Everything you need to know about ITR-2 Form

Before you start to file an income tax return, you must determine the relevant ITR form. However, decoding the details of these forms can be taxing and time-taking. So, today we will offer a comprehensive overview of ITR-2 by way of this article.

Without much ado, let’s get started!

ITR-2 is an income tax return form that is applicable for individual taxpayers as well as Hindu Undivided Family (HUF) who are not engaged in any profession or business. Its applicability depends upon the category of the taxpayer and his/her source of income. Now that you know what ITR-2 is in income tax, here is its structure.

After assessing ITR-2 meaning, one must understand that the form consists of several components, namely the following:

• Part A: It contains details of personal information and filing status
• Part B: This component has two parts:
  • Part B-TI: It involves the computation of total income with respect to income chargeable to tax
  • Part B-TTI: This part involves computing the tax liability on total income

Furthermore, this form comprises a number of schedules, which are described below:

• Schedule S: This section has details of income from salaries.
• Schedule CG: It includes computing the income under the heading ‘Capital Gains’.
• Schedule HP: A taxpayer must provide details of ‘Income from House Property’ in section HP.
• Schedule OS: It calls for computing one’s income under the heading ‘Income from Other Sources.’
• Schedule BFLA: This section holds a statement of income after setting off unabsorbed losses brought forward from preceding financial years.
• Schedule CYLA: It has a statement of income after setting off losses in the current financial year.
• Schedule 80G: This section has a statement of donations that are subject to deduction under Section 80G of the Income Tax Act.
• Schedule CFL: It contains a statement of losses that will be carried forward to subsequent financial years. 
• Schedule VI-A: It is a statement of deductions from an individual’s total income as per schedule VI-A.
• Schedule AMT: It includes computing one’s alternate minimum tax payable under Section 115JC of the Income Tax Act.
• Schedule 80GGA: This section presents a statement of donations for rural development or scientific research.
• Schedule AMTC: It includes the computation of an individual’s tax credit under Section 115JD.
• Schedule SI: This section contains a statement of the income that is chargeable to taxation at special rates.
• Schedule EI: It has details of exempt income, i.e., income that is not included in one’s total income.
• Schedule SPI: It is a statement of income of a taxpayer’s spouse/minor child/son’s wife or any such person or association of persons, who are to be included in this individual’s income as per schedulesHP, CG, and OS.
• Schedule TR: A taxpayer must furnish details of taxes paid outside India in schedule TR.
• Schedule PTI: It contains details of income details from business trusts or investment funds as per Section 115UA, 115UB.
• Schedule FSI: This presents a statement of income arising or accruing outside India.
• Schedule AL: It indicates one’s assets and liabilities at the year-end. It is applicable only if the total income of a taxpayer exceeds ₹50,00,000.
• Schedule FA: This section contains details of income from sources outside India as well as any foreign assets.
• Schedule 5A: It presents a statement of apportionment of one’s income between spouses.
• Schedule DI: This includes details of tax-saving investments, deposits, or payments entitled to deduction or exemption.

Now that you are familiar with the nitty-gritty of ITR-2, let’s find out if it is applicable for you.

As aforementioned, individuals and Hindu Undivided Families (HUFs) who do not receive income from sources under the heading ‘Profits and Gains from Business or Profession’ can file ITR-2. Therefore, you are eligible to file income tax returns with an ITR-2 form if you earn income from the following sources:

• Salary or pension
• House property (including more than one residential property)
• Capital gains or losses on the sale of property or investments (includes both short as well as long-term investments)
• Income from other sources, such as winning rewards from lotteries, horse racing, etc.
• Agricultural income of more than ₹5,000
• Income accrued outside India (foreign income)
• Income from foreign assets

Additionally, a taxpayer who is a director of any company or has invested in unlisted equity shares of a company is required to file returns with ITR-2.

So, who does not come under this ITR-2 eligibility? The following category of taxpayers cannot file ITR-2:

• An individual or Hindu Undivided Family (HUF) that earns income from profession or business.
• Taxpayers who are eligible to file returns with the ITR-1 form.

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You can file an income tax return offline or take the online route. However, only those taxpayers who are of 80 years of age or above can opt for an offline filing of ITR-2. 

These individuals can, therefore, easily furnish returns by way of a physical ITR-2 form and a bar-coded return of details on income earned. Moreover, when an assessee submits this paper form, he/she receives an acknowledgement from the Income Tax Department.

One can choose to file ITR-2 online by following these steps:

• Step 1: Visit the official website of income tax e-filing.
• Step 2: Log in to this portal by providing your user ID (PAN), password, and a CAPTCHA code. 
• Step 3: Select the option of ‘e-File’ on the menu.
• Step 4: Click on the ‘Income Tax Return’ option.
• Step 5: Your PAN details will get auto-populated on the income tax return page. Now, go ahead and select ‘Assessment Year,’ and then ‘ITR Form Number.’
• Step 6: Select ‘Filing Type’ and click on the option ‘Original/Revised Return.’
• Step 7: Now click on ‘Continue.’
• Step 8: Here, you must read the instructions carefully. Then, proceed to fill the ITR-2 form by entering details in all the applicable and mandatory fields.
• Step 9: Remember to select the ‘Save Draft’ button periodically to avoid loss of data due to session time-out. 
• Step 10: Choose an appropriate verification option in the tabs ‘Taxes Paid’ and ‘Verification.’
• Step 11: Opt for any one of the following options to verify your income tax return:

E-verification within 30 days from the date of filing the ITR.

Verification by a signed ITR-V through the post within 30 days from the date of filing ITR.

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• Step 12: Click on ‘Preview and Submit.’ Here, you must verify the accuracy of all the data in your ITR.
• Step 13: Click on ‘Submit.’

That concludes how to submit ITR-2 online. 

But wait, did you know that you can also file an online return with excel utility? Here’s how you can file ITR-2 online through this process.

Yes, you can prepare your ITR offline using an excel utility and submit it online. To do so, simply follow these steps:

• Step 1: Visit the income tax e-filing portal.
• Step 2: Select ‘Downloads’ at the top bar.
• Step 3: From the drop-down menu, choose the assessment year.
• Step 4: Proceed to download the Microsoft Excel file. Here, a zip file is downloaded.
• Step 5: Extract this file into your computer and open it. Select ‘Enable Content’.
• Step 6: Click on ‘Enable Macros.’
• Step 7: Once the excel file opens, you must remember the following points:

•  It is mandatory to fill in the red fields.

•  Green fields are for data entry.

•  Do not ‘cut’ or ‘paste’ data. So, do not use the ‘Ctrl + X’ and ‘Ctrl + V’ at any point.

• Step 8: Insert data under each tab and select ‘Validate.’
• Step 9: Validate all tabs of this ITR form and then calculate the tax.
• Step 10: Generate and save it as an XML file.
• Step 11: Now, go to the income tax e-filing website and login into the portal.
• Step 12: Here, continue following the same steps as discussed earlier. 
• Step 13: After selecting the option ‘Original/Revised Return,’ click on ‘Submission Mode.’
• Step 14: Now, use the option ‘Upload XML’ and submit the excel file. Then, proceed to file ITR-2 as instructed earlier.

Listed below are the major changes in ITR-2 with respect to AY 22-23:

• The taxpayer needs to provide additional disclosures under the Capital Gains Schedule. These disclosures pertain to the following:

• Acquisition and transfer dates of building/land 

• Details of cost of improvement, year of improvement and indexed cost of improvement

• Separate disclosures pertaining to cost and indexed cost of acquisition

• If the property is located in a foreign country, then the country code and zip code

• Taxpayers need to provide reports of interest accrued on Provident Fund upon which he would not be able to avail exemptions. 

• There is a provision of new schedule for reporting of deferred tax on ESOP. One has to disclose the following details:

• Tax deferred in the ITR filed

• Date of sale of the particular securities and the amount of payable tax on such sales

• The amount of tax payable in the current assessment year

• The date from which the assesse was no longer a part of the organization

• The balance of the tax amount that would be carried over to the next assessment year 

• As per Section 89A, the assesee will receive relief from taxation of income from retirement benefits account that he has in a notified country. In the new ITR form, details of income from salary or Schedule S needs the following disclosures:

• Income from the account of retirement benefits that is maintained in a notified country mentioned under Section 89A

• Income from retirement benefits account that exists in any other country other than the ones notified u/s 89A

• Pensioners need to provide further classification of their nature of employment. The following options have been incorporated for pensioners:

• Pensioners – CG

• Pensioners – PSU

• Pensioners – SC

• Pensioners – Others

• Schedule FA needs disclosure of foreign assets that one holds during a calendar year:

• A resident taxpayer needs to disclose his foreign assets and all foreign income earned under Schedule FA in the new ITR forms. 

• Even if the taxpayer is the beneficial owner of a foreign asset or has any financial interest in a foreign entity, he needs to provide an adequate report in the ITR form.

• Furthermore, the assessee needs to disclose the information if he holds foreign assets like foreign equity and debt interest in trusts that were created outside India. Additionally, information about Foreign Deposit Account, if applicable is required. 

ITR-2 underwent a number of significant changes for AY 2020-21, the most notable of which are highlighted below:

• RNORs and NRIs have to compulsorily file ITR-2 even if their total income does not exceed ₹50,00,000. Thus, you may need to know how to file ITR-2 for NRI. 
• Individual taxpayers who owe more than one residential/house property will now have to file the ITR-2 form.
• If an individual holds the position of director in a company or has unlisted equity investments, he/she must disclose the ‘Type of Company.’
• A taxpayer who is liable to file ITR-2 must mandatorily disclose the following information:
  • Foreign travel expenses in excess of ₹2,00,000.
  • Cash deposits exceeding ₹1 crore in a current account.
  • Electricity expenses exceeding ₹2,00,000.
• ITR-2 continues to be applicable to resident individuals with a total income of more than ₹50,00,000.
• Schedule VI-A for tax deductions is amended. It now includes deductions under Section 80EEA and 80EEB.

That concludes our guide on ITR-2. You can now use this information to simplify the process of filing your income tax returns.