Reporting Capital Gains in the Return

The tax on a year of share and fund sales is often settled before the return is opened. Most errors come in the return itself:

• a gain entered under the wrong item, so it is taxed at the wrong rate;
• a Schedule 112A total that does not match Schedule CG;
• a buyback loss claimed without the matching dividend; or
• a loss carried forward from a return filed late.

The portal’s validation rules reject some of these and let others through. This guide follows the capital gains reporting in ITR-2 and ITR-3 for assessment year 2026-27 (sales in financial year 2025-26), schedule by schedule.

Which Act and which form

Sales in financial year 2025-26 are reported under the Income-tax Act, 1961, in the forms notified on 30 March 2026:

• ITR-2: for individuals and HUFs without business income. Substituted by the Income-tax (Third Amendment) Rules, 2026 (G.S.R. 227(E), Notification No. 46/2026). They apply “in respect of returns filed for A.Y. 2026-27”.
• ITR-3: for individuals and HUFs with business or professional income, including F&O or intraday trading. Substituted by the Income-tax (Fourth Amendment) Rules, 2026 (G.S.R. 228(E), Notification No. 47/2026). Schedule CG and Schedule 112A in ITR-3 follow the same layout as in ITR-2.
• ITR-1: The ITR-1 validation rules for AY 2026-27 accept long-term capital gains under section 112A in a limited way. They say the figure “should not be more than 1,25,000”. Any short-term gain, or a larger long-term gain, needs ITR-2 or ITR-3.

Sales from 1 April 2026 are taxed under the Income-tax Act, 2025 and will be reported, from tax year 2026-27, in the return under section 263 in the form notified for that year.

Schedule CG: where each gain goes

Schedule CG is in two parts, short-term (A) and long-term (B). Each item has its own rate, so the item chosen decides the tax. The items that matter for securities in ITR-2 for AY 2026-27 are:

Item	What goes in it	Rate (FY 2025-26)
A2	Equity shares, equity-oriented fund units and business trust units “on which STT is paid under section 111A”	20 per cent
A5	“Sale of assets other than at A1 or A2 or A3 or A4”, including section 50AA gains on debt funds and market-linked debentures, unlisted shares, and off-market sales	Slab (applicable) rate
A(A)	“Capital Loss on buy back of shares” (short-term)	Loss
B2	Listed securities “(other than a unit) or zero coupon bonds as per Section 112(1)”, such as listed bonds and listed shares sold outside section 112A	12.5 per cent
B3	LTCG under section 112A, taken from column 14 of Schedule 112A, less any section 54F deduction	12.5 per cent (after the Rs 1.25 lakh exclusion)
B8	“Sale of assets where B1 to B7 above are not applicable”, such as non-equity fund units held long-term and unlisted shares	12.5 per cent
B(A)	“Capital Loss on buy back of shares” (long-term)	Loss

Items A3, A4 and B4 to B7 are for non-residents and foreign institutional investors.

The section 94(7) and 94(8) line. Items A2, A4 and A5 each have a line (2d, 4d, 5d) for the loss disallowed under section 94(7) or 94(8), entered as a positive figure and added back. This is where a dividend-stripping or bonus-stripping loss is reversed (see Buybacks, Bonus Shares and Splits).

Deductions in A2 and A5. The deductions are “under section 48”:

• cost of acquisition without indexation;
• cost of improvement without indexation; and
• expenditure wholly and exclusively in connection with transfer.

STT is not such expenditure; the last proviso to section 48 bars its deduction.

Table E (set-off). Part E of Schedule CG sets current-year losses against gains of each rate class:

• short-term at 20 per cent, at 30 per cent, at applicable rates and at DTAA rates; and
• long-term at 12.5 per cent and at DTAA rates.

The statutory limits apply: a long-term loss only against long-term gains (sections 70 and 74).

Table F (dates). Part F asks for the gains of each class by date of accrual: up to 15 June, 16 June to 15 September, 16 September to 15 December, 16 December to 15 March, and 16 March to 31 March. These periods match the advance tax instalments. The figures are used in computing interest under section 234C, where advance tax could not have been paid on a gain before it arose (see Advance Tax and Self-Assessment Tax).

Schedule 112A, column by column

Schedule 112A lists the transfers whose total becomes item B3. It is headed “From sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under section 112A”. Its columns are:

Column	Content
1a	Whether the share or unit was acquired on or before 31 January 2018, or after
2, 3	ISIN and name
4, 5	Number sold and sale price per share or unit
6	Full value of consideration: column 4 x column 5 for pre-2018 holdings, otherwise the full value
7	Cost without indexation: the higher of columns 8 and 9
8	Actual cost of acquisition
9	For assets acquired before 1 February 2018, the lower of column 6 and column 11
10, 11	Fair market value per share or unit on 31 January 2018, and in total (column 4 x column 10), “as per section 55(2)(ac)”
12	Expenditure wholly and exclusively in connection with the transfer
13	Total deductions (column 7 + column 12)
14	Balance (column 6 - column 13), carried to item B3 of Schedule CG

Columns 7, 9 and 11 reproduce the grandfathering formula in section 55(2)(ac). The higher of cost and the lower of fair market value and sale price is the cost (see Capital Gains on Listed Shares and Equity Funds).

What the portal checks. The ITR-2 validation rules for AY 2026-27 (version 1.0) build these formulas in:

• rules 84 to 90 check the column arithmetic;
• rule 134 requires item B3a of Schedule CG to equal the total of column 14; and
• rule 173 provides that columns 4, 5, 10 and 11 “cannot be greater than zero” where the drop-down says the asset was acquired after 31 January 2018.

The JSON schema for ITR-2 (version 1.2) follows the same split. For holdings acquired on or before 31 January 2018 it asks for the ISIN. For later holdings it takes the code “INNOTREQUIRD” for ISIN and “CONSOLIDATED” for the name. The Schedule therefore needs scrip-wise rows only for pre-2018 holdings. Later acquisitions can be reported as one consolidated row of sale value, cost and expenses.

The Rs 1.25 lakh exclusion in section 112A(2)(i) has no column in Schedule 112A. Column 14 and item B3 carry the full gain. Schedule SI lists section 112A gains at 12.5 per cent.

Other schedules that capital gains touch

• Schedule OS: a buyback in financial year 2025-26 is a dividend under section 2(22)(f), entered at item 1a(iii). Schedule CG says the buyback loss at A(A) or B(A) “can be claimed only if respective Dividend income u/s 2(22)(f) is offered” there, and ITR-2 validation rule 600 enforces it.
• Schedule SI: income chargeable at special rates under sections 111A, 112 and 112A flows here from Schedule CG and Schedule BFLA.
• Schedules CYLA, BFLA and CFL: current-year set-off, brought-forward set-off and losses carried forward. The ITR-2 schema change document of 13 August 2026 (version 1.2) added a field to Schedule CG, CYLA, BFLA and SI recording edits made to auto-populated details.
• Schedule AL: assets and liabilities, where total income exceeds the limit stated in the form.
• Schedule 115AD(1)(b)(iii) proviso: the non-resident counterpart of Schedule 112A. The validation rules require one or the other to be filled, not both.

What to have ready

• Broker and registrar capital gains statements, with the split between section 111A, section 112A, section 50AA and other gains, and the pre- and post-31 January 2018 split for section 112A.
• 31 January 2018 prices (highest quoted price) or NAVs for pre-2018 holdings, scrip by scrip.
• The AIS and TIS, to reconcile every reported sale and dividend (see Reconciling AIS, TIS and Form 26AS).
• Last year’s Schedule CFL, for brought-forward capital losses and their year of origin.
• Buyback dividends and TDS under section 194 (Form 16A or the AIS).
• Challans for advance tax and self-assessment tax.

Filing on the portal

The e-filing portal’s downloads page for AY 2026-27 lists, for ITR-2 and ITR-3:

• the offline utility;
• the JSON schema and the schema change document; and
• the validation rules.

The return can be prepared online or in the offline utility. A return that breaks a validation rule is flagged before it is accepted, so the arithmetic checks above apply to both routes. Walkthroughs of complete returns are in How to file ITR-2 with salary plus listed-equity capital gains and How to file ITR-2 as a director with unlisted equity.

Due dates, verification, fees and corrections

• Due date. Under Explanation 2 to section 139(1), as substituted by the Finance Act, 2026:
  • 31 July 2026 for ITR-2 filers;
  • 31 August 2026 for those with unaudited business income; and
  • 31 October 2026 for audited cases, extended to 21 November 2026 by CBDT Circular No. 07/2026 (see The Tax Audit).
• Belated return. Section 139(4) allows a return “before three months prior to the end of the relevant assessment year”, that is, by 31 December 2026, or before assessment is completed if earlier. Section 234F charges a fee of Rs 5,000, or not more than Rs 1,000 where total income does not exceed Rs 5 lakh.
• Losses need a timely return. A capital loss, or a business or speculation loss, is carried forward only if “determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139” (section 80). A belated return reports the loss but does not carry it forward.
• Verification. The return is verified electronically or by ITR-V within the time allowed (see E-Verifying a Return).
• Corrections.
  • After the Finance Act, 2026, section 139(5) allows a revised return “at any time before the end of the relevant assessment year”, that is, by 31 March 2027, subject to section 234-I.
  • After that, an updated return may add income.
  • A mismatch between the return and the AIS may lead to an intimation adjustment (see The Intimation under Section 143(1)).
  • See Belated and Revised Returns.

Summary

1. Choose the form: ITR-1 only for section 112A gains within the limit its rules allow, ITR-2 without business income, and ITR-3 with it.
2. Put each gain in the item that carries its rate:
   • A2 for section 111A gains;
   • A5 for section 50AA and other short-term gains;
   • B2 for listed bonds and listed shares outside section 112A;
   • B3 (through Schedule 112A) for section 112A gains; and
   • B8 for other long-term gains.
3. In Schedule 112A, report pre-February 2018 holdings scrip by scrip with the 31 January 2018 value. Later holdings may be consolidated.
4. Claim a buyback loss only with the section 2(22)(f) dividend offered in Schedule OS.
5. Fill Table F by date of accrual, so that interest under section 234C is computed correctly.
6. File by the due date to carry losses forward, and correct mistakes by a revised return by 31 March 2027.

This completes the set on shares and mutual funds. Capital gains on property are covered in Capital Gains on Selling Property.