ITR Filing: The Income Tax Department has notified the ITR-2 form. Now new rules are applicable regarding section 80 deduction, taxation on capital gains, TDS section code. Know how these changes will affect your tax filing.
The Income Tax Department has notified the ITR-2 form for the financial year 2024-25 (Assessment Year 2025-26). This form is for those individuals and Hindu Undivided Families (HUFs) who do not have any income from business or profession. This time many big changes have been made in the form, which will affect lakhs of taxpayers.
Who needs to file ITR-2?
ITR-2 is for those taxpayers whose income comes from specific sources. Such as:
- Salary or pension
- Rent from one or more house properties
- Capital gains (from sale of shares, bonds, mutual funds, etc.)
- Income from other sources (like lotteries, horse racing, legal betting etc.)
- Agricultural income of more than ₹5,000
- NRI (Non-Resident) or RNOR (Resident but Not Ordinarily Resident) individual
Apart from this, if someone’s income is more than ₹ 50 lakh, then he can also fill ITR-2. ITR-2 form is mandatory for company directors and individuals investing in unlisted companies. Those earning long term capital gain of more than ₹ 1.25 lakh in listed equity also have to file ITR-2.
If you are eligible for ITR-1, you can also file ITR-2 if you wish. However, it is wise to opt for the less complex ITR-1 first, provided you fulfil all its conditions.
What are the changes in ITR-2 form?
- New timeline in capital gains: As per the Finance Act 2024, the form now requires you to state when you sold your capital asset – before or after July 23, 2024. This is because the taxation rate on capital gains has changed from that date.
- Capital loss on share buyback: Earlier, the loss incurred on share buyback could not be claimed. But now, if the date of buyback is on or after October 1, 2024, and you have shown the dividend received on it in ‘Income from other sources’, then the capital loss can be adjusted.
- Schedule AL Limit: Earlier in ITR-2 form, if the total income of a taxpayer was more than ₹ 50 lakh, then he had to fill the information of his assets and liabilities in Schedule AL (Assets and Liabilities). But from this year this limit has been increased to ₹ 1 crore. This change will provide great relief to taxpayers with income of ₹ 50 lakh to ₹ 1 crore.
- Section 80 deductions: Now, the ITR-2 form will have to fill in more granular details of deductions under sections 80C, 80D, 80CCD, 10(13A) etc. This is aimed at more transparent reporting of investments and expenses of taxpayers.
- Mentioning ‘section code’ in TDS is mandatory: Earlier, while filling ITR-2 form, one had to only tell who deducted TDS and how much amount was deducted. Now it will also be necessary to tell under which section TDS was deducted. This will help the tax department in tracking.
Capital gains allowed in ITR-1
The Income Tax Department has allowed showing long term capital gains on equity shares or mutual funds in the ITR-1 form from this year. If you have earned up to ₹ 1.25 lakh from mutual funds or stock market, then you can show it in ITR-1. However, for taxpayers with amounts above this, it will be mandatory to file ITR-2.
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