- Date : 17/07/2023
- Read: 3 mins
Be an informed taxpayer. Discover the differences between ITR 1 and ITR 2 income tax return forms. Choose the right form for accurate tax filing.
The Income Tax Department of India has introduced seven types of Income Tax Return (ITR) forms to cater to the diverse income sources and minimise the complexities of the taxpayers. It is essential for taxpayers to choose the correct ITR form based on their income source/sources. Two commonly used forms are ITR 1 (Sahaj) and ITR 2. Here we understand the differences between ITR 1 and ITR 2 and get acquainted with ITR 2A to help taxpayers understand which form suits their needs.
- Forms ITR 1 and ITR 2 are common forms used for income tax filing
- To determine the appropriate form, taxpayers should evaluate their income streams, such as salary, pension, house property, capital gains, foreign assets, and business or professional income
- Filing the wrong form can lead to inaccurate reporting, potential penalties, and legal complications.
- ITR 2A is a recently introduced form for individuals and HUFs
ITR 1 (Sahaj): ITR 1, also known as Sahaj, is for salaried individuals or pensioners
Eligibility: ITR 1 is applicable to individuals who earn income from salary, pension, one house property, and interest on fixed deposits.
Income Limit: Taxpayers with a total income of up to ₹50 lakhs can file their returns using ITR 1. In the case of agricultural income, it should not be more than ₹5000.
Exclusions: Individuals with income from business or profession, capital gains, or more than one house property cannot use ITR 1.
ITR 2: ITR 2 is a more comprehensive form applicable to individuals and Hindu Undivided Families (HUFs) who have income from multiple sources.
Eligibility: Taxpayers who are not eligible to file ITR 1, meaning those with income from more than one house property, capital gains, or business or profession, should opt for ITR 2.
Income Limit: Taxpayers with an income of more than ₹50 lakh or agricultural income of more than ₹5000 can file returns with the ITR2 form
Foreign Assets: ITR2 is also used by individuals with foreign assets or income, making it suitable for Non-Resident Indians (NRIs) and Resident, but Not Ordinarily Resident (RNOR) taxpayers.
ITR 2 requires additional details on capital gains, foreign assets, foreign income, and any tax relief claimed under Double Taxation Avoidance Agreements (DTAA).
It is a recently introduced income tax return form for individuals and HUFs who have a salary income, own more than one house property, and do not have capital gains income.
Filing income tax returns accurately is a fundamental obligation for taxpayers. While ITR 1 is suitable for salaried individuals or pensioners, ITR 2 is meant for individuals and HUFs with multiple income streams. By selecting the appropriate form and diligently reporting income details, taxpayers can fulfil their tax obligations and avoid potential penalties.
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Also Read: Mastering the Art of Tax Saving
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.