ITR-2 Form Changes AY 2025–26: Complete Guide to New Disclosures & Compliance Rules

The Central Board of Direct Taxes (CBDT) has notified the ITR-2 Form Changes for AY 2025–26 through Gazette Notification No. 43/2025 dated 3rd May 2025. The new ITR-2 form introduces detailed updates across capital gains reporting, foreign retirement income (section 89A), Virtual Digital Assets (VDAs), and residential status classifications.

If you are an individual or Hindu Undivided Family (HUF) not having income from business or profession, ITR-2 is the applicable form—and these changes directly affect your reporting and compliance.

1. 🔁 Granular Residential Status Classification

• The form now includes a more refined set of checkboxes to classify:
  • Resident
  • Resident but not ordinarily resident (RNOR)
  • Non-resident
• Specific criteria from Section 6 of the Income Tax Act are explicitly listed to guide proper self-classification.

2. 🌍 Section 89A – Reporting Foreign Retirement Income

• A dedicated section is now added under Schedule OS for:
  • Income from retirement benefit accounts in notified countries
  • Income from non-notified countries
  • Past income on which relief was claimed earlier
• This enhances tax reporting clarity for NRIs and returning expats.

3. 📈 Detailed Capital Gains Reporting

• Changes introduced for reporting long-term and short-term capital gains:
  • Segregation of gains before and after 23 July 2024
  • Differentiation between indexed and non-indexed acquisition cost
  • Enhanced inputs for unquoted shares under section 50CA

4. 🪙 Introduction of Virtual Digital Asset (VDA) Schedule

• ITR-2 now includes Schedule VDA where:
  • Each transaction involving crypto or NFTs must be reported
  • Includes acquisition date, sale date, cost, consideration, and taxable gain
• Complies with taxation rules under Section 115BBH.

5. 🏦 Foreign Assets and Income Disclosure (Schedule FA & TR)

• Expanded Schedule FA now asks for:
  • Custodial accounts
  • Peak and closing balances
  • Foreign-sourced interest and income
• Schedule TR (Tax Relief) now mandates:
  • Country code
  • Article of DTAA
  • TRC status (Y/N).

6. 💼 Expanded ESOP Reporting

• If availing tax deferral on ESOPs from startups under Section 17(2)(vi), you must now provide:
  • DPIIT recognition details
  • Vesting dates and trigger events
  • Timelines for deferred tax payments.

The ITR-2 Form Changes AY 2025–26 are designed to:

• Improve transparency in capital gains and digital asset reporting
• Align tax treatment of NRIs and globally mobile taxpayers
• Enable real-time compliance checks on high-value and foreign-linked transactions
• Provide structured relief mechanisms (like 89A and ESOP deferral) in a standardized format

📌 Summary Table: ITR-2 AY 2025–26 vs AY 2024–25

Area	AY 2024–25	AY 2025–26 (Updated)
Residential Status	Basic selection	Criteria-based classification (Sec 6)
Section 89A Reporting	Manual mentions	Structured disclosure for foreign retirement income
Capital Gains	Basic STCG/LTCG summary	Segregated by dates, type, indexation, DTAA
VDAs	Optional mention	Compulsory Schedule VDA
ESOP Tax Deferral	Optional notes	Structured Schedule with DPIIT details
Foreign Assets	Basic details	Peak balance + income + custodial info

Q1. Who should file the ITR-2 for AY 2025–26?
Any individual or HUF not earning from business or profession, but with income from salary, multiple house properties, capital gains, foreign income, or VDAs.

Q2. Is VDA reporting mandatory in ITR-2 AY 2025–26?
Yes. If you have income from cryptocurrencies or NFTs, you must file Schedule VDA.

Q3. What is new in capital gains reporting?
The form now differentiates gains based on the 23 July 2024 threshold for specific assets and offers detailed inputs for unquoted shares and DTAA-linked gains.

Q4. How does the ITR-2 form handle foreign retirement accounts?
It requires structured input for income received from notified and non-notified countries under Section 89A, including income previously deferred.

Q5. Are there changes in foreign asset disclosures?
Yes, new columns for peak balances, foreign tax paid, and TRC status are mandatory in Schedules FA and TR.

If you're planning to file your income tax return using ITR-2 this year, be sure to understand these ITR-2 Form Changes AY 2025–26 thoroughly. From capital gains to foreign pensions and crypto assets—every new detail matters to stay compliant and avoid penalties.

For expert assistance or a step-by-step e-filing guide, stay tuned or reach out to your tax advisor today.