Tax Trouble Looms for Those Earning Over Rs 50 Lakh or Owning Multiple Houses: ITR-2, ITR-3 FY 2023-24 Guidelines

The Income Tax department requires additional information from taxpayers with earnings over Rs 50 lakh or multiple houses when filing ITR-2 and ITR-3 for the fiscal year 2023-24.

The Central Board of Direct Taxes (CBDT) has issued Notification No. 19 of 2024, specifying Income-tax Return Forms (ITR Form) 2, 3, and 5 for the Assessment Year 2024-25. Additionally, ITR Form-6 has been notified for AY 2024-25 through Notification No. 16 of 2024.

ITR-1 and ITR-4 for Assessment Year 2024-25 were previously notified on December 22, 2023, via Notification No. 105 of 2023. With the recent notifications, all ITR Forms 1 to 6 are now officially specified and will be applicable from April 1, 2024. Taxpayers have until July 31, 2024, to submit their ITR-2 and ITR-3 forms.

The Income Tax department has introduced additional reporting requirements for taxpayers earning over Rs 50 lakh or owning more than one house while filing their tax returns for the current fiscal year.

In the revised ITR-2, the Income Tax department has incorporated additional clauses, including the requirement for Legal Entity Identifier (LEI) details, details of contributions made to political parties, and information on deductions related to the maintenance, including medical treatment, of a dependent with a disability.

Taxpayers with earnings exceeding Rs 50 lakh are now required to provide additional details, including Legal Entity Identifier (LEI) information, contributions to political parties with payment details, and specifics about deductions claimed for the care of a dependent with a disability, including medical expenses.

The Income Tax Return Form 2 (ITR-2) is applicable for individuals and Hindu Undivided Families (HUFs) who do not have income from profits and gains of business or profession. ITR-2 can be filed by individuals or HUFs who fall under the following criteria:

1. Not eligible to file ITR-1 (Sahaj).
2. Do not have income from profits and gains of business or profession.
3. Do not have income from business or profession in the nature of interest, salary, bonus, commission, or remuneration.
4. Have the income of another person (like a spouse, minor child, etc.) to be clubbed with their income, provided the income to be clubbed falls into any of the above categories.

Key changes in the ITR-2 forms for the assessment year 2024-25 include:

1. Details of Legal Entity Identifier (LEI).
2. Details of contributions made to political parties (if made and claimed) – includes date, mode of payment, and transaction/cheque number/IFSC code.
3. Details of deduction for the maintenance, including medical treatment, of a dependent who is a person with a disability – includes the type of dependent, PAN, and Form 10IA details.
4. Individuals or HUFs subjected to a tax audit can verify their ITR using the electronic verification code (EVC), instead of relying on digital signature certificates (DSCs).

Income Tax Return Form 3 (ITR-3) is designed for individuals and Hindu Undivided Families (HUFs) who have income under the head “profits or gains of business or profession.” It is applicable to those who do not meet the eligibility criteria for filing Form ITR-1 (Sahaj), ITR-2, or ITR-4 (Sugam).

Correct, ITR-3 is specifically designed for individuals and Hindu Undivided Families (HUFs) who have income derived from profits or gains of business or profession. It encompasses various forms of business and professional activities, such as self-employment, freelancing, consultancy, and other related sources. HUFs engaged in business or profession and generating income from such activities also use ITR-3 to file their income tax returns.

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