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Who Needs to File ITR-2 for Income Above ₹50 Lakh?
If your gross total income (before deductions) for FY 2025-26 exceeds ₹50 lakh, you must file ITR-2 — even if you are salaried. ITR-1 is only for income up to ₹50 lakh. Filing ITR-1 when your income is higher is a defective return under Section 139(9).
ITR-2 is also required (regardless of income level) if you have:
- Capital gains from stocks, mutual funds, or property
- Foreign income or assets
- Income from more than one house property
- Directorship in any company
- Unlisted equity shares
The Biggest Compliance Item for HNIs: Schedule AL
If your gross total income exceeds ₹50 lakh, you must compulsorily file Schedule AL (Assets and Liabilities) in your ITR-2. This is a disclosure of what you own and owe as on 31 March 2026.
What Schedule AL Covers
- Immovable property: Land and buildings — cost of acquisition
- Movable property:
- Jewellery, bullion, archaeological collections, paintings, sculptures
- Vehicles (cars, bikes, boats)
- Yachts, aircraft
- Financial assets: Bank balances, shares, bonds, MF units, insurance policies
- Cash in hand
- Liabilities: Loans, mortgages, outstanding dues
The values are declared at cost of acquisition, not current market value — for most assets. Bank balances and financial instruments are at current value.
Common Schedule AL Mistakes
- Reporting property at market value instead of cost
- Omitting jointly held assets (you should declare your share)
- Forgetting foreign assets (covered separately in Schedule FA)
- Not disclosing cash in hand (even if it seems small)
The IT Department uses Schedule AL data to detect wealth accumulation inconsistent with declared income over years — it is taken seriously.
Surcharge on High Income — The Extra Tax You May Not Know About
In addition to income tax and cess (4%), individuals with income above certain thresholds pay a surcharge:
- ₹50 lakh to ₹1 crore: 10% surcharge on income tax
- ₹1 crore to ₹2 crore: 15% surcharge
- ₹2 crore to ₹5 crore: 25% surcharge
- Above ₹5 crore: 25% surcharge (capped; was 37% before Finance Act 2023)
Effective tax rates including surcharge and cess at the highest level: ~39% on income above ₹5 crore in the new regime.
Surcharge is computed on your income tax amount — not on your income directly. Example: Income tax of ₹15 lakh → 10% surcharge = ₹1.5 lakh additional → total tax ₹16.5 lakh → add 4% health and education cess.
Marginal Relief
If income crosses a surcharge threshold by a small amount, your surcharge cannot exceed the incremental income above the threshold. This "marginal relief" prevents effective tax rates above 100% at threshold boundaries. A CA should verify marginal relief calculation for income near ₹50L, ₹1Cr, ₹2Cr, and ₹5Cr.
Capital Gains for HNIs — After Budget 2024
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The Budget 2024 changes hit HNI investors harder than average taxpayers:
- STCG on equity: 20% (up from 15%)
- LTCG on equity: 12.5% on gains above ₹1.25 lakh (was 10%, threshold was ₹1L)
- No indexation on equity or debt MF — both at cost
- On property: 12.5% LTCG without indexation, or 20% with indexation (choose whichever is lower, for property purchased before 23 July 2024)
If you have significant equity holdings with unrealised long-term gains, a CA should model the post-Budget 2024 impact before you sell.
Foreign Income, RSUs, and ESOP — Additional Disclosures
If you are a senior executive, you likely have RSU or ESOP income. These create two tax events:
- Vesting (perquisite): Fair Market Value (FMV) on vesting date minus exercise price is taxable as salary income in the year of vesting — usually your employer includes this in Form 16. If not, verify.
- Sale (capital gain): If you sell the shares after vesting, the difference between sale price and FMV on vesting date is capital gain (STCG or LTCG based on holding period after vesting).
If the RSUs are from a foreign company (US tech company, for example), you must also:
- File Schedule FSI (foreign source income) in your ITR-2
- File Schedule FA (foreign assets) disclosing any foreign bank accounts or shares held outside India
- Consider DTAA with the country of the company — taxes paid in the foreign country may be credited against Indian tax
HNI Documents Checklist
- Form 16 (salary + perquisite details)
- RSU/ESOP vesting statement from employer's equity platform (Carta, Morgan Stanley, etc.)
- Capital gains statement — scrip-wise, from all brokers
- Property sale/purchase documents (for capital gains or asset disclosure)
- Home loan interest certificate (Section 24b)
- Foreign income documents — bank statements, dividend notices, FBAR records if applicable
- Assets inventory for Schedule AL — purchase receipts for jewellery, vehicles, property
- Directorship details — PAN and CIN of companies where you are a director
- Advance tax challans paid during the year
CA Assistance Is Essential for HNI Returns
An HNI return with Schedule AL, capital gains, surcharge, and foreign income disclosures has more moving parts than any other ITR type. A CA saves you from errors that attract notices — and ensures Schedule AL, FSI, and FA are correctly filled. FirstReports offers HNI ITR filing from ₹1,999, assigned to a CA who specialises in high-income returns. View HNI plans →
Frequently Asked Questions
What is the Schedule AL disclosure requirement for FY 2025-26?
Schedule AL (Assets and Liabilities) is mandatory for anyone with gross total income exceeding ₹50 lakh. It requires disclosure of: immovable property (address, value), financial assets (shares, MFs, bonds, deposits), jewellery and bullion, vehicles, cash above ₹2 lakh, and all outstanding liabilities as on 31 March 2026.
What surcharge rate applies to income between ₹50 lakh and ₹1 crore?
10% surcharge on the income tax amount for income between ₹50 lakh and ₹1 crore. For income ₹1–2 crore: 15%. For ₹2–5 crore: 25%. Above ₹5 crore: 37% (though for special rate incomes like STCG under 111A and LTCG under 112A, the surcharge is capped at 15% under both tax regimes).
Is advance tax more important for HNI clients?
Yes. For clients with income above ₹50 lakh — especially those with variable capital gains or F&O income — advance tax planning is critical. Underpayment triggers Section 234B/234C interest at 1% per month. CAs should estimate tax by each instalment due date and advise on revision if large gains are realised mid-year.
Can an HNI client claim Section 87A rebate?
No. The Section 87A rebate is available only for income up to ₹7 lakh (old regime) or ₹12 lakh (new regime). HNI clients with income above ₹50 lakh pay full tax at the applicable slab rate plus surcharge and cess, with no rebate.
What documents are critical for the Schedule AL in ITR-2 or ITR-3?
Property: registered sale deed or purchase agreement with cost details. Financial assets: demat account statement (CDSL/NSDL), MF consolidated account statement (CAMS/KFintech). Jewellery: purchase invoice or valuation certificate. Vehicles: RC book. Cash: bank statements. Liabilities: loan account statements (home loan, personal loan, margin funding).
Which ITR form is correct for an HNI with F&O income?
ITR-3. If the client has any F&O income or loss — even a single contract — ITR-3 is mandatory. The F&O income is non-speculative business income reported in Schedule BP. Capital gains from equity are also reported in ITR-3, in Schedule CG. A CA who files ITR-2 for an HNI with F&O exposure risks a defective return notice.