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ITR-2 Return Filing
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OVERVIEW
ITR-2 is an income tax return form designed for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession. It is ideal for taxpayers earning from multiple sources such as salary, multiple house properties, capital gains, foreign assets, or agricultural income above ₹5,000. Non-Resident Indians (NRIs) and individuals with income exceeding ₹50 lakh also frequently use ITR-2 due to its detailed reporting structure.
Filing ITR-2 helps taxpayers comply with tax regulations, accurately declare capital gains and foreign income, and claim relevant deductions. Submitting returns before the due date avoids penalties, ensures faster refunds (if applicable), and maintains a transparent financial record.
Key Features Of ITR-2 Return Filing
- • Multiple Income Sources : Suitable for those with salary, more than one house property, capital gains, and foreign income or assets.
- • Detailed Capital Gains Reporting : Provides separate sections for short-term and long-term capital gains, ensuring accurate tax calculation.
- • Ideal for NRIs and Complex Disclosures : Allows Non-Resident Indians and individuals with foreign bank accounts or assets to meet disclosure requirements.
What is ITR-2?
ITR-2 is one of the income tax return forms issued by the Income Tax Department of India, specifically designed for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession. This form is ideal for taxpayers with a more complex financial portfolio, as it covers income sources beyond just salary, such as capital gains, multiple house properties, foreign assets, dividend income, and agricultural income exceeding ₹5,000.
Unlike ITR-1, which is meant for individuals with a straightforward income structure, ITR-2 allows detailed reporting of various types of earnings, ensuring that taxpayers comply with legal requirements while availing of deductions and exemptions. It is also the preferred choice for Non-Resident Indians (NRIs) who need to declare their income and assets held in India. If a taxpayer has investments in stocks, mutual funds, bonds, or other capital assets, ITR-2 is necessary to report capital gains or losses from these transactions.
Moreover, ITR-2 provides sections for disclosing foreign income and assets, making it essential for individuals who have global earnings or investments outside India. This form also accommodates those receiving high-value exemptions and deductions, such as HUF members or individuals earning substantial rental income. Filing ITR-2 ensures comprehensive tax compliance while enabling taxpayers to accurately disclose their diverse income sources and claim applicable benefits under Indian tax laws.
Who Can File ITR-2?
Salaried Individuals and Pensioners with Multiple House Properties
If you earn a salary or pension, you are eligible to file ITR-2. Additionally, if you own more than one house property, including both self-occupied and rented properties, you must report these details under ITR-2. Even if you receive rental income from multiple properties, this form is applicable to you.
Individuals Earning Capital Gains
If you have earned money from the sale of capital assets, such as stocks, mutual funds, real estate, bonds, or gold, you need to file ITR-2. Whether these capital gains are long-term or short-term, they must be reported in your income tax return. Even if your gains are tax-exempt due to reinvestment (e.g., under Section 54 for property reinvestment), you still need to disclose them.
Agricultural Income Exceeding ₹5,000
Although agricultural income is tax-free, if your total agricultural income exceeds ₹5,000, it must be declared in ITR-2. This includes earnings from farming, livestock, horticulture, or agricultural leasing. While it is not taxed directly, it is considered for tax rate calculations.
Individuals Earning Dividends and Interest
If you receive dividends from stocks, mutual funds, or corporate shares, or earn interest from fixed deposits, savings accounts, or bonds, you must file ITR-2. Even if the dividend income is below ₹10 lakh, it needs to be reported.
Who Cannot File ITR-2?
Individuals with Business or Professional Income
If you are self-employed, own a business, work as a freelancer, consultant, or practice a profession (such as doctors, lawyers, or architects), you cannot file ITR-2. Instead, you must file ITR-3 or ITR-4, depending on whether you follow regular income tax provisions or opt for the Presumptive Taxation Scheme (PTS).
Individuals Opting for the Presumptive Taxation Scheme (PTS)
If you run a business or provide professional services and choose to pay tax under the presumptive taxation scheme (under Sections 44AD, 44ADA, or 44AE), you cannot file ITR-2. The PTS scheme is designed to simplify taxation for small businesses and professionals with lower turnover, requiring them to file ITR-4 instead.
Individuals with Income from a Partnership Firm
If you are a partner in a partnership firm and earn income from profit-sharing, interest, or salary from the firm, you must file ITR-3 instead of ITR-2. Even though this is not a direct business income, it is treated as business earnings for taxation purposes.
Individuals Who Need to Carry Forward Business Losses
If you have incurred losses from business or professional activities and wish to carry them forward to offset future income, ITR-2 is not applicable. You must use ITR-3, which allows for the carry-forward and set-off of business losses as per tax regulations.
Tax Deductions and Exemptions in ITR-2
Taxpayers filing ITR-2 can benefit from various tax deductions and exemptions to reduce their taxable income. Under Section 80C, deductions of up to ₹1.5 lakh are available for investments in PPF, EPF, life insurance, ELSS mutual funds, and home loan principal repayment. Additionally, under Section 80D, individuals can claim deductions for health insurance premiums paid for themselves and their family. Interest paid on home loans qualifies for a deduction under Section 24(b), with an exemption of up to ₹2 lakh per year. Moreover, capital gains exemptions can be availed under Sections 54, 54EC, and 54F by reinvesting the proceeds in property or government bonds. Income from dividends and agricultural sources is also partially or fully exempt under specific provisions. By leveraging these deductions and exemptions, taxpayers can significantly lower their tax liability while ensuring compliance with income tax laws.
Silent Features
For Individuals & HUFs with Multiple Income Sources
Capital Gains Reporting
Foreign Income & Assets Disclosure
Multiple House Property Income
Clubbing of Income
Deductions & Exemptions Eligibility
Advantages of Filing ITR-2
- Compliance with Tax Laws: Filing ITR-2 ensures that individuals comply with income tax regulations, avoiding penalties and legal issues related to non-compliance.
- Claiming Tax Deductions: Taxpayers can claim deductions under various sections like 80C (investments), 80D (health insurance), and 80G (donations), reducing their taxable income and overall tax burden.
- Accurate Capital Gains Reporting: ITR-2 allows individuals to properly report short-term and long-term capital gains from stocks, mutual funds, or property sales, ensuring correct tax liability calculation.
- Foreign Income & Asset Declaration: It facilitates compliance for individuals earning foreign income or holding overseas assets, helping them avoid penalties for non-disclosure.
- Easy Loan & Visa Approval: A properly filed ITR-2 serves as proof of income, making it easier to apply for home loans, car loans, and visas for travel abroad.
- Carry Forward Losses: Taxpayers can carry forward capital losses from previous years and set them off against future gains, reducing their tax liability in upcoming financial years.
Documents Required
PAN Card
Aadhaar Card
Bank Statements
Form 16
Income Proofs
Form 26AS
Step-by-Step Guide For Income Tax Return (ITR) Filing
Here are 5 steps to complete your Income Tax Return (ITR) Filing
Step 1
Gather Required Documents
Step 2
Log in to the Income Tax Portal
Step 3
Select ITR-2 Form and Fill in Details
Step 4
Claim Deductions and Verify Tax Liability
Step 5
Verify and Submit Your ITR
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