Introduction
Soon after ITR-1 and ITR-4 were notified for AY 2025-26, the Central Board of Direct Taxes (CBDT) followed up with ITR-2 and ITR-3.
These two forms are especially important as they cover most stock market investors, intraday and F&O traders, small businesses, and professionals across India.
That’s a huge chunk of taxpayers.
In this post, I’ll walk you through the major changes in ITR-2 and ITR-3 for assessment year 2025-26, and what they mean for you.
Before we dive in, a quick clarification — these forms are meant for reporting income earned during FY 2024-25, i.e. between 1 April 2024 and 31 March 2025.
What’s new in ITR-2 and ITR-3?
See a lot of these changes reflect updates announced in the last two union budgets of 2024 and 2025.
So, while majority changes aren’t really new per se, they’ve now made their way into the actual ITR forms — and that’s what matters during filing season.
Let’s take a quick look 
1. Capital gains reporting now asks for sale date
If you’ve realised capital gains or losses from asset sales (short-term or long-term), you now need to mention whether the sale happened before or on/after 23 July 2024.
This applies to both resident individuals and NRIs.
Why? Because Union Budget 2024 revised the capital gains tax regime, and your sale date determines which tax rate applies.
For example, here’s how taxation of listed stocks and equity mutual funds works now:
You can read how capital gains from other assets will be taxed in this thread.
Yes, it’s a bit of a headache this year — but from next year, only the new tax rates will apply, so this complexity is a one-time thing.
2. Buyback proceeds now taxable as dividends
Until now, income from share buybacks was completely tax-free in the hands of investors.
But from 1st October 2024, buyback proceeds are treated as deemed dividends, and must be reported under ‘Income from Other Sources’.
However, you can now report the cost of acquisition of shares tendered during buyback as a ‘capital loss’ while filing your ITR.
And this loss can then be offset against other gains or carried forward for up to 8 years.
Read more about it here.
3. Choose between two LTCG tax rate options for real estate
If you’ve sold any property on or after 23 July 2024, you now get a choice for calculating LTCG tax rate as either:
- 20% tax with indexation, or
- 12.5% flat tax without indexation
This was introduced in Budget 2024, you can refer to the table below.
4. Schedule Asset & Liability now only for ₹1 crore+ incomes
Previously, taxpayers had to fill Schedule AL (Assets & Liabilities) if their income exceeded ₹50 lakh. That threshold has now been raised to ₹1 crore.
This is a welcome relief because Schedule AL is a tedious task for non-business individuals. It requires comprehensive disclosures about real estate, jewellery, vehicles, and more.
5. New audit reporting section for cruise businesses
Not relevant for most readers here but for the record, a new section (44BBC) has been introduced to report audit information for cruise businesses.
So if you’re in the business of operating cruise ships, this one’s for you.
6. Other notable changes (also in ITR-1 & 4)
These changes were also reflected in the ITR-1 and ITR-4 forms announced earlier:
- Filing Form 10-IEA if you want to opt in or out of the new tax regime
- Dropdown menus for selecting Chapter VI-A deductions
- Need to mention the section number while reporting TDS details
I’ve covered these in detail in the earlier breakdown on changes in ITR-1 and ITR-4 forms. You can give it a read here.
Closing
Lastly, remember the deadline to file ITR is 31st July 2025, while those who require audit have until 31st October 2025.
If you’ve got questions about filing ITR-2 or ITR-3 for AY 2025–26, drop them below. We’ll be happy to help.