Sold an inherited property at a loss? Know how to report capital loss in ITR-2

Filing an income tax return (ITR) can become complicated when a property bought decades ago is sold after an inheritance. A taxpayer filing ITR-2 for Financial Year 2025-26 (Assessment Year 2026-27) has sought clarity on whether a long-term capital loss arising from the sale of an inherited property should be reflected in the return and carried forward.

The taxpayer said a residential house in Delhi, originally purchased in 1967, was gifted to him in 1982. He sold the property on November 28, 2025, for ₹39 lakh. For calculating capital gains, he used the fair market value (FMV) of ₹13.06 lakh as on April 1, 2001, based on a valuation certificate from an approved valuer.

According to the taxpayer, the income tax utility accepted the purchase date as April 1, 2001, and calculated the indexed cost of acquisition at around ₹49.13 lakh. Based on this calculation, the transaction resulted in a long-term capital loss of approximately ₹10.13 lakh.

However, the taxpayer claimed that while filing the return, the system considered the unindexed cost of ₹13.06 lakh for calculating taxable capital gains and displayed a long-term capital gain of ₹25.93 lakh. The taxpayer also said the loss did not appear in the Schedule CYLA, BFLA or CFL sections of the ITR utility.

The taxpayer has raised a question as to whether the long-term capital loss should be available for carryforward.

CA Abhishek Soni, CEO & Co-founder, Tax2win, said the taxpayer may be eligible to carry forward the loss if the computation is correct and other conditions are met.

“You are entitled to a long-term capital loss of approximately ₹10,13,124, assuming no other adjustments are affecting the computation. If there are no capital gains against which this loss can be set off during the year, the loss should be eligible for carry forward and should appear in Schedule CFL, provided the return is filed within the due date,” CA Soni said.

ITR filing deadline for FY 2025-26

Taxpayers who miss the deadline may still file a belated return, subject to applicable provisions and late filing consequences.

However, to carry forward certain losses, including capital losses, filing the return within the prescribed due date is important.

Who should file ITR-2?

ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) who have income from sources other than business or profession.

• Income from salary or pension

• Income from more than one house property

• Capital gains from sale of property, shares, mutual funds or other assets

• Foreign assets or foreign income

• Agricultural income above the specified limit

• Income from other sources exceeding the eligibility criteria for simpler ITR forms

• Individuals having income from business or profession generally need to use ITR-3 instead of ITR-2.