How to File ITR2 for Salary form16, Home Loan Interest and Short Term Capital Gains

How to File ITR2 for Salary form16, Home Loan Interest and Short Term Capital Gains

The ITR-1 is a simple form and you can fill it easily following the due process. But, this form is only for the salaried people. You may be also a salaried person, but there is a greater probability of some other earnings as well.

ITR-2 is the income return form for the people who have taxable income from the investments. This investment can be of shares, bonds, gold or property. The profit from these investments is called capital gains. The ITR-2 is required when there is a capital gain.

In the ITR-2 you can fill the following income.

• Income from salary or pension
• Income from house property
• Claim Interest on Home Loan
• Income from capital gains.
• Income from other sources including lottery or race horse.

ITR-2 can’t be efiled online, rather you are required to download it, fill it and upload it. There are two utilities to download the ITR-2. The Java utility and excel utility. If you can implement the java utility, filing the ITR-2 would be easier. However,  use excel utility as more people are familiar with excel.

• Login to the www.incometaxindiaefiling.gov.in.
• Click at ‘download’ on the menu.
• Go to the ITR-2 section and download the excel utility, i did with Java utility. you can do same with Excel.

Fill The ITR-2
Open the excel application and read the instructions on ‘Home Sheet’

Note there is a bar on right side of the each sheet.  You will see these buttons in this bar.

ITR2 buttons

• Home – It will lead you to the first sheet of the utility.
• Re-Calculate- Use this button after filing every sheet. It will check the errors.After giving all the information you should click on it. You will get to know the total tax liability. You would also know the payable tax, if any. If you find any payable tax, you must pay the outstanding income tax before generating or submitting the ITR-2 to the efiling 
• Save Draft- Use this button to partially save the data..
• Generate XML- Use this button at the end of the return filing. This button will generate another xml file. You are required to upload that file.
• Print – You can keep a print of the filed return.
• Help – To read the instructions on efiling.

Home

Don’t skip this sheet, it can make the tax filing process easy for you. In this sheet you choose the sections applicable for you. After the selection, you would not see the unnecessary sections. It will give you mental relief. (Click on pic to enlarge)

Change it to as follows if you want to fill only:
1. Salary
2. Home loan interest
3. Short term capital gains for share bough and sold within 12 month
(Click on pic to enlarge)

Part A General

In this sheet you need to give your personal detail. This section is relatively easy to fill. All the information required in this sheet does not require any effort. It can also be prefilled. Just login to income tax portal and download prefill xml data and open same into Java utility. In excel you have to type everything.

• The mandatory columns are marked red. You must fill them.
• Double check the PAN. It must be correct.
• The private employee should chose ‘OTH’ in employer category.
• Do give Adhaar number if you have. It will make you eligible for e-verification which in turn relieve you of sending ITR-V.

(Click on pic to enlarge)

Part B -TI- TTI

This sheet consist the summary of all the income and tax liability. You need not to fill the sheet except the light green cells. All other cell would be automatically filled once you give details in other sheets. You need not to touch the sections from 1-13. The people who want tax relief in the basis of double taxation on the foreign income can fill value in section 7A.

In the section 14, You are required to give details of all the active bank accounts. Don’t hesitate on mentioning the account details, as the government already know all the bank accounts linked to your PAN. Always look in to following 3 thing when you work upon any section. Click Re-Calculate and see the figure circled:

(Click on pic to enlarge)

TDS and Schedule S: To be filled together

Get form 16 of your employer and fill the details as follows and match it properly with form16

now check your Tax Liability payable/refund by clicking on Re-Calculate and go to Part B-TTI. It should match with your form16. Then only you should proceed for other schedules.

Schedule HP

To claim interest on Home Loan fill this section. add up if you have any pre construction interest on home loan mentioned at bottom:

Schedule CG: 

Give detail of your share sales for short term capital gain.
These may come here .

• Shares and equity mutual fund 1 year
• Listed bond and NCD 1 year
• Debt mutual fund 3 year
• Gold ETF 1 year
• Physical gold 3 year
• Property 3 year

Schedule VI-A

This need to be filled for all the deductions for your Home Loan Principal Payment, PF Deduction, NPS Contribution (under 80ccd1b) etc.

Now all schedules have been filled now check your Tax Liability payable/refund by clicking on Re-Calculate and go to Part B-TTI. 

Click on Save Button to validate all the data. If any error comes then please correct it:

If satisfied click on Preview. It will show Print out of your ITR.

Click on Submit to submit your ITR.

How to calculate Capital Gains on Shares?

Short-term capital gains can be computed by subtracting the following 3 items from the total value of sale:

Brokerage or expenditure incurred in connection with the sale of the asset
Purchase price of the asset
Sandeep Venkatesh bought 250 shares of a listed company in October 2015 at a cost of Rs. 155 per share, paying a total of Rs. 38,750. He sold them for Rs. 192 per share in March 2016, after 5 months, at Rs. 48,000. Let us see how much his short-term capital gains will be.

Full sales value – Rs. 48,000
Brokerage at 0.5% - Rs. 240
Purchase price – Rs. 38,750
Therefore short-term capital gain made by Sandeep will be: Rs. 48,000 – (Rs. 38,750+ Rs. 240) = Rs. 9,010

Home loan interest calculation including pre-construction period:

Deduction on home loan interest cannot be claimed when the house is under construction. It can be claimed only after the construction is finished. The period from borrowing money until construction of the house is completed is called pre-construction period.

Interest paid during this time can be claimed as tax deduction in five equal installments starting from the year in which the construction of the property is completed.

The pre-construction interest incurred on a housing loan is allowed as a deduction in five equal instalments, beginning from the financial year (FY) in which the property has been completely constructed. The allowability of interest is not linked to the existence of the housing loan in each of the five FYs when the deduction is being claimed. But you can claim deduction only if you continue to own the property in each of the said FYs.

Hence, assuming your property construction is completed in the current FY (i.e. FY 2017-18), the pre-construction interest paid by you until 31 March 2017 can be claimed in five equal instalments until the FY 2021-22. You could claim this deduction even if you have foreclosed the housing loan immediately after getting possession.

Further, as per current tax laws, there is a cap of Rs2 lakh per annum on the interest that can be claimed in each FY in respect of a self-occupied property


Read this example to understand how it can be claimed.

Vinay took a loan of Rs.20 lakhs to start construction of his house property in Bhubaneshwar in July 2015. He has been paying EMI of Rs.18,000 ever since. The construction was completed in Jun 2017 and he received a completion certificate. This house has been on rent from September.

Vinay is not sure how he can claim a deduction on interest for the home loan in his income tax return.

Homeowners can claim the deduction on interest for the home loan only from the year in which the construction of the property is completed. In this case, Vinay can claim it from FY 2017-18 as possession done on Jun 2017.

Let’s start with his EMI payments this year:

• Vinay pays a total EMI of Rs. 2,16,000 in FY 2017-18 (Rs.18,000 X 12), of which Rs.14,000 goes towards principal repayment
• Total interest on home loan, therefore, is Rs.2,02,000. Since the property is rented out, he can claim the entire interest as deduction.
• Vinay can claim a deduction for principal repayment of Rs.14,000 under Section 80C. He must remember not to sell this property in the next five years. The amount claimed under Section 80C will be added back to his income in the year of sale and he will be taxed accordingly if the property is sold within five years.

Now let’s look at interest paid when the house was under construction:

• The period from borrowing money until the construction of the house is called pre-construction period.
• Pre-construction interest deduction is allowed for interest payments made from the date of borrowing till March 31st before the financial year in which the construction is completed.
• Here the pre-construction EMI payment will be calculated for 21 months between July 2015 to March 2017 as under:

FY 2015-16 – July 2015-March 2016 >> 18,000 X 9 = 1,62,000

FY 2016-17 – April 2016-March 2017 >> 18,000 X 12 = 2,16,000

This adds up to Rs.3,78,000 for calculation of preconstruction interest.

FY 2017-18 - April 2017 -August 2017 (Possession year) >> 18,000 X 5 = 90000
FY 2017-18 - August 2017 -March2018 (Possession year) >> 18,000 X 7 = 126000
This adds up to 216000-14000 = 202000 interest to be claimed for FY17-18 in assessment year 2018-19


The total EMI payment included principal repayment of Rs.24,000. Subtract this to arrive at pre-construction interest.
Rs.3,78,000 – Rs.24,000 = Rs.3,54,000 is the pre-construction interest that can be claimed in five equal installments of Rs.70,800 starting from FY 2017-18(Possession year) which will come in assessment year 2018-19.

So Vinay can claim Rs.2,02,000 + Rs.70,800 = Rs.2,72,800 as deduction towards interest from home loan in FY 2017-18 in assessment year 2018-19

From FY 2017-18 this total amount of current period and pre-construction Interest that can be claimed has been restricted to Rs 2,00,000 so may be he will not get benefit of Rs. 2,72,800

- Written By

Vinod Kotiya