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Filing Income Tax return using ITR-2

May 22, 2024
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What is ITR-2 Form.

Individuals or HUFs who do not earn a profit or gain from their business or profession and for whom ITR-1 does not apply must file ITR-2 and are known as ITR 2 file form.

The Eligibility Criteria for file ITR 2 for AY 2024-25:

 

The ITR-2 form is for individuals and Hindu Undivided Families (HUFs) who do not qualify for the ITR-1 form. This includes both residents and non-residents who don’t earn income from a business or profession, and don’t receive income from a partnership firm in the form of interest, salary, bonus, commission, or remuneration.

You should use the ITR-2 form if you have an income over INR 50 lakh, or if your income includes:

  • Capital gains
  • More than one house property
  • Foreign income
  • Being a director of a company
  • Holding unlisted equity shares

Essentially, if your financial situation is more complex and includes any of these factors, the ITR-2 form is the right choice for accurately reporting your income.

Who is not Eligible for filing ITR-2?

 

ITR-2 cannot be filed by any individual or HUF whose total income for the year comprises profit and gains from business or profession, as well as income in the form of interest and salary.

The ITR-2 modifications for AY 2024–2025 filing are listed below.

√ Details of Legal Entity Identifier (LEI)

The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code that is used to uniquely identify parties in financial transactions around the world. It was adopted to increase the quality and accuracy of financial data reporting systems, resulting in better risk management.

According to RBI regulations, all single payment transactions of INR 50 crores or more              made by entities (non-individuals) must include remitter and beneficiary LEI information. This pertains to transactions carried out using the NEFT and RTGS payment systems.

To comply with RBI regulations, the new ITR forms now include a section for providing your Legal Entity Identifier (LEI) number. If you are a taxpayer seeking a refund of INR 50 crores or more, you need to fill in your LEI details. This addition ensures that large financial transactions are tracked accurately, aligning with regulatory requirements.

√Disclosure of information regarding to the Capital Gains Accounts Scheme.

In the Schedule-CG of the ITR forms, taxpayers are asked to provide details about the capital gains they’ve earned. This includes information about the capital asset they sold, such as its description and the particulars of the buyer. Additionally, taxpayers need to specify the amount spent for claiming exemptions. This schedule aims to gather comprehensive information about capital gains transactions, ensuring accurate reporting for tax purposes.

In the updated ITR-2 form, the Schedule-CG has been enhanced to provide more comprehensive information regarding sums deposited in the Capital Gains Accounts Scheme (CGAS). The revised schedule now includes additional details such as the date of deposit, account number, and IFS code related to the CGAS. This modification ensures that taxpayers can accurately report their transactions and deposits related to CGAS, facilitating smoother compliance with tax regulations.

Until the last Assessment Year, taxpayers were simply needed to furnish information about the amount placed in CGAS.

√Reporting of all banks held at any time.

  • Taxpayers must provide information regarding their bank accounts, particularly the account used to receive income tax returns.
  • New ITR forms require taxpayers to disclose all bank accounts held, excluding inactive accounts.

√Schedule – Tax Deferred on ESOP’ requires PAN and DPIIT Registration Number for qualifying startups.

When an employer offers securities to an employee through an Employee Stock Ownership Plan (ESOP) scheme, either free of cost or at a discounted rate, it’s considered a taxable perquisite for the employee in the year when the securities are allotted. However, there’s a unique provision for employees of eligible startups. In their case, while the securities’ value is taxable, the responsibility for paying or deducting tax on this perquisite is deferred. This special consideration aims to support and encourage the growth of startups by providing relief to their employees, helping them manage their tax liabilities more effectively.

The ‘Schedule – Tax Deferred on ESOP’ in your tax filing form is where you provide details about the tax deferral as outlined in Section 17(2)(vi). This section is designed to gather information about the assessment year, any deferred tax amounts carried forward from previous years, the tax payable for the current assessment year, and any remaining balance of tax deferred to be carried forward to the next assessment year. By filling out this schedule, you ensure accurate reporting and management of your tax obligations related to Employee Stock Ownership Plans (ESOPs), reflecting the specific provisions for tax deferral in the case of eligible startups.

To promote transparency, the updated ITR forms have made changes to this schedule, requiring additional information. Now, alongside the existing details, taxpayers are asked to provide the PAN of the employer (an eligible startup) and its DPIIT Registration number. These additions ensure clearer and more comprehensive reporting, helping tax authorities better monitor and validate the tax deferral benefits provided to employees of eligible startups under ESOP schemes.

√New Schedule 80GGC wants details of contributions made to political parties.

Section 80GGC allows you to get a tax deduction for contributions made to political parties or electoral trusts. In the latest Income Tax Return (ITR) forms, there’s a new section called Schedule 80GGC where you need to provide specific details about your donations. Here’s what you’ll need to include:

  • Date of Contribution: The exact date when you made the donation.

  • Contribution Amount: The total amount you donated, with a breakdown of how much was given in cash and how much through other methods.
  • Eligible Contribution Amount: The portion of your donation that qualifies for the tax deduction.
  • Transaction Reference Number: If you used UPI, this would be the UPI reference number. For cheques or bank transfers, it’s the cheque number or the reference number for IMPS, NEFT, or RTGS transactions.
  • IFS Code of the Bank: The IFS code of the bank you used for the transaction.

By filling out these details, you help ensure that your political contributions are transparent and that you can benefit from the tax deductions available under Section 80GGC.

  • Unlike previous tax returns, the new ITR forms now require you to provide more detailed information about your contributions under Section 80GGC, not just the amount eligible for deduction.
  • The Finance Act 2023 introduced a new Section 80CCH, which benefits individuals enrolled in the Agnipath Scheme. If you joined this scheme and started contributing to the Agniveer Corpus Fund on or after November 1, 2022, you can now get a tax deduction for the amount you deposit into this fund. This means that the money you put into the Agniveer Corpus Fund can help reduce your taxable income, making it a great incentive for participants in the Agnipath Scheme.

√New ITR forms now contain a column for indicating the amount that is eligible for deduction under Section 80CCH.

 When filling out the new ITR forms, you’ll need to provide specific details if you’re claiming deductions for a dependent with a disability. Here’s what you’ll need to include:

  • Nature of the Disability: What kind of disability does your dependent have?
  • Type of Dependent: Is the dependent your spouse, son, daughter, father, mother, brother, sister, or a member of your Hindu Undivided Family (HUF)?
  • PAN of the Dependent: The Permanent Account Number of your dependent.
  • Aadhaar of the Dependent: The Aadhaar number of your dependent.
  • Date of Filing and Acknowledgement Number of Form 10-IA: When did you file Form 10-IA, and what is the acknowledgement number?
  • UDID Number: The Unique Disability ID number of your dependent.

These details help ensure that the deductions you’re claiming are accurate and properly documented, providing the necessary support for your tax benefits.

New Schedule 80DD seeks details regarding the maintenance and medical treatment of the person with a disability.

 Section 80DD offers a deduction to resident individuals or Hindu Undivided Families (HUFs) who spend on medical expenses or pay insurance premiums for a family member with a disability. If the individual has a disability, they can claim a deduction of INR 75,000, and if the disability is severe, the deduction goes up to INR 1,25,000. This provision aims to ease the financial burden on families dealing with disabilities, providing support through tax benefits.

 In the past ITR Forms, taxpayers needed to report the deduction claimed under Section 80DD in Schedule VI-A of their income tax return forms. However, with the introduction of the new ITR forms, there’s now a dedicated ‘Schedule 80DD’ where you can provide detailed information about the deduction related to the maintenance, including medical treatment, of a dependent with a disability. This update streamlines the process, making it easier to accurately report and claim deductions specifically related to supporting dependents with disabilities.

These details comprise:

  • Nature of the disability
  • Type of dependent (spouse, son, daughter, father, mother, brother, sister or member of the HUF)
  • PAN of the dependent
  • Aadhaar of the dependent
  • Date of filing and acknowledgement number of Form 10-IA
  • UDID Number

√Declaration of Winnings from Online Games Chargeable Under Section 115BBJ.

 The Finance Act of 2023 introduced a new Section 115BBJ, which now taxes winnings from online games starting from the assessment year 2024-25. Simultaneously, a corresponding Section 194BA has been inserted, effective from April 1, 2023, requiring the deduction of tax from the net winnings derived from online games. This means that any winnings earned from online games on or after April 1, 2023, will be subject to taxation under Section 115BBJ and will also be subject to TDS (Tax Deducted at Source) under Section 194BA. These amendments aim to regulate and tax the income generated from online gaming activities. Schedule OS has been updated to include revenue from winning online games chargeable under Section 115BBJ in the ITR form.

√Reporting dividend income coming from a unit located in the IFSC.

The Finance Act of 2023 made changes to Section 115A, allowing for a reduced tax rate of 10% on dividend income from units in an IFSC (International Financial Services Centre) as specified in Section 80LA(1A), compared to the previous rate of 20%. This adjustment aims to encourage investment and activity within IFSCs by providing a tax incentive for dividend earners. Schedule OS’ has been updated in new ITR forms to reflect this change.

√Schedule-OS provides an additional column for the declaration of bonus payments received through life insurance plans.

The Finance Act of 2023 introduced changes to the taxation of life insurance policies. A new clause (xiii) in Section 56(2) now states that any amount received from life insurance policies with excess or high premiums is taxable under ‘other sources.’ This means that such receipts are subject to taxation beyond the regular provisions, impacting individuals who hold these policies. The ITR forms have been amended to include reporting of such income in Schedule OS.

√ Reporting of revenues received by a unitholder from the business trust.

To avoid the dual non-taxation of certain revenues distributed by business trusts to their unitholders, the Finance Act of 2023 added clause (xii) to Section 56(2).

Section 56 of the Act deals with the taxation of income under the head “Income from Other Sources.” Section 56(2)(xii) specifically mentions that any sum received by a unitholder is taxable under this head. Additionally, when units are redeemed, the proviso to clause (xii) allows for deducting the cost of acquisition from the sum received. This provision ensures fairness by accounting for the initial investment when determining taxable income from unit redemption.

To disclose income obtained by the unitholder under Section 56(2)(xii), ITR forms have been updated with a new column under Schedule-OS.

These are the Key changes to Income tax Return form which is applicable to mostly for Person Filing ITR-2.

What is the due date for filing the ITR FORM 2?

Taxpayers have until July 31st of the relevant assessment year to file an ITR, whereas taxpayers whose accounts are subject to audit have until October 31st.

FAQs (Frequently Asked Questions).

Q1: Can I file ITR-2 if I have income from business or profession?

 A: No, if you have income from business or profession, you should file a different ITR form such as ITR-3 or ITR-4 depending on the nature of your business or profession.

Q2: Can I file ITR-2 if I am a resident but have foreign assets or income?

A: Yes, ITR-2 can be filed by residents who have foreign assets or income, provided they meet the specified criteria for filing this form.

Q3: Is it mandatory to file ITR-2 electronically?

A: Yes, if your income exceeds the specified threshold or if you are claiming a refund, it is mandatory to file ITR-2 electronically (e-filing). However, certain categories of individuals are exempted from e-filing.

Q4: Can I revise my return if I have filed ITR-2?

A: Yes, you can revise your return within the prescribed time limit if you have filed ITR-2 and later discover any errors or omissions in your original return.

Q5: What documents are required to file ITR-2?

A: The documents required to file ITR-2 include Form 16 (for salary income), rent receipts or rental agreement (for house property income), details of capital gains transactions, bank statements, and other relevant documents.

Q6: Can I claim deductions under Chapter VI-A while filing ITR-2?

A: Yes, you can claim deductions under Chapter VI-A (such as Section 80C, 80D, 80E, etc.) while filing ITR-2, provided you meet the eligibility criteria for these deductions.

DISCLAIMER: The information provided in this ITR-2 form is intended for general informational purposes only and is based on the latest guidelines and regulations. While we strive to ensure the accuracy and completeness of the information, it may not reflect the most current legal or regulatory changes. Taxpayers are advised to consult with a qualified tax professional or you may contact to our tax advisor team through call +91-9871990777 or info@semantictaxgen.in. the appropriate government authority to verify the accuracy of the information and to obtain advice on their specific tax situations.

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