Filing income tax returns is a vital duty for every taxpayer. However, understanding which form to use can be challenging. Two frequently used forms are ITR-1 and ITR-2. As a taxpayer, understanding the difference between ITR-1 and ITR-2 is crucial. Let’s break it down in simple terms.
The deadline for filing income tax returns for FY 2023-24 (AY 2024-25) is July 31, 2024.
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What is ITR-1 form?
ITR-1, also known as Sahaj, is for individuals with income from salaries, one house property, other sources, and agricultural income. This form is suitable for most salaried employees, pensioners, and individuals with income from interest or rental properties.
What is the applicability of ITR-1?
- For individuals with income from salary.
- Income from one house property.
- Other sources of income excluding winnings from lottery and racehorses.
- Agricultural income up to INR 5,000.
Know about the income tax returns for salaried employees.
What is ITR-2 form?
ITR-2 is for individuals and Hindu Undivided Families (HUFs) not eligible to file ITR-1. It includes all sources of income like salary, house property, capital gains, business/ professional income, and other sources. If you have income from more than one house property, lottery winnings, or foreign assets, ITR-2 is the form for you.
What is the applicability of ITR-2?
- For individuals and HUFs with income from multiple sources.
- Excludes those eligible for ITR-1.
- Income from salary, house property, capital gains, business/professional income, and other sources.
- Agricultural income exceeding INR 5,000.
- Foreign assets and income.
Which ITR form should one choose?
- Salaried employees with simple income:
- If your income is from salary, one house property, and other sources like interest income, go for ITR-1.
- Income from multiple sources:
- If you have income from multiple sources like salary, house property, capital gains, or foreign assets, use ITR-2.
- Avoiding Penalties:
- Choosing the right form is crucial to avoid penalties for filing the wrong one. Ensure accuracy to prevent any complications.
- Consult a tax professional:
- If you’re unsure which form to choose, seek advice from a tax consultant or accountant. They can guide you based on your specific financial situation.
Difference between ITR-1 and ITR-2?
The key difference between ITR-1 and ITR-2 on various aspects are as follows;
| Aspect | ITR-1 | ITR-2 |
|---|---|---|
| Applicability | For individuals earning from salary, one house property, and other sources. | For individuals and HUFs with income from multiple sources, except those eligible for ITR-1. |
| Income Level | Up to INR 50 lakhs | More than INR 50 lakhs |
| Income Sources | Earnings from salary, one house property, and other sources (excluding winnings from lottery and racehorses). | All sources of income include salary, house property, capital gains, business/professional income, and other sources. |
| Agricultural Income | Agricultural income up to INR 5,000 allowed. | Agricultural income exceeding INR 5,000 allowed. |
| Capital Gains | Not applicable. | Applicable. |
| Foreign Assets | Not applicable. | Applicable. |
| House Property | Only one house property allowed. | Multiple house properties allowed. |
| Foreign Income | Not applicable. | Applicable. |
Key Points of ITR-1
- Applicable to individuals having salary, one house property, and other medium as income source.
- Not for those with an income over INR 50 lakhs or agricultural income exceeding INR 5,000.
- Can’t be used by individuals with income from capital gains or business/professional income.
Key Points of ITR-2
- Applicable to individuals and HUFs having income from more than one house property, capital gains, or foreign assets.
- Suitable for those with an income over INR 50 lakhs or an agricultural income exceeding INR 5,000.
- Can be used by individuals having income from salary, house property, capital gains, and business/professional income.
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In conclusion, understanding the difference between ITR-1 and ITR-2 is important when it comes to filing your income tax returns. In simple words, ITR-1 is for individuals with simple income, while ITR-2 is designed for those with more complex financial situations involving multiple sources of income, including capital gains and foreign assets.
Looking for an expert to get your income tax filed? Contact 24efiling rigt now.
FAQs
1. What is the key difference between ITR-1 and ITR-2?
The main differences lie in their applicability and the sources of income they cover. ITR-1 is for individuals with simple income from salary, one house property, and other sources, while ITR-2 is for those with more complex income sources, including multiple house properties, capital gains, business/professional income, and foreign assets or income.
2. Can I use ITR-1 if I have income from multiple sources?
No, ITR-1 is suitable for individuals with income from salary, one-house property, and other sources excluding certain types like capital gains. If you have income from multiple sources including capital gains, you should use ITR-2.
3. I have an agricultural income. Which form should I use?
If your agricultural income is up to INR 5,000, you can file using ITR-1. However, if your agricultural income exceeds INR 5,000, you should file using ITR-2.
4. What if I have more than one house property?
If you own more than one house property, you cannot use ITR-1. Instead, you should file using ITR-2, which allows reporting of income from multiple house properties.
5. I have income from abroad. Can I use ITR-1?
No, ITR-1 does not allow reporting of foreign income or assets. If you have income from abroad or foreign assets, you should use ITR-2, which includes provisions for reporting such income.
6. Can a salaried individual with capital gains use ITR-1?
No, if you have capital gains along with your salary income, you cannot use ITR-1. You should use ITR-2, which allows reporting of capital gains along with other income sources.
