mapping with TDS sections.
'Unlike last fiscal, each TDS entry must include the section under which tax was deducted," said Karundia.
The newly introduced TDS section code in Schedule TDS is prefilled in the latest ITR forms from details in Form 26AS and the annual information statement (AIS), said Alok Agrawal, partner, Deloitte India.
'However, taxpayers can manually edit the code from the options listed in the dropdown, if required. This requirement of quoting section code has been introduced to reduce mismatches and streamline the reconciliation process with Form 26AS and the AIS, for cases where the same payer has deducted tax under two different provisions of the law," he said.
Kakkar pointed out that more details about home loans are also required to claim interest on them under Income from House Property. 'For instance, the sanction date is to be filled, which would require the sanction letter. But, the amount disbursed, and not sanctioned, is also to be disclosed, so you need the loan statement as well. Similarly, other details like balance as of 31 March and interest on loan too need a loan schedule and statement for accurate reporting."
Apart from more disclosures, capital gains made before and after 23 July 2024 have to be reported separately.
Reporting capital gains
Equity assets sold on or before 23 July 2024 will be taxed at 20% for short-term capital gains (STCG) and 10% for long-term capital gains (LTCG). However, for those sold after this date, the LTCG rate is 12.5%.
Kakkar said the ITR utility provides distinct sections or sub-schedules for these periods, ensuring accurate tax rate application on eligible capital gains.
LTCGs from stocks and mutual funds are to be reported scrip-wise, but the information is not pre-filled in the forms this time either, so taxpayers will need to either manually fill in the data or upload a comma-separated values (CSV) file.
'At the time of advance tax calculations, we noticed that brokers are already giving statements classifying them into these two periods. So, reporting the transactions separately should not be a challenge," Kakkar said.
STCGs on equity don't require scrip-wise details, and instead only the total sale amount and cost of acquisitionshould be mentioned.
For property sales done after 23 July, sellers can choose between two methods to calculate LTCG tax: The new flat rate of 12.5%, without the benefit of indexation on the cost of acquisition, or the old rate of 20%with the indexation benefit. This gives sellers the flexibility to pick the option that results in a lower tax outgo. Most sellers would have already decided this while calculating advance tax, so reporting in the ITR form should be done accordingly.
CGAS withdrawal after 23 July
The requirement to split capital gains reporting also extends to unutilized amounts withdrawn from the Capital Gains Account Scheme (CGAS), where taxpayers temporarily park capital gains intended for reinvestment in property to claim benefits under Section 54 and Section 54F.
In the updated ITR forms, a separate column has been introduced to indicate whether such withdrawals occurred before or after 23 July 2024. The forms have also clarified that funds withdrawn after 23 July will be taxed at the new 12.5% rate, though experts believe this may not be correct.
Sonu Iyer, partner and national leader, people advisory services-tax, EY India, explained that the unutilized balance in the CGAS is deemed to be LTCG in the year in which the limitation period expires.
'Section 112(1)(a)(ii) says that LTCG should be taxed at 20% for any transfer that takes place before 23 July 2024 and 12.5% for any transfer that takes place on or after 23 July 2024. The date of transfer here should be construed as the date of transfer of the original property. Hence, the withdrawal from CGAS per se does not result in transfer," said Iyer.
"So, the 12.5% tax rate applied by the excel utility appears to be a deviation from the technical position, as the tax rate should not be the date of withdrawal or expiry of the CGAS period and rather is based on the original date of transfer, which should make the tax rate 20% in this case," she added.
Share buyback loss provision
A new feature in Schedule CG of ITR-2 and 3 forms addresses the treatment of share buyback transactions. Following 1 October 2024, the tax responsibility for share buybacks by listed companies has shifted. Shareholders can now claim a capital loss on such buybacks, provided the income from the buyback is correctly reported as dividend income.
'In effect, the ITR form expects the sales consideration to be shown as nil in the capital gains schedule since the company already paid buyback tax and the equivalent amount to appear as taxable income elsewhere. This dual disclosure will activate the allowable loss," Kakkar explained.
Earlier, individual taxpayers had no way to claim losses from share buybacks, as the entire tax treatment was handled at the company level. With the new rules, eligible taxpayers can now use these buyback-related losses to offset capital gains, which may help lower their overall tax liability.
'Taxpayers will need to be diligent in linking their buyback entries across schedules to avail the benefit correctly," Kakkar said.