Updated: Jun 20
As the cold waves simmer, here we are, warming ourselves to the Income tax return and their types. In my last blog, I elaborated on ITR-1 and the exceptions that do not fall under its umbrella. With this series of blogs, I aim to make ITR as accessible as our dependency on it. Further, the series promises to keep you updated with the latest changes initiated by the government concerning ITR and its numerous forms, eligibility, and tangents.
Today, I will talk you through the basics, variations, and a more in-depth understanding of ITR-2. Shall we get started?
ITR-2 form is for individuals and Hindu Undivided Families (HUF) acquiring income other than the income earned from ‘Profits and Gains from 'profession or business'. This form is for individuals with income through selling property or assets and earning from other countries.
Additionally, if you are a director of any company and have invested in unlisted equity shares of a company, you must file returns in ITR-2.
Consequently, individuals with earnings from the following sources are qualified to file Form ITR-2:
1) Income from salary/pension
2) Income from capital gains/loss on sale of investments/property both short-term and long term
3) Income from house property (Please note that it can be from more than one house property)
4) Income from other sources, including bets on racehorses, winning from the lottery, and additional legal means of gambling
5) Agricultural income of more than Rs 5,000
6) Resident not ordinarily resident and a non-resident
7) Foreign Income
There is no need to fill out ITR-2 when you are an entrepreneur or HUF with income from a business or an occupation.
Is there a difference between ITR-2 and ITR-2A form?
The ITR-2 form is a much more elaborated form when compared to the ITR-2A form. Anyone eligible to use the ITR-2A form can alternatively use the ITR-2 form. The only difference to note here is that the ITR-2A form does not qualify for an income from Capital Gains.
You will need the following documents in addition to the ITR-1 or ITR-2A, or ITR-2 forms.
A copy of the tax return from the previous year
A bank statement, your TDS, and saving certificates
Balance sheets, profit & loss account statements
Other requisite audit reports, if and when needed
Diverse terms and conditions come with different sources of income.
Different ITR forms get aligned with various complexities, documentation, and cases of proof. In saying that, we must not get afraid of any of it. We can always have it examined in front of us, and platforms like TaxBuddy offer expert support for your every step of growth.
If I may take the advising outpour ahead, make sure you take care of the following while filing your ITR:
Link your Aadhaar with your PAN and pre-validate the bank account you want to accept your refund.
Make sure to select the right ITR before filing it, or the filed return will get deemed defective.
Verify your return by opting for e-Verification
File the return within the defined timelines
Let's dive into the changes introduced to the forms other than ITR-1 in the union budget 2023:
The forms other than ITR-1 now have a new schedule for reporting income earned from Virtual Digital Assets (VDAs) under the Capital Gains category.
To fill this new schedule, taxpayers are required to provide information about the date of acquisition, date of transfer, cost of acquisition, and proceeds received from the sale of VDAs. Quarterly reporting of VDA income is mandatory.
The forms have been updated to include additional questions related to the selection of the new tax regime.
Taxpayers are required to indicate if they opted for the new regime in the previous assessment year, and select the assessment year in which they made the choice.
Furthermore, another question got added asking whether taxpayers opted out of the New Regime in any of the previous years and providing details about both selections using the 10IE form.
I strongly recommend you keep a trace of all your incomes and proofs as part of an accessible and simplified folder. Having instant access to the classification of your sources of income and documentation makes the process of picking the right ITR form extensively easier and more so efficient.