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.
2. He held unlisted equity shares at any time during the year.

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

The ITR-1 conditions for AY 2026-27 shut out, among others, a person who:

• is a director in a company – listed or unlisted, Indian or foreign; or
• has held unlisted equity shares at any time during the previous year – including shares in one’s own start-up, a family company or an angel investment.

ITR-4 carries the same two exclusions. ITR-2 (or ITR-3, with business income) is the return for such a person.

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 ITR-1 is still unavailable for the year.

Listed shares don’t count. Only unlisted shares. Listed equity (NSE / BSE) is fine for ITR-1, subject to its capital-gains limits (no short-term gain; Section 112A gains up to ₹1.25 lakh).

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)
• Type of company (domestic / foreign)
• Whether its shares are listed or unlisted

Schedule “Unlisted equity shares held”

Per company in which you hold unlisted shares:

• Company name + PAN
• Type of company (domestic / foreign)
• Opening balance (number of shares, cost)
• Shares acquired during the year (number, date of subscription or purchase, face value, and issue price or purchase price per share)
• Shares transferred during the year (number, sale consideration)
• Closing balance (number of shares, cost)

(Fields as in the CBDT ITR-2 schema for AY 2026-27, version 1.2.)

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). Fees and commission paid to a non-executive or independent director are not salary; tax on them is deducted under Section 194J(1)(ba). 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. A director’s fee for board attendance, with no employer–employee relationship, is not salary; offered as business or professional income it takes the return to ITR-3. Whole-time directors paid as employees report salary in 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
• Type of company: Domestic
• Shares listed? No (unlisted)

Unlisted shares held

Sahir adds:

• Company name + PAN: Stratos Mobility Pvt Ltd, AABCS1234D
• Opening balance: 5,000 shares, cost ₹5,00,000
• Shares acquired during year: 0
• Shares transferred during year: 0
• Closing balance: 5,000 shares, cost ₹5,00,000

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: ₹25,000 (self and family – the Section 80D(2)(a) cap below age 60)
• 80CCD(1B): ₹50,000 (NPS Tier-1)
• 80TTA: ₹6,000 (savings interest)

Total Chapter VI-A (old regime): ₹2,31,000.

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	–	₹2,31,000
Total Income (Sec 288A)	₹33,75,000	₹31,66,600

Step 9 – Compute and compare

	New regime	Old regime
Tax on slab	₹5,92,500	₹7,62,480
87A rebate	₹0	₹0
Cess 4%	₹23,700	₹30,499
Total tax	₹6,16,200	₹7,92,980
TDS	₹4,80,000	₹4,80,000
Balance payable	₹1,36,200	₹3,12,980

New regime saves ₹1,76,780. 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

1. Filing ITR-1 when you’re a director. ITR-1 is not available to a director in a company.
2. Leaving out a company you resigned from. The disclosure covers any company in which you were a director at any time during the year, so a February 2026 resignation is still reported.
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. (Interest or remuneration from an LLP is business income under Section 28(v), which takes the return to ITR-3.)
4. Unlisted shares from your spouse’s company. Unlisted shares received by gift or inheritance count too; the test is holding them at any time in the year.
5. Confusing PSU/listed-foreign-company directorships. Both count; the ITR-2 schedule asks whether the company is domestic or foreign and whether its shares are listed.
6. Founder ESOPs. An option is not a share. Shares allotted on exercise of an ESOP in a private company are unlisted equity shares from allotment.
7. Not aligning DIN with ROC records. The DIN entered should match the one on the MCA records.

6. FAQs

Q: I’m a non-executive director on an external Board (independent director). Is it salary or professional income? A: Sitting fees and commission paid to a non-executive or independent director, with no employer–employee relationship, are not salary. Tax is deducted under Section 194J(1)(ba) at 10 per cent. Whether the receipt is business or professional income or income from other sources depends on the facts; offered as business or professional income, it takes the return to ITR-3.

Q: I hold ESOPs in a Pvt Ltd. ESOPs are not yet vested. Do I disclose? A: An option – vested or not – is not a share, so it is not reported as an unlisted shareholding. Once the option is exercised and shares are allotted, those shares are unlisted equity shares: ITR-1 is then unavailable and the ITR-2 schedule applies.

Q: I’m a director of a foreign company. Is ITR-1 still ruled out? A: Yes. The ITR-1 bar covers a director in any company, and the ITR-2 director schedule records whether the company is domestic or foreign. Schedule FA (for a resident) is a separate question: it covers foreign assets and accounts, including accounts over which there is signing authority.

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, ITR-1 is still unavailable for AY 2026-27.

Q: I’m a director in a Section 8 company (non-profit). Same treatment? A: Yes. The bar applies to a director in any company, Section 8 companies included.

Q: I sold my unlisted shares this year. How is the CG taxed? A: Unlisted shares are Section 112 (not 112A) for LTCG: 12.5 per cent without indexation for transfers on or after 23 July 2024. The indexation option in Section 112 covers only land or buildings, not shares. Holding period for “long-term” is 24 months, not 12. The sale is also shown in the unlisted-shares schedule (shares transferred and sale consideration).

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

• Allotment on exercise: perquisite under Section 17(2)(vi), valued at fair market value on the date of exercise less the amount paid – already in your salary schedule via Form 16 (employer’s TDS). Vesting alone is not taxed.
• Sale: capital gain in Schedule CG. Cost = the value taken as the perquisite (Section 49(2AA)). Holding period runs from the date of allotment or transfer of the shares.

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 it. If “Director” is just a courtesy designation without ROC registration, you’re not a director for ITR purposes. Check MCA’s records.