How to file ITR-2 when you are a director or hold unlisted equity shares (AY 2026-27)

Meet Sahir Bhandari, 41, the Whole-time Director of Stratos Mobility Pvt Ltd, a Gurugram-based mobility startup. He’s also a founder-shareholder, holding 5,000 unlisted equity shares (face value ₹10, issue price ₹100). His salary income is straightforward, but two facts make him ineligible for ITR-1:

1. He’s a director in a company – triggers D110 in BharatTax’s form selector.
2. He held unlisted equity shares at any time during the year – triggers D111.

Either disqualifier alone forces ITR-2. Sahir has both. This article walks Sahir through filing ITR-2 with the disclosure obligations that come with director / unlisted-shares status.

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1. Why ITR-2 is mandatory here

ITR-1 has 18 disqualification rules in BharatTax’s backend/engines/form_selector.py. Two of them target high-net-worth risk patterns:

• D110 – Director in a company: Whether listed or unlisted, domestic or foreign, executive or non-executive, the moment you’re named on a company’s Board, ITR-1 falls away. Reason: directors face CSR / governance / additional reporting obligations that ITD wants visibility on.
• D111 – Unlisted equity shares held: Even one share in a private Indian company – including your own startup, your spouse’s company, or an angel-investment – triggers this rule. Reason: unlisted share valuations are SFT-reported and ITD wants to track inflows / outflows separately.

D110 + D111 disqualification rules per current form_selector.py.

A subtle trap. Even if you exited the company in March 2026 – sold all your unlisted shares – you still held them at some point during the year, so D111 still applies. ITR-2 for the year.

Listed shares don’t trigger D111. Only unlisted shares. Listed equity (NSE / BSE) is fine for ITR-1 (subject to the no-CG condition).

2. Disclosure obligations – what you must report

ITR-2 has two specific schedules that ITR-1 doesn’t:

Schedule “Companies in which I’m a director”

Per filing, list each company where you’re a Board member:

• Company name
• Company PAN
• DIN (Director Identification Number)
• Whether listed (Yes/No)
• Nature of directorship (Executive / Non-Executive / Independent)
• Date of cessation (if you stepped down during the year)

Schedule “Unlisted equity shares held”

Per company in which you hold unlisted shares:

• Company name + PAN
• Shares held at year-start (with cost)
• Shares acquired during the year (with cost + date)
• Shares sold during the year (with consideration + date)
• Shares held at year-end (with cost)
• Face value + issue price

exact field-level requirements of director schedule + unlisted shares schedule per ITR-2 schema v1.4 (latest CBDT release).

These are disclosure-only schedules – they don’t directly trigger tax. But they’re mandatory once you’ve answered “Yes” on the questionnaire.

3. What you need

Document	Why
DIN (Director Identification Number)	Schedule companies; one DIN serves across all directorships.
MoA / AoA / share certificates	Founder equity / acquired shares documentation.
Board resolution(s)	For appointment / cessation dates.
Form 16	Director’s salary breakup.
Bank statements	Salary credits + any director-fee credits.
PAN, Aadhaar	Standard.

4. Step-by-step walkthrough

Step 1 – Sign in

Step 2 – Skip last-year import

Step 3 – Personal information

Standard PAN, DOB, address. Sahir’s address is in Gurugram (DLF Phase 5). Aadhaar required.

Step 4 – The questionnaire reveals the form choice

Two key questions:

• Are you a director in any company (listed or unlisted) during the year? ☑ Yes
• Did you hold any unlisted equity shares at any time during the year? ☑ Yes

Both ticks. BharatTax routes to ITR-2 immediately.

What if I answer No to both, but ITD says I am a director? Don’t lie. ITD pulls director-PAN linkages from MCA’s database. A mismatch between your declared status and MCA’s records is a high-priority audit flag.

Step 5 – Salary

Director compensation is taxable as salary under Section 17(1) when there’s an employer-employee relationship (Whole-time / Executive director). For independent directors, the fee is professional income (taxable under “Other Sources” via Sec 194J TDS) – which would force ITR-3, not ITR-2. Sahir is Whole-time → salary.

• Employer: Stratos Mobility Pvt Ltd, TAN DELS22345A
• Basic: ₹18,00,000
• HRA: ₹7,20,000
• Special allowance: ₹6,00,000
• Perquisite (company car): ₹2,40,000
• Profession tax: ₹2,400
• TDS: ₹4,80,000

Gross ₹33,60,000.

Independent director vs whole-time director – different forms. If your director “fee” is paid for board attendance / consultancy (no employer-employee), it’s professional income. You’d need ITR-3. Whole-time directors in salary-style relationships use ITR-2.

Step 6 – Disclosure schedules

After the questionnaire ticks, BharatTax surfaces two new sub-sections inside Personal Info:

Director details

Sahir adds:

• Company name: Stratos Mobility Pvt Ltd
• Company PAN: AABCS1234D
• DIN: 12345678
• Listed? No
• Nature: Whole-time Director
• Cessation date: – (continues)

Unlisted shares held

Sahir adds:

• Company name + PAN: Stratos Mobility Pvt Ltd, AABCS1234D
• Shares at start of year: 5,000
• Shares acquired during year: 0
• Shares sold during year: 0
• Shares at end of year: 5,000
• Face value: ₹10
• Issue price: ₹100 (₹5,00,000 invested)

Form 12BB cross-reference. Some employers ask whether you’re a director or hold unlisted shares as part of the Form 12BB investment-declaration form (it usually doesn’t ask, but some Big 4 firms include it for compliance). Whatever you tell the employer on 12BB must match what you file on the ITR.

Step 7 – Other Sources, 80C, 80D, 80CCD(1B)

• Savings interest: ₹6,000 + FD interest: ₹84,000 = ₹90,000
• 80C: ₹1,50,000 (PPF)
• 80D: ₹35,000 (self)
• 80CCD(1B): ₹50,000 (NPS Tier-1)

Total Chapter VI-A (old regime): ₹2,35,000.

Step 8 – Schedule TI / TTI

Line	New regime	Old regime
Salary (after Sec 16)	₹32,85,000	₹33,07,600
OS	₹90,000	₹90,000
Gross Total Income	₹33,75,000	₹33,97,600
Less: Chapter VI-A	–	₹2,35,000
Total Income (Sec 288A)	₹33,75,000	₹31,62,600

figures derived; run fixture through BharatTax.

Step 9 – Compute and compare

	New regime	Old regime
Tax on slab	₹5,92,500	₹7,61,280
87A rebate	₹0	₹0
Cess 4%	₹23,700	₹30,451
Total tax	₹6,16,200	₹7,91,731
TDS	₹4,80,000	₹4,80,000
Balance payable	₹1,36,200	₹3,11,731

arithmetic against BharatTax compute output.

New regime saves ₹1,75,531. At Sahir’s income level, the widened slabs make new regime decisively cheaper – the deduction stack (80C + 80D + 80CCD1B) is just not enough to compensate for the much wider 0-4-8-12-16-20-24 lakh slab structure.

At what income does old regime catch up? Roughly when total Chapter VI-A + HRA + Sec 24(b) home-loan interest combined exceeds ~₹4-5 lakh AND total income is in the ₹15-20 lakh band. Below ₹15 lakh, new wins almost always (87A rebate dominates). Above ₹25 lakh, depends entirely on deductions claimed.

Step 10 – Confirm regime, download JSON

Pay SAT challan ₹1,36,200 (per Sec 234B/C interest also if not paid quarterly), confirm New, download JSON, upload to incometax.gov.in.

5. Common mistakes for directors / unlisted-share holders

review all items.

1. Filing ITR-1 when you’re a director. Costly mistake. ITD’s automated reconciliation against MCA21 catches this. Defective return filing notice + 30 days to fix.
2. Forgetting cessation date when you stepped down. If you resigned in February 2026, enter the cessation date. Otherwise ITD’s records show you continuing – inviting cross-checks in future years.
3. Listing yourself as Director of an LLP. LLPs don’t have directors – they have designated partners. Using “Director” for an LLP role is wrong. (LLP-partner income forces ITR-3.)
4. Unlisted shares from your spouse’s company. Even gifts/inheritance of unlisted shares trigger D111. Track them.
5. Confusing PSU/listed-foreign-company directorships. Both are “directorships” for D110. ITD wants disclosure regardless of company type.
6. Founder ESOPs – vested but unlisted yet. ESOPs in private companies (pre-IPO) still count as unlisted shares. Disclose.
7. Not aligning DIN with ROC records. If you have multiple DINs (rare, but happens with reactivation cases), use the one ROC currently recognises.

6. FAQs

all answers.

Q: I’m a non-executive director on an external Board (independent director). Is it salary or professional income? A: Independent / non-executive directors usually receive sitting fees

• commission, NOT salary. There’s no employer-employee relationship. This is professional income under Sec 28 – TDS deducted u/s 194J at 10%. ITR-3 (or ITR-4 if you opt for 44ADA presumptive) is the right form, not ITR-2.

Q: I hold ESOPs in a Pvt Ltd. ESOPs are not yet vested. Do I disclose? A: Until ESOPs vest you don’t own the underlying shares – only an option. No disclosure under D111 yet. Once vested, even before sale, you hold unlisted shares – D111 applies.

Q: I’m a director of a foreign company. Is D110 still triggered? A: Yes. D110 doesn’t restrict to Indian companies. Foreign directorship triggers ITR-2 + Schedule FA disclosure of foreign asset holdings.

Q: My company recently IPO’d and the shares I hold are now listed. Do they still count as unlisted for ITR purposes? A: They count as unlisted at the time you held them as unlisted. The disclosure for ITR-2 covers any time during the year – so if you held unlisted shares from April-September and then they listed in October, D111 still applies for AY 2026-27.

Q: I’m a director in a Section 8 company (non-profit). Same treatment? A: Yes. D110 doesn’t carve out Section 8 / charitable companies. Disclose all directorships.

Q: I sold my unlisted shares this year. How is the CG taxed? A: Unlisted shares are Section 112 (not 112A) for LTCG: 20% with indexation, or 12.5% without indexation (post-23-Jul-2024 transitional choice for those acquired pre-23-Jul-2024). Holding period for “long-term” is 24 months, not 12. Use BharatTax’s CG schedule with asset type OTHER_ASSET + unlisted shares sub-classifier.

Q: I have ESOPs that vested + I sold them in the same year. Where do I report? A: Two separate events:

• Vesting: perquisite under Section 17(2) – already in your salary schedule via Form 16 (employer’s TDS).
• Sale: capital gain in Schedule CG. Cost basis = the FMV at vesting (not exercise / strike price) per Sec 49(2AA). Holding period starts from vesting date.

Q: My company has a “Director” name plate but technically I’m the founder-CEO running operations. Do I need to disclose? A: If you’re on the company’s Board (registered with ROC), yes – disclose under D110. If “Director” is just a courtesy designation without ROC registration, you’re not a director for ITR purposes. Check MCA’s records.

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Verification checklist

• [ ] All ... markers above resolved.
• [ ] Confirm D110 + D111 ITR-1 disqualification text.
• [ ] Confirm Schedule of Companies + Schedule of Unlisted Shares field requirements per current ITR-2 schema.
• [ ] Confirm BharatTax UI surfaces these schedules when D110 / D111 flagged.
• [ ] Confirm AY 2026-27 surcharge thresholds.
• [ ] Run fixture through BharatTax + replace approximations.
• [ ] Persona name uniqueness in _PERSONAS.md.