ITR-2 Filing: A Guide for Salaried Individuals in India

ITR-2 is an Income Tax Return form specifically designed for individuals and Hindu Undivided Families (HUFs). This form is meant for those who earn income from salary or pension, own multiple house properties, and have capital gains or losses from their investments. It's also applicable to those who generate income from other sources and individuals who serve as company directors. Additionally, the form is suitable for people who have investments in unlisted equity shares. However, it's important to note that this form is not meant for those who have income from business or professional activities. The form serves as a comprehensive tool for taxpayers who have diverse income sources beyond just salary, making it particularly relevant for individuals with investment income and property holdings.

Who Should File ITR-2?

You should file ITR-2 if you meet any of these criteria:

• You earn salary/pension AND own multiple properties
• You have made capital gains/losses from selling stocks, mutual funds, or property
• You're a company director
• You have foreign assets or foreign income
• You have income from other sources exceeding ₹50,000

Key Components of ITR-2

Personal Information

• Basic details (Name, PAN, Aadhaar)
• Address and contact information
• Bank account details
• Filing status (Original/Revised)

Income from Salary: Example of Salary Income Calculation:

• Basic Salary: ₹8,00,000
• HRA: ₹3,00,000
• Special Allowance: ₹2,00,000
• LTA: ₹50,000
• Gross Salary: ₹13,50,000

Less: Exemptions

• HRA (if eligible): ₹2,40,000
• LTA (if claimed):  ₹50,000
• Net Taxable Salary: ₹10,60,000

Income from House Property: Example for Multiple Properties:

Property 1 (Self-Occupied):

• Municipal Value: ₹3,00,000
• Interest on Loan: ₹2,00,000
• Net Income: -₹2,00,000 (Loss)

Property 2 (Let-Out):

• Annual Rent: ₹4,80,000
• Municipal Tax: ₹20,000
• Standard Deduction: ₹1,44,000 (30% of Net Annual Value)
• Interest on Loan: ₹1,50,000
• Net Income: ₹1,66,000

Capital Gains

Short-term Capital Gains (STCG): Example of shares sold within 1 year:

• Sale Price: ₹1,50,000
• Purchase Price: ₹1,00,000
• STCG: ₹50,000 (Taxed at 15% for equity shares)

Long-term Capital Gains (LTCG): Example of property sold after 2 years:

• Sale Price: ₹80,00,000
• Indexed Cost: ₹60,00,000
• LTCG: ₹20,00,000 (Taxed at 20% with indexation)

Income from Other Sources

• Interest from savings accounts
• Fixed deposits interest
• Dividends
• Rental income from machinery
• Gifts received

Example:

• Savings Interest: ₹15,000
• FD Interest: ₹1,00,000
• Dividends: ₹50,000
• Total: ₹1,65,000

Deductions Available in ITR-2

Section 80C (Up to ₹1,50,000)

• Public Provident Fund (PPF)
• Equity-Linked Savings Scheme (ELSS)
• Life Insurance Premium
• Principal repayment of home loan
• Tuition fees

Section 80D (Up to ₹25,000)

• Health Insurance Premium
• Preventive health checkup

Other Important Deductions

• 80E: Education loan interest
• 80G: Charitable donations
• 80TTA: Savings account interest (up to ₹10,000)

Step-by-Step Filing Process

Download Form ITR-2 from the Income Tax website

Gather required documents:

• Form 16
• Bank statements
• Investment proofs
• Loan statements
• Property documents
• Capital gains statements

Fill in personal information

Enter income details:

• Salary income
• House property income
• Capital gains
• Other sources

Claim deductions

Calculate tax liability:

• Gross Total Income: ₹15,00,000
• Less: Deductions: ₹2,50,000
• Taxable Income: ₹12,50,000
• Tax Liability: ₹1,87,500
• Less: TDS: ₹1,50,000
• Tax Payable/Refund: ₹37,500

Verify and submit

Common Mistakes to Avoid

• Incorrect selection of ITR form
• Missing out on reporting all bank accounts
• Forgetting to report exempt income
• Incorrect reporting of capital gains
• Not reporting directorship in companies
• Missing out on claiming all eligible deductions

Important Deadlines and Penalties

• Regular Filing: July 31 (Usually)
• Late Filing: December 31 (with penalty)

Penalties:

• Up to ₹5,000 for filing after due date
• Higher penalties for substantial income non-disclosure

Tips for Accurate Filing

• Keep all documents organized throughout the year
• Maintain a record of all investments and transactions
• Calculate capital gains properly with indexation where applicable
• Report all bank accounts, even if dormant
• Include director details if applicable
• Report foreign assets correctly to avoid penalties
• Verify all pre-filled information carefully

Filing ITR-2 requires careful attention to detail and proper documentation. Keep all relevant documents organized and ensure accurate reporting of all income sources. When in doubt, consult a tax professional to ensure compliance and maximize legitimate deductions.