File Your ITR for Salary and Capital Gain

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ITR for Salary and Capital Gain : A.Y. 2025-26

Filing Income Tax Returns (ITR) is a crucial financial responsibility for taxpayers in India. For the Assessment Year (AY) 2025-26, which corresponds to the Financial Year (FY) 2024-25, many individuals earn income through salaries and capital gains. Understanding how to file ITR for salary and capital gains, along with the latest updates, can help taxpayers comply with tax laws and optimize their tax liabilities.

What Is Salary Income and Capital Gain?

Before diving into tax rules, let’s quickly understand what these two income types mean:

  • Salary Income: Money you receive as part of employment, including basic pay, allowances, bonuses, and perquisites.
  • Capital Gains: Profits from selling capital assets like shares, mutual funds, property, or gold

Capital gains are of two types: Short-Term Capital Gain: Profit from selling an asset within a short holding period (usually less than 12 or 24 months) and Long-Term Capital Gain: Profit from selling an asset after holding it for a longer time.

ITR for Salary and Capital Gain, Income Tax Return Filing for AY 2025-26

Income Tax Return Filing Fees

For AY 2025-26

₹ 1499/-
  • Computation
  • ITR acknowledgment
  • Filed ITR form
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Documents Required for Income Tax Return Filing

  1. Rent paid – if any
  2. Home loan interest certificate if any
  3. School fee – if any
  4. Lic policy receipt if any
  5. Health insurance receipt if any
  6. Medical expenses – if any
  7. Salary Slip for last financial year
  8. Form 16 – if have
  9. User id and password of income tax portal – if remembered

ITR Filing Due Date for AY 2025-26

For Assessment Year (AY) 2025-26, which corresponds to the Financial Year (FY) 2024-25, the due date for filing ITR 2 for individuals whose accounts are not required to be audited has been extended to September 15, 2025.

Initially, the due date was July 31, 2025, but the Central Board of Direct Taxes (CBDT) extended it due to extensive changes in the ITR forms and the time needed for system readiness and rollout of utilities.

Changes for AY 2025-26 You Must Know

The tax rules for AY 2025-26 include several major updates that impact salaried individuals and those earning capital gains:

a. Raised Tax-Free Limit for Salaried Individuals

The new tax regime now offers a higher tax-free income limit. If your total income, including salary, is up to ₹7 lakh, you could pay zero tax due to the enhanced Section 87A rebate and increased standard deduction of ₹75,000.

b. Capital Gains Tax Rates Changed

New rates apply based on whether the capital gains occurred before or after 23 July 2024.

  • Short-Term Gains (STCG) on stocks and mutual funds are now taxed at 20%, up from 15%.
  • Long-Term Gains (LTCG) are now taxed at 12.5% without indexation, replacing the older 10%/20% rate.
  • First ₹1.25 lakh of equity LTCG is tax-free (earlier it was ₹1 lakh).
  • Property sellers can still choose between 12.5% without indexation or 20% with indexation, depending on asset purchase date.

c. Simpler ITR Forms for Small Taxpayers

Taxpayers with only salary income and LTCG up to ₹1.25 lakh (and no STCG or capital loss) can now file using ITR-1 or ITR-4, which are easier and faster to complete.

Who Needs to File ITR for Capital Gain and Salary?

You must file an ITR if your total income exceeds ₹2.5 lakh (old regime) or ₹3 lakh (new regime). However, even if you are within limits, filing is compulsory in the following cases:

  • You have capital gains from sale of shares, mutual funds, or property
  • You want to claim a tax refund
  • You want to carry forward capital losses
  • You hold foreign assets or bank accounts

Choosing the Right ITR Form

Your income sources determine which ITR form you need. Here’s a quick summary:

Income TypeApplicable ITR FormNotes
Salary only, 1 house, LTCG ≤ ₹1.25L, no STCGITR-1Simplest form
Salary + LTCG > ₹1.25L or STCGITR-2For capital gains
Salary + business income + capital gainsITR-3For freelancers, traders
Presumptive income (small businesses) + capital gainsITR-4Only if capital gains ≤ ₹1.25L

If you have any short-term capital gain or carry-forward losses, ITR-2 or ITR-3 is mandatory, even if gains are small.

Capital Gains Tax Rules (After 23 July 2024)

1. Short-Term Capital Gains (STCG)

  • What it applies to: Shares, mutual funds, bonds sold within 12 months
  • Tax rate: 20% (earlier 15%)
  • No exemption limit

2. Long-Term Capital Gains (LTCG)

  • What it applies to: Assets held more than 12 or 24 months
  • Tax rate: 12.5% without indexation
  • Exemption: ₹1.25 lakh on listed equity shares or mutual funds

For real estate, you can still opt for 20% with indexation for property bought before July 2024. This gives flexibility to reduce your tax liability.

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Frequently Asked Questions (FAQ)

1. Can I file ITR-1 if I have capital gains?
No, ITR-1 cannot be used if you have any taxable capital gains. However, if your only capital gains are exempt (like LTCG under ₹1.25 lakh from equity), you may still be able to use ITR-1—but only if there are no STCG or losses.

2. Which ITR form should I file if I have salary and capital gains?
If you have:

  • Salary + LTCG up to ₹1.25 lakh and no STCG or loss: ITR-1 or ITR-4 (subject to other conditions)
  • Salary + LTCG > ₹1.25 lakh or any STCG: ITR-2
  • Salary + Capital gains + business/freelance income: ITR-3

3. Is capital gain allowed in ITR-1?
Only exempt long-term capital gains (LTCG) up to ₹1.25 lakh on listed equity shares or mutual funds may be shown in ITR-1. Any taxable capital gains or short-term capital gains (STCG) require ITR-2 or higher.

4. Can I show capital gains in ITR-4?
ITR-4 is only allowed if:

  • Your capital gains are exempt (LTCG ≤ ₹1.25 lakh)
  • You have presumptive business or profession income
  • Otherwise, use ITR-2 or ITR-3 depending on your other income.

5. Which ITR form for capital gains?
Use:

  • ITR-2 if you have capital gains (LTCG or STCG) without business income
  • ITR-3 if you have capital gains + business or professional income

6. I have capital gains—can I use ITR-1?
Only if:

  • LTCG is fully exempt (≤ ₹1.25 lakh)
  • No STCG, no carry-forward losses, and no complex income
  • Otherwise, file ITR-2.

7. Which ITR to file for salaried person with capital gains?

  • Salary + LTCG ≤ ₹1.25 lakh (no other gains): Possibly ITR-1
  • Salary + LTCG > ₹1.25 lakh or any STCG: ITR-2
  • Salary + business income + capital gains: ITR-3

8. What is the correct ITR form for capital gain and salary income?

  • ITR-2 for most people with salary + capital gains
  • ITR-3 if you also have income from business, freelancing, or trading
  • ITR-4 only if capital gains are fully exempt and you use presumptive income

9. Can capital gains be reported in ITR-1 or ITR-4?
Only if:

  • Gains are exempt (LTCG ≤ ₹1.25 lakh)
  • No STCG, loss, or complicated reporting is required

10. What happens if I choose the wrong ITR form?
Your return may be invalid or defective, and you may not be able to carry forward losses or claim refunds. Always choose the correct ITR based on your income type and capital gains status.