In India, people must file an income tax return (ITR) every year to report their income to the government. To make the process easier, the Indian government has created several forms, each designed to suit different types of income. ITR1 and ITR2 are two of the most commonly used forms for filing income tax returns. These two forms often confuse ITR filers. Knowing the differences between the two income tax return forms is essential because if the ITR is filed using the wrong ITR form, it will be considered a defective return.
In this article, we will explore the differences between ITR1 and ITR2, helping you understand which form you should use based on your income and tax situation. Whether you are filing a tax return for the first time or have filed income tax returns in the past, this article will give you the information you need to ensure your tax returns are filed accurately and efficiently.
Eligibility to file ITR1:
According to the Income Tax Department of India, ITR 1 (also known as Sahaj) can only be filed by a resident of India whose:
1. Income does not exceed INR 50 lakh in a financial year.
2. Income comes from salaries, pensions, agricultural land (up to Rs 5,000), etc.
3. Other sources of income include:
- Savings account interest
- Deposit Interest (Bank / Post Office / Cooperative Society)
- Interest on income tax refund
- Interest received on enhanced compensation
A person must be a regular resident of India to avail ITR1.
Eligibility to file ITR2:
According to the Income Tax Department of India, ITR-2 can be filed by individuals or HUFs (Hindu Undivided Families) who:
1. You have income more than INR 50 lakh in a financial year.
2. You have salary income and more than one residential property.
3. You have foreign income from foreign stock dividends and other sources.
4. He is a director of a company.
5. Own unlisted stocks.
Difference between ITR 1 and ITR 2:
ITR1 and ITR2 are two different forms used to file income tax returns in India. The main difference between ITR1 and ITR2 is the type of income that must be declared:
ITR1 (Sahaj): This form is used by people with a total income of up to 50 lakhs from salary, house ownership and other sources (excluding lottery winnings and horse racing income). The individual must be an ordinary resident of India.
ITR2: This form is used by individuals and Hindu Undivided Families (HUFs) who have income from sources other than salary/pension and/or income from more than one residential property. This form is also used by people who have capital gains or foreign assets/income. Company directors must also file an ITR2.
In short, ITR1 is intended for people with simple tax situations, while ITR2 is intended for people with more complex tax situations that include multiple sources of income, capital gains, and foreign assets/income. It is important to use the correct form for your specific tax situation to ensure your tax returns are filed accurately and efficiently. Depending on your income, designation and assets, you can easily decide which of the two forms (ITR1 or ITR2) is right for you.
We hope this article was helpful in explaining the difference between ITR1 and ITR2.
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Source: ptivs2.edu.vn