WHAT IS ITR-2 TAX RETURN?

The income-tax department has categorized taxpayers on the basis of income, source of income and many other factors to ensure easy compliance.

Taxpayers having incomes from different categories, thus, have to download and fill different Income Tax Return forms. Or its the another way to file online Income Tax Return.

The income tax return (ITR) forms a taxpayer has to use depends on the residential status of an individual and total income earned from various sources during the financial year.

The applicability of ITR 2 depends on the category of the taxpayer and the source of income. ITR 2 is applicable only to individuals and HUFs who do not have any income from business or profession. You can file ITR 2 either by preparing online on an e-filing portal or by filling an excel utility.

Union Budget 2021 proposes to exempt senior citizens from filing ITR 1. Such senior citizen taxpayers have only pension income and interest income as their annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.

So ITR 2 is next to ITR 1 in simplicity and ease of filling up. Since HUF cannot use ITR 1 they can use ITR 2 in all the cases where individuals are eligible to use ITR 1. ITR 2 can be used by all those persons who are not eligible to use ITR 1 and their source of income does not have any business or professional income. So you cannot use ITR 1 if you are a director or have unlisted shares or even if you own more than one house or have agricultural income over Rs. 5,000/- as long as you do not have any income whether taxable under whether profit or loss under the head “Profits and Gains of Business or profession.

You can use ITR 2 if you are a non-resident or being a resident have any asset or interest in asset outside India or even have an authority to sign any bank account outside India if there is no business income. All those who have income from other sources and who wish to claim any expenditure under the head “Income from other Sources" can use ITR 2. Those who have dividend income and have borrowed money to make such investments can use ITR 2 if they wish to claim expenditure in respect of interest paid on money borrowed for purchasing such shares. Please note you are allowed to claim interest upto 20% of the amount as dividends even if actual interest cost incurred for the year is higher than 20% of the aggregate of dividends received by you.

For all those who either have brought forward losses which they wish to set off against current year’s income or those who have losses under these head for the current year and wish to carry forward the same for set off during subsequent years can also use ITR 1 as they cannot use ITR 1.

So to say it in one line all the individuals and HUFs who do not have any income under the head “Business or profession" and who cannot use ITR 1 are eligible to use ITR 2. Since incomes includes loss also you cannot use ITR 2 if you have incurred any loss in your business howsoever small the amount. Majority of people are under the impression that profits made by them on trading of shares and commodities can be offered under the head “Income from other Sources" as they are not engaged in business as they do not have proper business set up. In my opinion this is not correct and such transactions amount to business activity and one has to use either ITR 3 or ITR 4.

WHO CAN USE ITR-2 AND WHO CANNOT?

ITR Form 2 is for Individuals and HUF receiving income other than income from “Profits and Gains from Business or Profession”. Thus persons having income from the following sources are eligible to file Form ITR 2:

Briefly stated ITR 2 cannot be used by an Individual or an HUF who have any business or professional income. The income here includes loss also and in case you have incurred any loss in your business howsoever small the amount is, you cannot use ITR 2 and have to invariably use ITR 3 or ITR 4. This form can also be used by the individuals who are partner in a firm but are not carrying on any business or profession in your own name.

WHO CANNOT USE ITR-2?

WHO CAN USE ITR-2?

Individuals/HUFs who are having following sources of income are eligible to file ITR-2 form-

CHECKLIST OF DOCUMENTS REQUIRED TO FILL ITR-2

FOLLOWING DOCUMENTS ARE REQUIRED TO FILL-UP ITR-2:

MAJOR CHANGES INTRODUCED IN ITR-2

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