Depending on the sources of income earned during the financial year, an individual will file either ITR 1 or ITR 2. It is crucial to understand the dissimilarities between these two income tax return forms, as filing ITR with the wrong form would result in a defective return. In such cases, the income tax department may issue a tax notice, requesting the individual to file ITR using the appropriate form according to their income.
Even if an individual misses the July 31, 2022 deadline for filing ITR, they can still file their income tax return, which is referred to as a belated ITR. However, a late filing fee is required to be paid while submitting a belated ITR.
Who is eligible to file using ITR 1?
ITR 1, also known as Sahaj form, is designed for individuals who have income from salary or pension, one house property, and income from other sources like interest income, family pension income, etc. Here are the eligibility criteria for filing ITR 1:
- Resident individuals who have income from salaries or pensions.
- Individuals who own only one house property.
- Individuals who have income from other sources like interest income, family pension income, etc., except income from lottery or horse racing.
- The total income of the individual should not exceed Rs. 50 lakhs during the financial year.
- Agricultural income of up to Rs. 5000 can be included in ITR 1.
It is important to note that if an individual has any income from business or profession, capital gains, or foreign assets, they are not eligible to file ITR 1 and should file the appropriate form according to their income sources.
Who is eligible to file using ITR 2?
ITR 2 is applicable to individuals and Hindu Undivided Families (HUFs) who have income from multiple sources, including salary, pension, capital gains, house property, and foreign assets. Here are the eligibility criteria for filing ITR 2:
- Resident individuals and HUFs who have income from multiple sources, excluding income from profits and gains of business or profession.
- Individuals who own more than one house property.
- Individuals who have capital gains on the sale of assets like stocks, mutual funds, property, etc.
- Individuals who have earned income from foreign sources or have foreign assets.
- Individuals who are eligible for relief under Section 90 or 90A of the Income Tax Act (relating to tax paid in a foreign country).
- Individuals who have earned income from winnings of lottery or horse racing.
It is important to note that if an individual has income from profits and gains of business or profession, they are not eligible to file ITR-2 and should file the appropriate form according to their income sources.
If an individual has additional sources of income, such as income from business and profession, they are not eligible to file ITR-1 or ITR-2. Instead, they must file their income tax return using a different ITR form that is applicable to their income sources.
It is essential to note that ITR-2 is a much more intricate form than ITR-1. ITR-1 is also known as Sahaj because it is a simple ITR form that requires less information than ITR-2.
Filing tax returns using ITR-1 on the new income tax portal is relatively easy. Most of the information in the form is pre-filled, and individuals are only required to cross-check it with the available documents before submitting the return. However, filing ITR-2 on the new income tax portal can be challenging. Even though some information is pre-filled, the portal demands certain questions to be answered before the start of the form and requires additional details like date of purchase, unit details (in case of capital gains from shares or mutual funds), etc.