How to File ITR-2 If You Have Mutual Fund and Stock Market Gains

Every year, millions of Indian investors who hold mutual funds or stock market investments arrive at the filing season and face the same moment of uncertainty. They know they need to file an income tax return.

They are reasonably sure they need to file ITR-2 and not the simpler ITR-1. But the form itself is long, the schedule for capital gains runs across multiple tables, and the instructions assume a level of tax knowledge that most investors have not had reason to develop.

This guide walks through the ITR-2 filing process specifically for investors with capital gains from equity mutual funds, debt mutual funds, and direct stock market transactions. It covers which form to use, what documents to collect before you begin, how capital gains are classified and entered, how losses are handled, which schedule maps to which type of gain, and what commonly goes wrong. The tax rates cited are applicable for FY2025-26 (Assessment Year 2026-27).

The income tax department offers several ITR forms, and using the wrong one invalidates the return. For most salaried investors with investment income from mutual funds and stocks, the choice is between ITR-1 and ITR-2, with ITR-3 becoming relevant if you have trading income treated as business income.

Form	Who Should Use It	Investment Income Allowed
ITR-1 (Sahaj)	Salaried individuals with income up to Rs 50 lakh; only one house property; no capital gains	Cannot be used if you have capital gains of any kind
ITR-2	Individuals and HUFs with income from salary, house property, and capital gains; no business or professional income	All capital gains: equity, debt, property, gold, any other asset
ITR-3	Individuals and HUFs with business or professional income in addition to other income	All capital gains; also required if F&O trading is treated as business income
ITR-4 (Sugam)	Individuals with presumptive business income under Sections 44AD or 44ADA	Cannot be used if you have capital gains other than from equity shares at concessional rates

The rule is simple: if you have redeemed any mutual fund units or sold any shares during the financial year, even if the gain or loss is small, you must file ITR-2 (or ITR-3 if you have business income). You cannot use ITR-1. Many investors make the mistake of filing ITR-1 because they see their Form 16 and assume salary is their only income, not realising that a mutual fund redemption of even Rs 5,000 disqualifies them from the simpler form.

If you have engaged in futures and options trading, the tax treatment depends on how the activity is classified. F&O trading is generally considered business income and non-speculative in nature, which means ITR-3 is required. Equity delivery-based trading, including long-term and short-term capital gains from stocks, continues to use ITR-2.

Filing ITR-2 for investment income without the right documents leads to errors, omissions, and likely a defective return notice. The following documents should be collected before opening the filing portal.

• Form 16 (from employer): Part A covers TDS details; Part B covers the salary computation and deductions.

• Annual Information Statement (AIS): Available on the income tax portal under the Services tab. AIS aggregates all financial information about you that has been reported to the income tax department, including capital gains from mutual funds and stocks, dividends, interest income, and TDS deductions. Review it carefully and reconcile any discrepancies before filing.

• Taxpayer Information Summary (TIS): A summarised version of AIS. Also available on the portal.

• Capital Gains Statement from your broker: Most brokers provide an annual capital gains statement that lists every transaction, the purchase date and cost, the sale date and proceeds, and the computed gain or loss for each transaction, split by STCG and LTCG.

• Capital Gains Statement from mutual fund AMCs or RTAs: CAMS and KFintech (formerly Karvy) are the two major RTAs in India. Both provide a consolidated capital gains statement covering all mutual fund transactions across all fund houses that use them. Some fund houses have their own RTA systems. Download the statement for the full financial year (1 April to 31 March).

• Form 26AS: The traditional TDS certificate available on the income tax portal; shows all TDS deducted on your PAN. Now largely subsumed by AIS but still worth checking for older TDS entries.

• Dividend warrants or statements: If you received dividends from shares or mutual funds during the year, these are taxable as income. AMC statements and the AIS will reflect these.

• Interest certificates from banks and post office: All interest income must be declared.

• Previous year's carry-forward loss details: If you have capital losses carried forward from earlier years, note the amounts by type (STCL, LTCL). These are used to offset this year's gains.

Before touching the form, you need to understand how each investment transaction is classified for tax purposes. Different types of gains are reported in different schedules and taxed at different rates.

Asset Type	Holding Period for LTCG	STCG Rate	LTCG Rate (FY2025-26)
Listed equity shares (delivery-based)	More than 12 months	20%	12.5% on gains above Rs 1.25 lakh per year
Equity mutual funds (equity-oriented)	More than 12 months	20%	12.5% on gains above Rs 1.25 lakh per year
Debt mutual funds (units purchased from 1 April 2023)	No LTCG distinction; all gains at slab rate	Slab rate	Slab rate (LTCG classification removed)
Debt mutual funds (units purchased before 1 April 2023)	More than 36 months	Slab rate	20% with indexation
Hybrid funds (equity-oriented; more than 65% in equity)	More than 12 months	20%	12.5% above Rs 1.25 lakh
Hybrid funds (debt-oriented; less than 65% in equity)	More than 36 months (for pre-April 2023 units) or all at slab	Slab rate	20% with indexation (pre-April 2023) or slab rate (post-April 2023)
Gold ETFs and gold funds	Units post 1 April 2023: all at slab; pre-April 2023 units: 36 months for LTCG	Slab rate	20% with indexation (pre-April 2023 units); slab rate for post-April 2023
REITs and InvITs listed on exchange	More than 36 months	Slab rate	12.5% without indexation

The distinction between equity-oriented and debt-oriented mutual funds for tax purposes is whether the fund maintained an average equity allocation of 65 percent or more during the financial year. The fund's tax classification is typically mentioned in the capital gains statement issued by the AMC or RTA. If you are unsure, check with the fund house.

The Rs 1.25 lakh annual LTCG exemption applies only to equity and equity-oriented investments taxed at the 12.5 percent rate. It is not applied transaction by transaction; it is an annual threshold across all qualifying LTCG. If your total LTCG from equity and equity mutual funds is Rs 1.80 lakh in a year, only Rs 55,000 is taxable (the amount above Rs 1.25 lakh).

ITR-2 is structured in parts and schedules. For an investor with salary income and capital gains, the sections that require the most careful attention are Schedule CG (Capital Gains) and the relevant income sections. Here is an overview.

Section or Schedule	What You Enter Here	Relevant for Investors?
Part A: General Information	PAN, name, residential status, filing status, bank details	Yes; verify pre-filled data is correct
Part B-TI and Part B-TTI	Total income and total tax computation; auto-populated from schedules	Review carefully; do not edit manually
Schedule S: Salary	Salary income details from Form 16	Yes if salaried
Schedule HP: House Property	Rental income and home loan interest	Yes if applicable
Schedule CG: Capital Gains	All capital gain and loss transactions; the most important schedule for investors	Yes; primary focus of this guide
Schedule OS: Other Sources	Interest income, dividend income, and any other income	Yes; dividend and interest must be declared here
Schedule VIA: Deductions	80C, 80D, 80CCD, and other deductions	Yes if claiming deductions under old regime
Schedule CFL: Carry Forward Losses	Capital losses to be carried forward to future years	Yes if you have unabsorbed losses
Schedule BFLA: Brought Forward Losses	Prior year losses being set off against current year gains	Yes if you have brought-forward losses from prior years
Schedule AL: Assets and Liabilities	Required only if total income exceeds Rs 50 lakh	Yes for high-income investors

Schedule CG is where you enter all capital gain and loss transactions from the financial year. It is divided into sub-sections for different types of gains: short-term gains taxable at special rates (equity STCG at 20 percent), short-term gains taxable at slab rates, long-term gains taxable at 12.5 percent (equity LTCG), long-term gains taxable at 20 percent with indexation (older debt and gold holdings), and long-term gains taxable at 12.5 percent without indexation (REITs and some other assets).

Within the ITR-2 online portal, Schedule CG typically has the following subsections.

• A1: Short-term capital gains from securities covered by Section 111A (listed equity and equity mutual funds; taxed at 20 percent STCG rate).

• A2: Short-term capital gains on assets other than those in A1, including debt mutual funds, gold, property, and other assets taxed at slab rates.

• B1: Long-term capital gains taxable at 12.5 percent under Section 112A (listed equity and equity mutual funds).

• B2: Long-term capital gains taxable at 20 percent with indexation under Section 112 (older debt funds with pre-April 2023 purchases, gold funds with pre-April 2023 purchases, property, etc.).

• B3: Long-term capital gains taxable at 12.5 percent without indexation (REITs, InvITs, and other specified assets).

Most investors filling ITR-2 for the first time will primarily be entering data in A1 (equity STCG), A2 (debt fund gains at slab rate), and B1 (equity LTCG). B2 is relevant only if you have older debt or gold fund units purchased before April 2023 or property gains. B3 is relevant mainly for REIT or InvIT investors.

Within each subsection, the portal asks you to enter the full amount of gains (not net of losses). Losses from the same category are entered separately, and the form computes the net position. Do not try to manually net gains and losses before entry; the form handles this.

Equity capital gains from direct stocks and equity mutual funds are the most common entries in Schedule CG for most retail investors. The data you need comes from your broker's capital gains statement and your mutual fund RTA statement.

For STCG from equity (Section 111A): Enter the total short-term capital gain from all listed equity transactions during the year. Your broker's statement will show this as a single total or line by line. Enter the gross STCG; any STCG losses are entered separately.

For LTCG from equity (Section 112A): This section requires slightly more detail. Under Section 112A, the first Rs 1.25 lakh of LTCG in a year is exempt. The form will ask for the full LTCG amount before the exemption, and the exemption of up to Rs 1.25 lakh will be automatically applied.

The portal also requires you to report the opening and closing values of certain equity investments under Section 112A, related to grandfathering. The grandfathering provision applies to equity gains from shares purchased before 1 February 2018. For such shares, the deemed cost of acquisition is the higher of the actual purchase price or the fair market value as on 31 January 2018. The broker's capital gains statement should already reflect the grandfathered cost; you do not need to compute this manually.

The first Rs 1.25 lakh of LTCG from equity and equity mutual funds each year is exempt from tax. This threshold is applied annually across all qualifying long-term equity gains combined, not separately for each fund or stock.

Entering Debt Mutual Fund and Other Slab-Rate Capital Gains

Gains from debt mutual funds purchased on or after 1 April 2023 are taxed at slab rates regardless of holding period, and they are entered in section A2 of Schedule CG. These gains are added to your total income and taxed at your applicable slab rate.

For debt mutual funds purchased before 1 April 2023 where the holding period is more than 36 months, the gain is a long-term capital gain taxable at 20 percent with indexation and should be entered in section B2. For such holdings with a holding period of 36 months or less, the gain is short-term and taxed at slab rate, entering in A2.

Your mutual fund RTA capital gains statement (from CAMS or KFintech) will classify each redemption as STCG or LTCG and will specify whether the applicable rate is the special rate or the slab rate. Use this classification directly.

Debt fund losses from units purchased after April 2023 are similarly classified as short-term capital losses and can be set off against both STCG and LTCG from any asset class, which provides useful flexibility in planning.

Capital Losses: Setting Off and Carrying Forward

Capital losses must be carefully handled in Schedule CG. The rules about which losses can be set off against which gains are specific, and using them correctly can significantly reduce your tax liability.

Type of Loss	Can Offset Against	Carry Forward Period	Key Condition
Short-Term Capital Loss (STCL)	Both STCG and LTCG from any capital asset	8 years; only against capital gains	Cannot offset against salary or other income
Long-Term Capital Loss (LTCL)	LTCG only; cannot offset STCG	8 years; only against LTCG	Cannot offset against STCG or any other income
Loss from equity STCL (Section 111A)	STCG and LTCG from any capital asset; including non-equity STCG	8 years	Standard STCL rules apply
Loss from equity LTCL (Section 112A)	Only LTCG; primarily useful against other LTCG	8 years; only against LTCG	Post-January 2018 LTCL from equity now set-offable against other LTCG
Speculative loss (intraday equity)	Only speculative gains	4 years; only against speculative profits	Intraday trading losses cannot offset delivery-based capital gains

When entering losses in the ITR-2 portal, enter them in the appropriate loss section within Schedule CG. The system will automatically compute the set-off against gains in the correct priority: STCL first against STCG, then against LTCG; LTCL only against LTCG.

If you have brought-forward losses from prior years (which means you filed your return on time in those years and the losses were declared), use Schedule BFLA to enter them. These prior-year losses will be set off against the current year's gains in the same schedule before computing the net taxable gain.

After all set-offs are done, any remaining unabsorbed losses go into Schedule CFL (Carry Forward Losses) for carry-forward to the next year. The ITR-2 portal handles this automatically, but you should verify that the closing balance in Schedule CFL matches what you expect.

One critical rule: capital losses can only be carried forward if you file your return by the due date for that assessment year. If you file late, you lose the right to carry forward the loss permanently. This is one of the strongest arguments for timely filing, especially in years when your portfolio has incurred losses.

Dividend Income: Schedule OS

Dividends received from Indian companies and from mutual fund payouts are fully taxable as income in the hands of the investor, at the applicable slab rate. They must be declared in Schedule OS (Other Sources), not in Schedule CG.

TDS at 10 percent is deducted by the company or mutual fund on dividends exceeding Rs 5,000 in a year per investor per company or fund house. This TDS is reflected in your Form 26AS and AIS. The TDS is a credit against your total tax liability computed in the return.

The dividend amounts are typically pre-filled in the ITR-2 form from the AIS data. However, you should cross-check the pre-filled amounts against your own records. AMC dividend statements, company dividend warrants, and your bank account entries are all useful for verification.

If dividends received from a company or fund were below the Rs 5,000 TDS threshold and therefore no TDS was deducted, you are still required to declare the dividend income in Schedule OS. The absence of TDS does not excuse the declaration.

Working with Pre-Filled Data on the Portal

The income tax portal now pre-fills significant amounts of data in ITR-2 based on information received from banks, brokers, AMCs, and employers. This is a major time-saver but also a source of potential errors if you accept the pre-filled data without verification.

The AIS is the most comprehensive pre-fill source. It reflects all reported capital gains, dividends, interest, and TDS. However, not all transactions are reported perfectly. Errors in AIS data include incorrect gain amounts due to missing cost-of-acquisition data, duplicate entries, transactions attributed to the wrong PAN, and missing transactions from brokers or AMCs that did not report correctly. Review AIS carefully before starting the filing.

If you find discrepancies in AIS, you have the option to file feedback on the portal indicating that a transaction is incorrect, not relating to you, or already included elsewhere. This feedback is noted but does not prevent you from filing the return with correct data. You should always file with the correct data as per your own records, not with incorrect pre-filled data. Explain the discrepancy in the feedback mechanism and proceed.

Capital gains from direct mutual fund investments made through the AMC website may appear correctly in AIS based on RTA reports. But gains from investments made through third-party platforms may sometimes not appear correctly. Always reconcile with the CAMS and KFintech consolidated statements as the authoritative source for your mutual fund gains.

Common Errors Investors Make When Filing ITR-2

• Filing ITR-1 despite having capital gains. As discussed, even a single mutual fund redemption requires ITR-2. Filing ITR-1 when ITR-2 is applicable results in a defective return notice, and the investor must refile using the correct form.

• Not reporting zero-gain redemptions. If you redeemed mutual fund units and the gain was zero or the transaction resulted in a loss, it must still be reported. The portal does not automatically know about unreported redemptions; the AIS may flag these later.

• Confusing gross LTCG with taxable LTCG. The Rs 1.25 lakh exemption on equity LTCG applies after all LTCG transactions are aggregated. The total gross LTCG is entered in the form, and the exemption is applied by the system. Entering only the net (after exemption) amount is incorrect.

• Not using grandfathered costs for pre-February 2018 equity purchases. Shares or equity funds purchased before 1 February 2018 use the higher of actual cost or fair market value as on 31 January 2018. Broker statements should reflect this, but self-computed gains using only the original purchase price will overstate the taxable gain.

• Entering debt fund gains in the equity section. Debt fund gains are entered in the slab-rate section (A2) or in B2 for older pre-April 2023 units with LTCG treatment. They do not go in the 20 percent equity STCG section or the 12.5 percent equity LTCG section.

• Omitting dividends from equity mutual fund growth plans that have been reinvested. Growth plan mutual funds do not pay dividends; IDCW plans do. If you hold IDCW plans and received any payouts, these are dividends and must be declared in Schedule OS.

• Missing the ITR-2 filing deadline and losing loss carry-forward rights. As noted, late filing means you cannot carry forward capital losses. If you have had a poor year for your portfolio, filing on time is especially valuable.

• Not claiming TDS credit. TDS deducted on dividends (by companies or AMCs) and on brokerage account transactions shows up in AIS and Form 26AS. These TDS amounts are tax already paid and must be claimed as credits in the return to reduce or offset your tax liability.

A Step-by-Step Filing Sequence

The following sequence reflects how a salaried investor with equity and mutual fund gains should approach ITR-2 filing.

• Step 1: Download and review your AIS and TIS from the income tax portal. Note any discrepancies and flag them using the feedback mechanism.

• Step 2: Download the capital gains statement from your stock broker for FY2025-26. Verify that STCG and LTCG totals match what appears in AIS.

• Step 3: Download the consolidated capital gains statement from CAMS (cams.com) and KFintech (kfintech.com) covering all mutual fund transactions. Verify totals against AIS.

• Step 4: Note any dividend income from the AIS or AMC statements and cross-check against your bank account entries.

• Step 5: Collect Form 16 (Part A and Part B) from your employer.

• Step 6: Open the ITR-2 filing portal and select the applicable assessment year (AY2026-27 for FY2025-26 income).

• Step 7: Verify the pre-filled basic details (personal information, bank accounts). Correct any errors.

• Step 8: Enter or verify salary income in Schedule S using Form 16.

• Step 9: Enter capital gains in Schedule CG: equity STCG in A1, debt or slab-rate gains in A2, equity LTCG in B1, older debt or gold LTCG in B2 as applicable.

• Step 10: Enter dividend income in Schedule OS.

• Step 11: Enter any brought-forward losses from prior years in Schedule BFLA. Check the system automatically applies them against current gains.

• Step 12: Enter deductions in Schedule VIA under the applicable tax regime.

• Step 13: Review the computed total income and total tax in Part B-TI and Part B-TTI. Verify that TDS credits from Form 26AS and AIS are correctly reflected.

• Step 14: If tax is payable, pay it as Self-Assessment Tax (SAT) using Challan 280 before submitting the return. Enter the challan details in the return.

• Step 15: Submit the return and complete e-verification immediately, either through Aadhaar OTP, net banking, or demat account-linked verification. An unverified return is treated as not filed.

Key Dates for FY2025-26 Filing

Date	Significance	Consequence of Missing
31 July 2026	Due date for ITR filing for individuals without audit requirement (typically salaried and investors)	Late filing fee up to Rs 5,000 under Section 234F; loss carry-forward rights forfeited
31 December 2026	Belated return filing deadline; last date to file a late return for FY2025-26	Cannot file after this date; assessment may proceed ex-parte
31 December 2026	Revised return filing deadline; last date to correct a return filed before 31 July	Errors in the original return cannot be corrected after this date
15 June 2026 (approx)	First advance tax instalment due if total tax liability for the year exceeds Rs 10,000	Interest under Section 234B and 234C if advance tax not paid on time

Advance tax is relevant for investors whose capital gains are realised early in the financial year. If you sell significant equity holdings in April or May and your capital gains tax liability for the year is likely to exceed Rs 10,000, you are required to pay advance tax in instalments. Failure to do so results in interest charges that are added to the tax liability when computing the final dues.

Old vs New Tax Regime: The Decision Matters for Slab-Rate Gains

For capital gains taxed at flat rates, specifically equity STCG at 20 percent and equity LTCG at 12.5 percent, the choice of tax regime does not affect the rate. These flat rates apply regardless of whether you choose the old or new tax regime.

However, the regime choice does affect the tax on slab-rate gains, including debt mutual fund gains post April 2023, dividend income, and interest income. If your slab rate is lower under the new regime due to that regime's lower middle-income slab rates, your tax on these income streams will be lower under the new regime.

Investors with substantial deductions (80C, 80D, home loan interest) may find the old regime beneficial if the deductions are large enough to outweigh the new regime's lower slab rates. Investors with few deductions and income primarily from salary plus equity gains at flat rates often find the new regime better.

The regime is selected at the time of filing by indicating your choice in the ITR-2 form. Salaried individuals can change their regime choice when filing the return, even if they declared differently to their employer at the start of the year.

NRI-Specific Notes for ITR-2 Filing

NRIs who have capital gains from Indian investments must also file ITR-2 if their total Indian income exceeds the basic exemption limit or if they want to claim a refund of TDS deducted. The process is broadly the same as for residents, with the following differences.

• Residential status must be declared as Non-Resident in the personal information section. This affects the tax computation, particularly for special rates and surcharge applicability.

• NRIs do not need to declare foreign assets in Schedule FA when filing as non-residents on Indian income. Schedule FA is applicable only for residents and RNORs.

• TDS deducted by brokers on equity sale proceeds (for NRIs, TDS is deducted at the flat capital gains rates at source) appears in AIS and Form 26AS. This TDS is credited against the tax computed in the return, often resulting in a refund.

• DTAA benefits, if applicable, should be claimed by attaching the relevant details and asserting the treaty claim in the return. Form 10F and the Tax Residency Certificate from the country of residence support the DTAA claim.

• The refund, if any, is credited to the bank account registered in the ITR. For NRIs this should be an NRE or NRO account linked on the portal.

Disclaimer: This article is for educational purposes only and does not constitute tax or financial advice. Tax provisions, form schedules, and portal features cited reflect the position as understood for FY2025-26 (AY2026-27) and are subject to change. The income tax portal's interface and pre-fill mechanisms are updated periodically and may differ from what is described here. Please consult a qualified chartered accountant before filing, particularly if your transactions are complex, if you have NRI status, or if you have prior-year losses to carry forward.