How to file ITR-2 with salary plus listed-equity capital gains (AY 2026-27)

Meet Ishan Khurana, 32, a software engineer at Phi Tech Industries in Pune. His employer pays him ₹23.5 lakh a year. On the side, he trades listed equity. During FY 2025-26 he had two material exits:

• Short-term: Sold Lambda Capital shares 5 months after buying. Profit ~₹94,000.
• Long-term: Sold Mu Engineering shares ~3.5 years after buying. Profit ~₹6.99 lakh.

With both kinds of capital gains in the year, ITR-1 is no longer available – ITR-2 takes over. This article walks Ishan through filing ITR-2 manually, captures the post-Finance-Act-2024 rate changes on listed-equity gains, and shows how the Section 87A rebate behaves when special-rate income is involved.

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1. Why ITR-2, not ITR-1?

ITR-1’s eligibility test D106 (per backend/engines/form_selector.py) disqualifies any filer with capital gains income in the year. The moment you have an STCG / LTCG entry on the questionnaire, BharatTax auto-routes you to ITR-2 – you don’t have to make the call. ITR-1 disqualification on CG presence per current form_selector.py D106.

ITR-2 is for individuals and HUFs with:

• Salary / pension
• Up to multiple house properties (no cap)
• Capital gains (any flavour)
• Other sources (incl. winnings, family pension)
• Foreign income, foreign assets (with mandatory Schedule FA)

ITR-2 disqualifies if you have business or profession income (non-presumptive) – those go to ITR-3.

Ishan: salary + CG only. ITR-2 fits.

2. Listed-equity gains – the key sections and rates

Holding period	Section	Tax treatment	Rate (post-23-Jul-2024)
≤ 12 months	111A	STCG, special rate	20% (was 15% pre-Finance Act 2024)
> 12 months	112A	LTCG, first ₹1.25 lakh exempt, balance taxable	12.5% (was 10%)

Both rates apply only to STT-paid, listed-exchange equity (and equity-oriented mutual funds). Sale through OTC / off-market routes loses the 111A/112A privilege and gets taxed under the slab regime (OTHER_ASSET in BharatTax) at potentially much higher rates.

Critical caveats:

• The ₹1.25 lakh annual exemption under 112A applies across all 112A scrips combined – it’s not per-scrip.
• The new 20% / 12.5% rates apply to sales on or after 23 July 2024. Sales before that date use the old 15% / 10%. BharatTax’s CG engine reads dateOfSale and applies the right rate automatically. 23-Jul-2024 cutoff in <code>backend/engines/v2025/schedule_cg.py</code>.
• Special-rate income (111A, 112A) does not benefit from the Section 87A rebate under either regime. The rebate applies to slab tax only.

3. What you need

Document	Why
Form 16	Salary breakup.
Broker statement / contract notes / capital-gains report	Each transaction’s dates, price, charges. Most brokers (Zerodha, Groww, Upstox, ICICI Direct) issue an annual capital-gains statement that maps directly to BharatTax’s CG schedule.
AIS	Lists every reported sale by ISIN. Catches missed sales – a frequent error.
Demat statements	For ISIN + holding period verification.
PAN, Aadhaar, bank details	Standard.

4. Step-by-step walkthrough

Step 1 – Sign in

Step 2 – Skip last-year import

Step 3 – Personal information

Standard PAN + address + bank, but Ishan’s higher income means he’ll also need to verify any AIS-reported foreign signals (he has none).

Step 4 – Questionnaire signals ITR-2

The crucial question:

• Sources of income: ☑ Salary, ☑ Capital Gains, ☑ Other Sources.

The moment “Capital Gains” is ticked, BharatTax internally re-routes to ITR-2. You’ll see “ITR-2” appear in the form badge at the top of the Income Data dashboard.

Step 5 – Income Data dashboard with CG card

ITR-2’s dashboard shows additional cards: Capital Gains and the disclosure-only Schedule AL (assets/liabilities, mandatory if total income > ₹50 lakh) and Schedule FA (foreign assets, mandatory if any foreign holding).

Ishan’s total income will be around ₹30 lakh – so the Schedule AL disclosure becomes mandatory. He’ll fill that in too. AL threshold ₹50L for AY 2026-27; some sources say it’s unchanged from the Finance Act 2017 introduction.

Step 6 – Salary

Same flow as ITR-1 articles:

• Employer: Phi Tech Industries Pvt Ltd, TAN PUNP12345D
• Basic: ₹15,00,000
• HRA: ₹6,00,000
• Special: ₹2,50,000
• Profession tax: ₹2,500
• TDS: ₹2,50,000

Gross salary ₹23,50,000.

Step 7 – Capital Gains schedule

Click View on the Capital Gains card. The CG schedule editor opens. Click + Add Transaction.

STCG 111A (Lambda Capital Ltd)

• Asset Type: Listed Equity (STT paid) – Section 111A
• Description: Lambda Capital Ltd – short-term
• Date of purchase: 10-Mar-2025
• Date of sale: 22-Aug-2025
• ISIN: INE100A01010
• Sale consideration (full value): ₹5,00,000
• Cost of acquisition: ₹4,05,000
• Expenses on transfer (brokerage + STT + stamp + transaction): ₹1,000

BharatTax computes:

• Holding period: 5 months (< 12 months) → STCG 111A
• Gain: ₹5,00,000 − ₹4,05,000 − ₹1,000 = ₹94,000
• Tax @ 20% (post-23-Jul-2024 rate): ₹18,800

LTCG 112A (Mu Engineering Ltd)

Click + Add Transaction again.

• Asset Type: Listed Equity (STT paid) – Section 112A
• Description: Mu Engineering Ltd – long-term
• Date of purchase: 14-Jun-2022
• Date of sale: 02-Dec-2025
• ISIN: INE200B02020
• Acquired before 31-Jan-2018? No (so no grandfathering FMV adjustment under the Sec 112A FMV-cap-on-31-Jan-2018 transitional rule)
• No. of shares: 1,000
• Sale price per share: ₹1,500
• Cost per share: ₹800
• Expenses on transfer: ₹1,500

BharatTax computes:

• Holding: 3.5 years → LTCG 112A
• Gross gain: (1,500 − 800) × 1,000 − 1,500 = ₹6,98,500
• Less: ₹1.25 lakh exempt under 112A: ₹5,73,500 taxable
• Tax @ 12.5% (post-23-Jul-2024 rate): ₹71,687

The “acquired before 31-Jan-2018” toggle. For 112A scrips bought on or before 31 January 2018, Section 112A grandfathered gains accrued up to that date by allowing the higher of cost OR FMV-on-31-Jan-2018 as the cost basis. Ishan bought Mu in 2022 – well after the cutoff – so this toggle is OFF and FMV doesn’t matter.

Step 8 – Other sources + 80C + 80D

• Savings interest: ₹4,500 (negligible; 80TTA gives full deduction under old)
• 80C: PPF ₹1,50,000
• 80D: Self health insurance ₹25,000

Step 9 – Schedule TI and TTI breakdown

Compared to ITR-1, ITR-2’s TI breaks income into normal-rate and special-rate portions. Critical to read both halves:

Line	New regime	Old regime
Salary (after Sec 16)	₹22,75,000	₹22,97,500
OS (savings interest)	₹4,500	₹4,500
CG (special-rate, 111A + 112A above 1.25L exempt)	₹6,67,500	₹6,67,500
Gross Total Income	₹29,47,000	₹29,69,500
Less: Chapter VI-A (only on slab-rate income)	–	₹1,75,000
Total Income (Sec 288A)	₹29,47,000	₹27,94,500

figures derived; run fixture through BharatTax for exact values. Note: special-rate CG income does NOT receive Chapter VI-A deduction even under old regime.

Step 10 – Compute and compare

Tax computation splits in two parts: slab tax on non-special income, plus special-rate tax on CG.

	New regime	Old regime
Salary + OS taxable at slab	₹22,79,500	₹21,27,000
Tax at normal rates	₹3,33,850	₹4,53,100
87A rebate	₹0 (TI > ₹12L)	₹0 (TI > ₹5L)
Slab tax	₹3,33,850	₹4,53,100
STCG 111A (₹94,000 × 20%)	₹18,800	₹18,800
LTCG 112A (₹5,73,500 × 12.5%)	₹71,687	₹71,687
Special-rate tax	₹90,487	₹90,487
Cess 4% on (slab + special)	₹16,973	₹21,743
Total tax	₹4,41,310	₹5,65,330
TDS already paid	₹2,50,000	₹2,50,000
Balance payable	₹1,91,310	₹3,15,330

arithmetic against BharatTax compute output. Specifically confirm slab rates applied at AY 2026-27 widened bands.

BharatTax recommends New regime – saves approximately ₹1,24,020 (slab portion is significantly cheaper at the widened 4-8-12-16-20-24L bands; special-rate tax is identical).

Why does the special-rate tax not change between regimes? Sections 111A and 112A specify their own rates, independent of the slab system. The choice of slab regime (old vs new) only affects the slab-tax portion. So a high-income equity trader’s regime choice hinges entirely on which slab structure is cheaper for their non-CG income.

Step 11 – Schedule AL (mandatory, total income > ₹50 lakh)

Wait – Ishan’s total income is ~₹29 lakh, NOT above ₹50 lakh. So Schedule AL is NOT mandatory for him. (If he had a higher salary or larger CG year, AL would be required.) BharatTax greys out the AL card when total income is below the threshold.

AL threshold of ₹50 lakh confirmed for AY 2026-27.

Step 12 – Confirm regime, download JSON

Confirm New, download ITR-2 JSON, upload to incometax.gov.in. Note: ITR-2 JSON schema is v1.2 latest CBDT v1.4 schema release for AY 2026-27. As of session date (2026-05-06), CBDT hadn’t yet published v1.4 – BharatTax’s JSON download is locked until then; you can still download the COI PDF + Sahaj-style PDF for record-keeping. JSON-locked status at time of publishing.

5. Common mistakes for equity-CG filers

review all items.

1. Forgetting the 23-Jul-2024 cutoff. Sales BEFORE 23 July 2024 use 15% (STCG 111A) and 10% (LTCG 112A above ₹1L threshold). Sales ON OR AFTER use 20% / 12.5% with ₹1.25L threshold. BharatTax handles this if dateOfSale is correct – a wrong date silently computes the wrong rate.
2. Mixing equity-oriented MFs with debt MFs. Equity-oriented MFs (≥ 65% equity) get 111A/112A treatment. Debt MFs (post-1-Apr-2023 acquisitions) lose indexation entirely AND are taxed as STCG at slab rate regardless of holding period (per Finance Act 2023). Use the right asset-type code in the schedule.
3. Claiming the ₹1.25L exemption per scrip. It’s an aggregate annual exemption across all 112A scrips. Not per-stock.
4. Missing intraday equity gains. Intraday equity is speculative business income under Section 43(5), NOT capital gains. Forces ITR-3, not ITR-2. If you have intraday in addition to delivery-based sales, you’re on the wrong form. (Covered in “ITR-3: salary + intraday speculation”.)
5. Forgetting STT on the off-market exit. If you sold via an off-market deal (not on the exchange), STT was not paid → the sale loses 111A/112A treatment → gain taxed at slab rate. Use OTHER_ASSET asset type for those.
6. Underreporting AIS-listed sales. AIS lists every broker-reported sale. Cross-check your CG schedule against AIS line items before submitting.
7. No grandfathering for post-2018 acquisitions. The “Acquired before 31-Jan-2018” toggle only applies to scrips bought on or before that date. Don’t toggle it ON for newer purchases – the FMV-cap math doesn’t apply.
8. Confusing 112A (listed equity LTCG) with 112 (everything else LTCG). 112A = listed equity / equity MFs (special rate, 1.25L exemption). Sec 112 = unlisted shares, debt MFs, gold, real estate (different rates and indexation rules).

6. FAQs

all answers.

Q: I had only ₹50,000 in LTCG 112A this year (under the ₹1.25 lakh exemption). Do I still need to file ITR-2? A: Yes – the moment you have ANY capital gain (even fully exempt), ITR-1 disqualifies. File ITR-2 with the LTCG 112A row entered; the schedule reflects the exemption automatically and tax is zero on that head.

Q: I had a small STCL (short-term capital loss) of ₹20,000 from one stock and a STCG of ₹1,00,000 from another. Net taxable? A: STCL offsets STCG (intra-head set-off under Section 70). Net STCG ₹80,000 → tax @ 20% = ₹16,000. Enter both transactions; BharatTax nets them within Schedule CG.

Q: My broker’s annual capital-gains report shows the rates as 15% and 10% – not 20% and 12.5%. Why? A: Many brokers publish rates as of the start of FY. If your sales are post-23-Jul-2024 (within FY 2025-26), the higher rates apply. Trust BharatTax’s date-driven computation, not the broker’s header-page summary.

Q: I sold US-listed stocks (Apple, Google). Are they 112A too? A: No. Section 112A applies only to STT-paid, India-listed equity. US-listed shares are treated as unlisted shares under Section 112 – LTCG 20% with indexation (or 12.5% without indexation, your choice for sales pre-23-Jul-2024 only). Plus you have a Schedule FA reporting obligation. foreign-listed equity treatment under current law.

Q: I had an LTCG loss in equity 112A (sold below cost after >12 month hold). Can I set it off against STCG? A: LTCL from 112A can be set off against any LTCG (per Section 74 intra-head rules); cannot be set off against STCG. Carry forward unutilized LTCL up to 8 years.

Q: My CTC includes ESOPs that vested this year. Where do I report? A: ESOP vesting is taxed twice – (i) perquisite income at vesting (taxable as salary, employer adds to Form 16), (ii) capital gain on eventual sale. The vesting-side perquisite is already in your salary schedule via Form 16. The sale-side gain goes in Schedule CG when you sell. Holding period for the CG side starts from the date of allotment (vesting), not grant.

Q: I bought shares in a private (unlisted) company. Are 111A/112A applicable on sale? A: No. Unlisted shares are NOT 111A/112A. They go under “Other Asset” with Section 112 treatment. They also trigger ITR-1 disqualification D111 (held unlisted equity shares at any time during the year), forcing ITR-2. (Covered in “Director / unlisted shares”.)

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Verification checklist

• [ ] All ... markers above resolved.
• [ ] Confirm STCG 111A rate 20% post-23-Jul-2024.
• [ ] Confirm LTCG 112A rate 12.5% post-23-Jul-2024 with ₹1.25L exemption.
• [ ] Confirm Schedule AL threshold ₹50L for AY 2026-27.
• [ ] Run fixture through BharatTax + replace approximations with exact compute output.
• [ ] Confirm ITR-2 JSON schema status (v1.4 release for AY 2026-27).
• [ ] Persona name uniqueness in _PERSONAS.md.
• [ ] Verify the cross-references to companion ITR-3 article 12 (intraday) and ITR-2 article 04 (director / unlisted) link correctly once those articles exist.