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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.

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.

  1. Income from business/ profession,
  2. Taxpayer who is partner in a partnership firm.

Individuals/HUFs who are having following sources of income are eligible to file ITR-2 form-
  1. Income from salary,
  2. Income from house property,
  3. Income from other sources like interest from savings A/c., interest from fixed deposits, casual incomes like lottery, card games, income from race horse etc.
  4. Income from capital gains from sale of shares, property, etc.
  5. Foreign source income,
  6. Having Foreign asset such as shares, property, etc. outside India.
  7. Agricultural Income more than Rs 5000
  8. Resident not ordinarily resident and a Non-resident

  1. If you have salary income, you will need Form 16 issued by your employer to enter salary details.
  2. If you have earned interest on Fixed deposits or saving bank A/c. and TDS has been deducted on the same, you will need TDS certificates i.e. Form 16As issued by deductors to enter interest details.
  3. You will need Form 26AS to verify TDS on salary as well as TDS other than salary.
  4. If you are living in rented premises, then you will need rent paid receipts for calculation of HRA (in case you forgot to submit the same to your employer within time).
  5. If you have any capital gain transaction in shares, you will need summary or Profit/loss statement of capital gain transactions of shares or securities during a year, if any for computation of capital gain.
  6. In case you have sold out any property, you will need sale & purchase deed or property for computation of capital gain.
  7. You will need your bank passbook, fixed deposit receipts (FDRs) to calculate amount of interest income.
  8. If you have received rent from your rented house property, then you will need rental receipts to calculate rental income.
  9. In case you want to claim any loss incurred during current year, then you will need document exhibiting the loss.
  10. In case you wish to claim previous year's loss, you will need copy of ITR-V pertaining to previous year disclosing said loss.
  11. You will also need documents or proofs for claiming tax saving deductions U/s. 80C, 80D, 80G, 80GG such as life & health insurance receipts, donation receipts, rent receipts, receipts for tuition fees etc, if the same were not considered in your Form 16.

  1. RNORs and non-resident individuals have to file their income tax return in ITR-2 even in case of total income below Rs 50 lakh.
  2. The taxpayer should disclose (a) the amount of cash deposits above Rs 1 crore in the current accounts with a bank, (b) expenditure incurred above Rs 2 lakh on foreign travel (c) expenditure incurred above Rs 1 lakh on electricity.
  3. Resident individuals who own more than one house property should also file their income tax return in ITR-2.
  4. ITR-2 continues to apply to resident individuals who have total income exceeding Rs 50 lakh.
  5. Any individual taxpayer having income from business or profession cannot use ITR-2.
  6. In case an individual is a director in a company or holds unlisted equity investments, the ‘type of company’ should also be disclosed
  7. In case of short-term or long term capital gains from sale of land or building or both, the details of the buyer(s) i.e. name, PAN or Aadhaar, percentage share of ownership and address have to be given.
  8. A separate schedule 112A for the calculation of the long-term capital gains on the sale of equity shares or units of a business trust which are liable to STT.
  9. Under ‘income from other sources’, a taxpayer should provide the details of ‘any other income’.
  10. The details of the deductions against ‘income from other sources’ should be provided.
  11. The ‘Schedule VI-A’ for tax deductions is amended to include deduction under section 80EEA and section 80EEB.
  12. In the case of a business trust or investment fund, the details of ‘capital gains’ income and ‘dividend’ income should be provided.
  13. The details of tax deduction claims for investments or payments or expenditure made between 1 April 2020 until 30 June 2020.
  14. While providing the details of bank accounts, if a taxpayer selects multiple bank accounts for credit of refund, the income tax department may choose any account for processing the refund.
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