Schedule CG errors are the single most common reason ITR-2 returns get flagged, attract defective return notices, or result in underpaid tax demands. For FY 2025-26, the risk is higher than previous years because Finance Act 2024 changed STCG and LTCG rates mid-year — and many CAs are still applying the pre-July 2024 rates. Below is a practical checklist of the 11 mistakes CA practices make most often, with the correct treatment for each.
Scope note: This guide covers listed equity shares and equity-oriented mutual funds reported in Schedule CG of ITR-2. F&O and intraday equity are covered separately because they require ITR-3, not ITR-2 — see Mistakes 2 and 3 below.
1. Reporting Net P&L Instead of Gross Sale Consideration and Cost
The error: A CA downloads the broker's P&L statement, sees a "net profit" or "net gain" column, and enters that single number into Schedule CG. The ITR-2 form, however, does not have a "net profit" field. It has separate fields for full sale consideration, cost of acquisition, and cost of transfer (brokerage, charges).
Correct treatment: Enter the gross sale consideration in the "Full value of consideration" field. Enter the indexed or actual cost of acquisition separately. Enter allowable transfer expenses (brokerage, exchange charges, stamp duty — not STT) in the "Expenditure wholly and exclusively in connection with transfer" field. The system computes the gain. Pasting a net figure conflates these three components and produces an incorrect computation.
2. Putting F&O Income Inside Schedule CG
The error: A client has both equity capital gains and F&O trading. The CA reports everything in ITR-2 Schedule CG, including the F&O P&L.
Correct treatment: F&O income is non-speculative business income under Section 43(5) read with CBDT Circular 6/2016. It must be reported in Schedule BP (Business and Profession) of ITR-3. A client with any F&O turnover — profit or loss — cannot file ITR-2 at all. The correct form is ITR-3. Filing ITR-2 when F&O exists is itself the first-order error; the Schedule CG misclassification is a consequence of that. See the related guide on ITR-2 vs ITR-3 form selection for the full decision tree.
Once you have confirmed the client has no F&O, you may proceed with ITR-2. Deadline: 31 July 2026 for non-audit cases.
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3. Treating Intraday Equity as STCG
The error: A client buys and sells the same equity share on the same day (intraday). The CA classifies this as Short-Term Capital Gain under Section 111A and reports it in Schedule CG.
Correct treatment: Intraday equity trading is speculative business income under Section 43(5). It is not STCG. It must appear in Schedule BP of ITR-3. Misclassifying it in Schedule CG prevents the correct set-off rules from applying — speculative losses can only be set off against speculative income, not against capital gains.
4. Using Pre-Finance Act 2024 Tax Rates
The error: The CA computes STCG tax at 15% or LTCG tax at 10%, referencing rates that were correct before 23 July 2024.
Correct treatment for FY 2025-26:
| Gain Type | Old Rate (pre-23 Jul 2024) | Current Rate (FY 2025-26) | Section |
|---|---|---|---|
| STCG on listed equity | 15% | 20% | 111A |
| LTCG on listed equity | 10% above ₹1 lakh | 12.5% above ₹1.25 lakh | 112A |
Since all FY 2025-26 transactions occur on or after 1 April 2025 — well past the 23 July 2024 effective date — the new rates apply to every transaction in the return. There are no split-rate computations for FY 2025-26.
Budget 2025 note: Finance Act 2025 made no changes to capital gains tax rates. The rates above carry forward unchanged into FY 2025-26.
Using the wrong rate is not just an underpayment — it can trigger an intimation under Section 143(1) with a demand plus interest under Section 234B/234C. From ₹999 · Deadline: 31 July 2026.
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5. Skipping the Grandfathering Computation for Pre-2018 Holdings
The error: A client holds equity shares acquired before 31 January 2018 and sells them in FY 2025-26. The CA uses the actual historical purchase price as the cost of acquisition, ignoring the grandfathering rule.
Correct treatment: For shares acquired before 31 January 2018, the cost of acquisition for Section 112A is the higher of:
- Actual purchase price, OR
- Fair Market Value (FMV) as on 31 January 2018 — but capped at the sale price
This step reduces taxable LTCG by locking in the gain accrued up to 31 January 2018 as tax-free. Most broker P&L reports (Zerodha, Groww, Upstox) apply this automatically. Verify before copying figures — if a broker does not apply grandfathering, the LTCG figure will be overstated and the client will overpay tax.
6. Deducting STT as a Transfer Expense
The error: The CA includes Securities Transaction Tax (STT) paid on the sale transaction as part of "expenses incurred in connection with transfer" in Schedule CG.
Correct treatment: STT is not deductible from capital gains. Allowable transfer expenses are limited to brokerage, exchange transaction charges, and stamp duty directly attributable to the transfer. STT is a government levy — it does not reduce the capital gain. (It is deductible only as a business expense in ITR-3 when F&O income is reported as business income.)
7. Omitting Schedule 112A Scrip-Wise Details
The error: A client has LTCG under Section 112A below the ₹1.25 lakh exemption, so the CA concludes no Schedule 112A is needed. Or the CA enters only summary figures in Schedule CG without filling the scrip-level Schedule 112A grid.
Correct treatment: Schedule 112A is mandatory for every LTCG transaction under Section 112A — regardless of whether the total gain is above or below the exemption limit. Required fields per scrip:
- ISIN
- Name of the share / unit
- Number of units acquired and sold
- Date of acquisition and date of sale
- Cost of acquisition
- FMV as on 31 January 2018 (for pre-2018 acquisitions)
- Full value of consideration (sale price)
Omitting Schedule 112A — even when no tax is due — is one of the most consistent triggers for a defective return notice under Section 139(9). The CPC system cross-validates Schedule 112A entries against AIS data. Gaps get flagged automatically.
Practical note: For clients with hundreds of equity transactions, populating Schedule 112A manually from multiple broker P&L statements is time-consuming and error-prone. A consolidated P&L statement that aggregates scrip-level data across all brokers makes this significantly faster.
Preparing Schedule 112A across multiple broker accounts for a client with heavy equity activity takes hours without a consolidated statement. From ₹999 · Deadline: 31 July 2026.
Let a CA handle Schedule 112A for your client →
8. Claiming Section 87A Rebate Against STCG or LTCG
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The error: A client's total income is within the rebate threshold (₹12 lakh under the new regime for FY 2025-26). The CA applies the Section 87A rebate to offset the tax computed on STCG at 20% or LTCG at 12.5%, resulting in zero net tax.
Correct treatment: The Section 87A rebate does not apply to special rate taxes. Tax on STCG under Section 111A and LTCG under Section 112A must be paid in full. The rebate can only reduce tax on income taxed at slab rates. This position was clarified by the Finance Act 2023 and was reaffirmed in Budget 2025 — there is no ambiguity on this point for FY 2025-26.
Example: A salaried client has ₹5 lakh salary (slab income, new regime) plus ₹2 lakh STCG. The rebate covers the slab-rate tax on salary; it does not cover the ₹40,000 STCG tax (₹2L x 20%). That ₹40,000 is payable in full.
See the detailed breakdown: Section 87A Rebate and Capital Gains — What Every CA Must Know →
9. Incorrect FIFO Application Across Tranches
The error: A client bought the same stock in three tranches at different prices and dates. The CA (or the broker's export) uses average cost method or manually selects a lot, instead of applying FIFO strictly.
Correct treatment: For listed equity shares held in demat, the Income Tax Act mandates FIFO — the earliest-purchased lot is treated as sold first. This affects both the cost of acquisition and the holding period (and therefore STCG vs LTCG classification). Verify the broker P&L explicitly applies FIFO; some older reports or manual workings incorrectly use AVCO (average cost). If a client consolidates holdings from multiple demat accounts, FIFO must be applied across the combined pool, not per-account.
10. Applying the ₹1.25 Lakh Exemption Before Loss Set-Off
The error: A client has ₹3 lakh LTCG and ₹1 lakh LTCL. The CA applies the ₹1.25 lakh exemption first (₹3L - ₹1.25L = ₹1.75L taxable), then deducts the LTCL (₹1.75L - ₹1L = ₹75,000 taxable). This is the wrong sequence.
Correct sequence under Section 112A:
- First, set off STCL against STCG (and any remaining STCL against LTCG)
- Then, set off LTCL against LTCG (LTCL cannot be set off against STCG)
- Finally, apply the ₹1.25 lakh exemption on the net LTCG figure after set-off
Using the example above: ₹3L LTCG minus ₹1L LTCL = ₹2L net LTCG. Apply ₹1.25L exemption: ₹2L - ₹1.25L = ₹75,000 taxable LTCG. The wrong sequence produces the same answer here, but with different numbers the sequences diverge — particularly when STCL is also in the mix.
See the full set-off mechanics: Capital Loss Set-Off and Carry Forward Rules (FY 2025-26) →
11. Missing the Deadline and Losing Loss Carry-Forward
The error: A client has unabsorbed STCL or LTCL for FY 2025-26. The CA files the ITR after 31 July 2026 (belated return under Section 139(4)).
Correct treatment: Capital losses can only be carried forward to future years if the return is filed on or before the due date — 31 July 2026 for non-audit individual cases. A belated return causes those losses to lapse permanently. Intra-year set-off (within FY 2025-26) is not affected, but the carry-forward entitlement is lost entirely.
For clients with significant capital losses, missing the deadline is an irreversible outcome. Late fees under Section 234F (₹5,000, or ₹1,000 if income does not exceed ₹5 lakh) are the least of the cost — the lapsed losses are worth far more. The deadline is 31 July 2026 — time is short.
File before the deadline — from ₹999 →
Quick-Reference Checklist for CAs
| # | Check | Correct Position |
|---|---|---|
| 1 | Gross figures entered (sale consideration, cost, charges separately) | Yes — never paste net P&L directly |
| 2 | No F&O in Schedule CG | F&O goes in ITR-3 Schedule BP |
| 3 | No intraday equity in Schedule CG | Intraday = speculative business income, ITR-3 |
| 4 | STCG rate = 20%, LTCG rate = 12.5% | Finance Act 2024 rates apply to all of FY 2025-26 |
| 5 | Grandfathering applied for pre-31 Jan 2018 shares | CoA = higher of actual price or FMV on 31 Jan 2018 (capped at sale price) |
| 6 | STT not deducted as transfer expense | Only brokerage, charges, stamp duty are deductible |
| 7 | Schedule 112A filled scrip-wise | Mandatory even if LTCG is below ₹1.25L exemption |
| 8 | 87A rebate not applied against STCG/LTCG tax | Special rate income is outside 87A rebate |
| 9 | FIFO applied across all tranches | Verify broker P&L uses FIFO, not average cost |
| 10 | Loss set-off done before applying ₹1.25L exemption | Set off first, exempt the net figure |
| 11 | ITR filed on or before 31 July 2026 | Belated return loses capital loss carry-forward |
How FirstReports Helps
Several of these mistakes originate not in the tax computation but at the data-gathering stage: CAs receive P&L files from multiple brokers in incompatible formats, reconcile them manually, and errors creep in. FirstReports consolidates equity P&L statements from Zerodha, Groww, Angel One, Upstox, and 11 other brokers into a single normalized statement — with scrip-level ISIN, acquisition dates, FIFO-verified lots, and grandfathering-adjusted cost figures.
The consolidated output maps directly to Schedule CG and Schedule 112A fields, reducing the manual copy-paste step where most of the above errors occur.
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Related Reading
- How to Calculate STCG and LTCG for ITR-2 (FY 2025-26) →
- Capital Loss Set-Off and Carry Forward Rules (FY 2025-26) →
- Section 87A Rebate and Capital Gains — What Every CA Must Know →
- F&O Tax Treatment in India: What CAs Must Know →
- ITR-2 vs ITR-3: Which Form for Capital Gains and F&O? →
- ITR Filing Due Dates for FY 2025-26 →
Frequently Asked Questions
Can F&O losses be shown in Schedule CG of ITR-2?
No. F&O income and losses are non-speculative business income under CBDT Circular 6/2016. They must be reported in Schedule BP of ITR-3. Using ITR-2 at all when a client has F&O turnover is itself the primary error — the correct form is ITR-3.
What is the LTCG exemption limit for FY 2025-26?
The LTCG exemption for listed equity shares under Section 112A is ₹1.25 lakh per financial year. This was raised from ₹1 lakh by Finance Act 2024, effective 23 July 2024. All FY 2025-26 transactions are past that date, so the ₹1.25 lakh limit applies universally.
Is Schedule 112A mandatory even if LTCG is below the ₹1.25 lakh exemption?
Yes. Schedule 112A must be filled with scrip-wise details for every Section 112A transaction, regardless of whether the gain is below or above the exemption. Omitting it — even when no tax is payable — is a consistent trigger for defective return notices under Section 139(9).
Can Section 87A rebate reduce tax on STCG at 20%?
No. The Finance Act 2023 clarified that the Section 87A rebate does not apply to tax computed on special rate incomes such as STCG under Section 111A (20%) and LTCG under Section 112A (12.5%). Tax on these gains must be paid in full even if total income is within the rebate threshold.
Is STT deductible as a transfer expense in Schedule CG?
No. Securities Transaction Tax is not an allowable deduction from capital gains. Only brokerage, exchange transaction charges, and stamp duty on transfer qualify as cost of transfer. STT is deductible only as a business expense in ITR-3 when F&O is reported as business income.
What happens to capital losses if ITR-2 is filed after 31 July 2026?
A client who files a belated return after 31 July 2026 cannot carry forward unabsorbed capital losses (STCL or LTCL) to future assessment years. The losses lapse permanently. Intra-year set-off against gains within FY 2025-26 is unaffected — only the carry-forward entitlement is lost.
Which cost method applies when a client bought shares in multiple tranches?
The Income Tax Act mandates FIFO (First-In First-Out) for listed equity shares held in demat form. The earliest-purchased lot is deemed sold first. Average cost method is not permitted. Verify that the broker P&L statement applies FIFO before copying figures into Schedule CG.