ITR Filing Guide for Income Above ₹50 Lakh — Directors, HNIs, and Multiple Income Sources (FY 2025-26)

ITR-2 or ITR-3 — Getting the Form Right

For individuals with income above ₹50 lakh, the first determination is form eligibility. Filing the wrong form is a defective return under Section 139(9) and the Income Tax Department will issue a notice requiring rectification.

ITR-2 — Eligibility

ITR-2 is applicable to individuals and HUFs who have income from:

• Salary or pension
• House property (including multiple properties and brought-forward losses from house property)
• Capital gains (short-term and long-term, from any asset)
• Other sources (including dividend income, interest, foreign income)
• Foreign assets or foreign income
• Directorship in a company (holding listed or unlisted shares)

ITR-2 cannot be used if the individual has any income from business or profession — including F&O trading income, intraday equity trading income (speculative business income), freelancing income, or any other business activity.

ITR-3 — Eligibility

ITR-3 applies to individuals and HUFs who have income from a proprietary business or profession, in addition to the income categories covered by ITR-2. Common triggers for ITR-3:

• F&O trading (non-speculative business income under Section 43(5) proviso)
• Intraday equity trading (speculative business income)
• Freelancing, consulting, or any professional income
• Any other business income

A director of a company who also has F&O income must file ITR-3. A director with only salary and delivery-based equity capital gains should file ITR-2.

Surcharge Rates for AY 2026-27

Surcharge is an additional levy on the base income tax for high-income individuals. The rates for AY 2026-27 are as follows:

Surcharge is applied on the computed income tax (before cess). Health and education cess of 4% is then applied on (tax + surcharge).

Surcharge Cap on Capital Gains — Section 112A and Section 111A

An important restriction applies specifically to capital gains income. Under the Finance Act 2024 (applicable from AY 2025-26), the surcharge on tax payable on LTCG under Section 112A and STCG under Section 111A is capped at 15%, irrespective of total income. This means even if the taxpayer's total income exceeds ₹5 crore (which would attract a 25% surcharge on other income), the surcharge on the Section 111A/112A tax component remains at 15%.

This cap is significant for HNIs with large equity portfolios — it makes the effective tax rate on LTCG and STCG lower than it would otherwise be at the highest surcharge slabs.

Marginal Relief

Where the total income crosses a surcharge threshold by a small margin, marginal relief ensures the incremental tax (including surcharge) does not exceed the incremental income. The marginal relief provision ensures that the additional tax payable due to surcharge does not exceed the income that pushed the taxpayer into the higher surcharge slab. CAs must compute marginal relief at each surcharge threshold crossing (₹50L, ₹1Cr, ₹2Cr, ₹5Cr) and apply it if it results in a lower tax burden.

Schedule AL — Mandatory Assets and Liabilities Disclosure

When total income exceeds ₹50 lakh in FY 2025-26, individuals must complete Schedule AL (Assets and Liabilities) in ITR-2 or ITR-3. This is a mandatory disclosure requirement — omitting it renders the return defective.

What Must Be Disclosed in Schedule AL

Schedule AL requires disclosure of the following assets (and associated liabilities) as of 31 March 2026:

• Immovable property: Land and building — cost of acquisition must be disclosed. Address of each property.
• Movable assets:
  • Cash in hand
  • Jewellery, bullion, archaeological collections, drawings, paintings, sculptures (cost of acquisition)
  • Vehicles (including boats and aircraft) — cost of acquisition
  • Financial assets: bank deposits (balance as of 31 March 2026), shares and securities (cost of acquisition), insurance policies (sum assured), loans and advances given
• Liabilities: Loans outstanding against each asset category disclosed above

The disclosure is based on cost (not market value) for most categories. The Income Tax Department cross-references Schedule AL with wealth declarations in prior years and with information received from registration authorities, banks, and depositories. Unexplained assets or inconsistencies between Schedule AL and other information can lead to notices under Section 69 (unexplained investments).

Capital Gains Tax — Rates for FY 2025-26

The Finance Act 2024 (effective 23 July 2024) revised the capital gains tax rates that apply for the full FY 2025-26 (AY 2026-27):

The ₹1.25 lakh annual exemption under Section 112A is per taxpayer per financial year — not per broker account or per stock. It cannot be carried forward if unused.

Section 112A — Scrip-Level Reporting Requirement

For LTCG under Section 112A, the ITR requires detailed scrip-by-scrip reporting in Schedule 112A. Each row must contain:

• ISIN (International Securities Identification Number)
• Name of the share or unit
• Number of units sold
• Sale price per unit and total sale consideration
• Fair Market Value (FMV) per unit as on 31 January 2018 (for shares acquired before that date — grandfathering provision)
• Cost of acquisition
• Period of holding

This is operationally intensive for clients who have traded across multiple brokers. A consolidated, scrip-level trade log — reconciled across all broker P&L statements — is required before Schedule 112A can be filled accurately. Manual compilation from multiple broker CSVs is the primary source of errors and delays in ITR-2/ITR-3 filing for equity-active HNI clients.

Foreign Income and DTAA Basics

If the individual is a resident and ordinarily resident (ROR) in India for FY 2025-26, their global income is taxable in India. This includes:

• Salary received from a foreign employer for work done outside India
• Dividends from foreign companies
• Interest from foreign bank accounts
• Capital gains from sale of foreign assets (shares, property, etc.)

Double Taxation Avoidance Agreements (DTAAs) executed under Section 90 (bilateral agreements) or Section 90A (agreements by non-sovereign territories) provide relief — either by exempting the income in India or by allowing a credit for foreign tax paid. The relief method and eligible income categories differ by treaty. CAs must refer to the specific DTAA with the relevant country and obtain Form 67 from the client (certificate of tax paid in the foreign country) before claiming relief.

Foreign asset and foreign income disclosures are mandatory in Schedule FA and Schedule FSI of ITR-2/ITR-3. Failure to disclose attracts penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Directorship Disclosure Requirements

Individuals who are directors in any company (Indian or foreign) must disclose:

• Name of the company, PAN/CIN, and the director's DIN
• Whether the company is listed or unlisted
• Date of appointment as director

This disclosure is made in Schedule DI (Director Information) of ITR-2 and ITR-3. Additionally, if the director holds shares in unlisted companies, these must be disclosed in Schedule AL and the relevant capital gains schedule (if shares are sold during the year). Unlisted equity shares cannot be reported in ITR-1 — individuals who are directors must file at minimum ITR-2.

Advance Tax Obligation — Section 208

Under Section 208, every taxpayer whose estimated tax liability for the financial year (after TDS) exceeds ₹10,000 is required to pay advance tax. This obligation is particularly relevant for HNIs and individuals with multiple income sources where TDS may not cover the full tax liability.

For FY 2025-26, the advance tax due dates and percentages under Section 211 are:

If advance tax paid by 15 March 2026 is less than 90% of the assessed tax, interest under Section 234B is applicable at 1% per month on the shortfall. Interest under Section 234C applies for shortfalls at each instalment due date.

Filing Due Dates — AY 2026-27

The 30 September 2026 due date applies to individuals whose gross receipts from business or profession exceed the threshold under Section 44AB (₹1 crore for business turnover, ₹50 lakh for professional receipts — with higher limits for cases opting for presumptive taxation). Most salaried directors filing ITR-2 (no F&O) are non-audit cases and face the 31 July 2026 deadline.

Capital losses cannot be carried forward unless the return is filed by the due date under Section 139(1). For HNIs with equity portfolios, missing the 31 July 2026 deadline has direct tax consequences beyond the Section 234F late filing fee.

Documents Required

• Form 16 from all employers
• Form 26AS and AIS from the income tax portal — cross-check all income sources
• Capital gains statements from all brokers (consolidated, scrip-wise for Schedule 112A)
• Schedule AL data: property documents, jewellery purchase records, vehicle registration, bank balances, demat holding statements as of 31 March 2026
• Foreign income evidence: bank statements, employer letters, tax certificates (for DTAA relief — Form 67 requirement)
• Directorship details: DIN, company CIN, date of appointment
• Advance tax challans (Challan 280) paid during FY 2025-26
• Self-assessment tax challan (if applicable)

How FirstReports Helps

For HNI and director clients with equity trading across multiple brokers, Schedule 112A scrip-level data is the most time-consuming part of ITR-2 preparation. FirstReports consolidates P&L statements from all major Indian brokers — Zerodha, Groww, Angel One, ICICI Direct, Upstox, HDFC Securities, Kotak Securities, and others — into a single tax-ready statement with STCG, LTCG, and scrip-wise LTCG data ready for direct entry into Schedule 112A. This reduces the risk of errors from manual compilation and ensures the AIS capital gains figures can be reconciled before filing.

Related Reading

• How to Calculate STCG and LTCG for ITR-2 (FY 2025-26)
• Section 87A Rebate and Capital Gains — What CAs Must Know
• F&O Tax Treatment in India — CA Guide
• Advance Tax Calculation for FY 2025-26
• Download capital gains reports from all major brokers →