ITR 1 vs ITR 2: Which One You Should Opt And Fill

ITR 1 vs ITR 2: Which One You Should Opt And Fill

The correct form must be selected when filing income tax returns. The IT department may reject your return and possibly impose a penalty for missing the deadline.

G R MukeshUpdated: Saturday, June 15, 2024, 04:34 PM IST
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ITR 1 vs ITR 2: Which One You Should Opt And Fill | Image Source: Wikipedia (Representative)

As the Income Tax Filing (ITR) season is underway and the deadline approaches, it is important to choose the correct form when filing income tax returns. The IT department may reject your return and possibly impose a penalty for missing the deadline. Individual taxpayers typically struggle to decide between ITR 1 and ITR 2 in this regard.

Although the these two income tax return forms cover nearly identical income categories, they differ slightly in small ways.

ITR 1 Eligibility

When filing their taxes, residents who are salaried and whose annual income does not exceed Rs 50 lakh must select the ITR 1 form. The following standards establish their applicability:

1) A salary or a pension should be the source of income.

2) One property should provide all of the income.

3) Other sources of income are possible (but not from gambling, lotteries, horse racing, or other similar endeavors).

4) The individual must not possess any real estate outside of India.

5) It is improper for him or her to get money from other nations.

6) Earn interest from savings bonds, deposits, and additional sources of interest.

7) Pension for family.

ITR 2 Applicability

Within a fiscal year, Hindu Undivided Families (HUFs), salaried resident individuals, and non-resident individuals are all eligible to file an ITR 2. Candidates must select ITR 2 in the following situations:

1) The ITR-1 filing is not available to taxpayers.

2) If they receive a pension or salary income.

3) In the event that they earn money from multiple properties,.

4) In the event that they make money from other sources (betting, lotteries, card games, horse racing, etc.).

5) If the taxpayer has both short- and long-term capital gains,.

6) Should the person have carried over losses from the prior fiscal year?

7) If the person earns more than Rs 5,000 from agriculture in a given fiscal year.

8) Amounts taxable over Rs 50 lakhs

9) If the person owns assets or property overseas,.

10) Taxpayers whose income is earned outside of India or abroad.

11) Taxpayers who wish to apply for relief under Sections 90/91 or DTAA benefits.

An individual is subject to a 10 per cent Tax deduction at source (TDS) if their annual dividend income exceeds Rs 5,000. The dividend income must be reported under the heading Income from Business or Profession if it comes from shares held for business purposes.

The returns would be subject to taxation under the heading Income from Other Sources if the shares were held for investment purposes.

Investors may choose to file an ITR 1 or 2, depending on this and the other factors listed above.

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