In India, individuals are required to file an income tax return (ITR) every year to report their income to the government. To make this process easier, the Indian government has created several forms, each designed to suit different income categories. ITR1 and ITR2 are two of the most commonly used forms for income tax returns. These two forms often cause confusion for ITR filers. Knowing the difference between the two income tax return forms is very important because if the ITR is filed using the incorrect ITR form then it will be considered an erroneous 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 a first-time filer or have filed an income tax return before, this article will provide the information you need to ensure that your tax return is filed accurately and efficiently.
Eligibility to file ITR1:
According to the Indian Income Tax Department, ITR 1 (also known as Sahaj) can only be filed by residents of India who have:
1. Income not exceeding INR 50 Lakhs during the financial year.
2. Income comes from salary, pension, agricultural land (up to Rs. 5000), etc.
3. Other sources of income include:
- Interest from savings account
- Deposit interest (Bank/Post office/Cooperative)
- Interest from income tax refund
- Interest received from Enhanced Compensation
An individual must be an ordinary resident of India to avail ITR1.
Eligibility to file ITR2:
According to the Indian Income Tax Department, ITR-2 can be filed by individuals or HUF (Hindu Undivided Family):
1. Have an income exceeding INR 50 Lakhs during the financial year.
2. Have income from salary and have more than one residential property.
3. Have foreign income from dividends from overseas stocks and other sources.
4. Being a director of a company.
5. Owning equity shares that have not been publicly traded.
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 they must report:
ITR1 (Sahaj): This form is used by individuals with a total income of up to 50 lakhs from salary, a house and other sources (excluding lottery winnings and income from racing horses). 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 multiple assets in home. This form is also used by individuals with capital gains or foreign assets/income. Company directors are also required to file ITR2.
In short, ITR1 is for individuals with simple tax situations, while ITR2 is for individuals with more complex tax situations including 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 that your income tax return is filed accurately and efficiently. Depending on your income, position, and assets, you can easily decide which of the two forms—ITR1 or ITR2—is for you.
We hope this article was helpful in explaining the difference between ITR1 and ITR2.
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Source: pagasa.edu.vn