Filing your Income Tax Return (ITR) for the financial year 2024-25 (assessment year 2025-26) can be a smooth process if you're well-prepared, especially when dealing with investments in shares and mutual funds. Understanding the key aspects of reporting these investments is crucial for accurate filing and avoiding potential notices from the Income Tax Department.

Key Documents to Keep Ready

To ensure a hassle-free ITR filing experience, keep the following documents handy:

• Form 16: Issued by your employer, this form provides a breakup of your salary, allowances, and Tax Deducted at Source (TDS). Verify the accuracy of the pre-filled data on the e-filing portal using this form.
• Capital Gains Statement: Collect this statement from your stockbrokers or mutual fund houses if you sold equity shares, mutual funds, or other assets during the financial year. This is essential for distinguishing between short-term and long-term gains for correct tax calculation.
• AIS, TIS, and Form 26AS: Download these from the e-filing portal. They reflect incomes such as interest, dividends, rent, securities transactions, and foreign remittances. Cross-check these to ensure all reported incomes match with TDS records.
• Interest Certificates and Bank Statements: Obtain these from banks to accurately report interest income.
• Tax-Saving Investment Proofs: If you plan to opt for the old tax regime, gather proofs of tax-saving investments and expenditures to claim deductions under sections like 80C, 80D, etc.
• Aadhaar Card, PAN, and Bank Account Details: Keep these readily available for verification and accurate filing.

Understanding Capital Gains

Capital gains arise from the sale of capital assets, such as shares and mutual funds. These gains are categorized as either short-term capital gains (STCG) or long-term capital gains (LTCG), depending on the holding period of the asset.

• Equity Mutual Funds and Shares: If equity mutual funds are sold within one year, the gains are termed as STCG and taxed at 20% plus cess. If sold after one year, the gains are LTCG and taxed at 12.5%. LTCG up to ₹1.25 lakh in a financial year is exempt from tax. This limit applies to the aggregate amount of long-term capital gains from equity mutual funds and listed equity shares.
• Debt Mutual Funds: Capital gains rules for debt mutual funds have changed from April 1, 2025. As per the new definition, a debt mutual fund will invest more than 65% of its total proceeds in debt and money market instruments. LTCG will be taxed at 12.5%, while STCG will be taxed at income tax slabs.

Which ITR Form to Use?

Selecting the correct ITR form is crucial to avoid notices from the Income Tax Department.

• ITR-1: Generally used by resident individuals with income up to ₹50 lakh from salary, one house property, and other sources. Starting FY 2024-25, ITR-1 allows reporting of LTCG up to ₹1.25 lakh from listed equity shares or equity mutual funds.
• ITR-2: Applicable for individuals and Hindu Undivided Families (HUFs) not having income from business or profession. It is suitable for taxpayers with total income exceeding ₹50 lakh, having capital gains income, foreign income or assets, or more than one house property. If your capital gains exceed ₹1.25 lakh or are from assets other than listed equity shares or equity mutual funds, you must file ITR-2.

Common Mistakes to Avoid

Several common mistakes can lead to your ITR being scrutinized by the Income Tax Department:

• Mismatch in Income Details: Ensure the income you declare matches the data in your Form 26AS, AIS, or TIS.
• Incorrect TDS Claims: Claiming a TDS refund or credit that doesn't appear in your Form 26AS can flag your return.
• Not Reporting Capital Gains: Failing to declare capital gains from selling shares, mutual funds, property, or crypto can lead to scrutiny.
• High Deduction Claims: Claiming very high deductions under sections like 80C or 80D may raise red flags.
• Filing Under the Wrong ITR Form: Using ITR-1 when your income includes capital gains exceeding the specified limit or business income is a common mistake.

Deadline and Extension

The government has extended the ITR filing deadline for FY 2024-25 (AY 2025-26) to September 15, 2025, for those not requiring an audit. For individuals and businesses whose accounts need auditing, the due date remains the same.

By keeping these tips in mind and ensuring you have all the necessary documents, you can navigate the ITR filing process with ease and accuracy.