• Jun
  • 14
  • 2009

How to fill & file Income Tax Return ( ITR-2)

Posted In Income Tax | 43 Comments » Print Friendly and PDF

To file I-T returns, the choice for salaried individuals will be between the Indian Income Tax Return – 1 (ITR-1) and ITR-2 forms. If your earnings for the year are through salary income and interest earned on bank deposits, then ITR-1 is the form you should fill up. If you are a salaried individual and have made some money selling shares, or if you own a house, then ITR-2 is the form to be filled up.

Even if you are filling up ITR-1, this is a helpful guide. The main portion of ITR-2 has two pages, which are reprinted below. Other than these, there are four pages occupied by 15 schedules, most of which have been reprinted on the sides. The user has to first fill up the schedules and then get around to filling up the two main pages.

General information
Name and address are the first entries you should fill up.

Then come to filling up the permanent account number, popularly known as PAN. If you want to file a tax return, you must necessarily have a PAN. You cannot file a return otherwise.

To know the designation of your assessing officer, pull out a copy of your last year’s return. If you are filing a return for the first time, find out about it when you go to the income tax office.

To know the section under which returns are being filed, look at instruction number 9 in the list of instructions. For individuals filing returns before the due date, the right section is 11.

Indians living outside the country need to specify whether the returns are being filed by a representative assessee. Salaried Indian nationals can ignore this entry.

For better understanding we are taking example of one Mr. Ramesh Sharma.

Mr. Ramesh Sharma’s salary structure
Before moving onto the next entry, let’s take a look at Sharma’s salary structure.
Basic- 1,44,400
House rent allowance;72,000
Special allowance;96,720
Transport Allowance;9,600
Medical Reimbursement;15,000
Leave travel allowance ;15,000
Bonus ;1,80,000

Salary income
The information to fill up this schedule comes largely from Form 16 and your salary structure.

Salary includes your basic salary and the bonus earned during the course of the year. In the case of Mr. Sharma, the basic and bonus amount to Rs 3,24,000.

Allowances like leave travel allowance, medical reimbursement, house rent allowance (if an individual lives in a rented accommodation) and transportation allowance, etc are exempt from taxes. Nevertheless, these need to be mentioned in the form. You don’t need to calculate this entry separately — your form 16 will have the numbers.

Allowances not exempt include allowances like special allowance. It also includes the house rent allowance (HRA) if the individual owns a house and lives in it. Mr. Ramesh Sharma has bought a house for Rs 30 lakh this year and lives in it. He has taken a loan of Rs 25 lakh and paid the remaining amount from his own savings. Since he lives in the house, his HRA is taxable. The total of his special allowance (Rs 96,720) and HRA (Rs 72,000) works out to Rs 1,68,720.

The income chargeable to tax under this head works out to Rs 4,92,720.

Income from house
If you don’t own a house, this section is not for you.

If you have a house and you live in it, the entry that matters to you is the interest paid on borrowed capital. Mr. Ramesh Sharma has a 20-year housing loan of Rs 25 lakh at a fixed interest rate of 12%. His equated monthly instalment (EMI) for this works out to Rs 27,527. The interest component for the year works out to Rs 2,98,275.

In case of a self-occupied house, interest of up to  Rs 1,50,000 can be shown in a given year. So, even though Mr. Ramesh Sharma has paid an interest of Rs 2,98,275 during the year, he can show an interest of only Rs 1,50,000. To make this entry, take a look at the certificate issued by the bank, whose housing loan you have.

Given that Mr. Ramesh Sharma lives in the house he bought, and he pays an interest on the home loan he has taken, his income from house property is negative. That entry has been made in the table below.

For those who rent out their house, the entire interest part of the EMI can be set off against the rent earned during the course of the year.

Income from capital gains
All capital gains are not taxed at normal tax rates. Hence the need for a separate entry. Short-term capital gains from equity are taxed at the rate of 15% for the financial year 2008-09. Other short-term capital gains are lumped with income and taxed according to the tax bracket you fall in.

A short-term capital loss can be set off against any short-term capital gain you have made on selling shares or any other taxable short-term capital gain. But this loss cannot be set off against long-term capital gain on selling shares, because long-term capital gain made on selling shares is not taxable. Nevertheless, you can set off the short-term capital loss against any other taxable long-term capital gain like sale of gold or property or debt mutual funds.

Long-term capital gains made through stocks sold through a stock exchange, which are not taxed, are not to be mentioned in this section. There is a separate schedule EI (exempt income, which is not shown here) for that.

Other long-term capital gains are taxed at the rate of 10% without indexation and 20% with indexation. Indexation is essentially a process that takes inflation into account while deciding the cost of acquisition of a particular asset. For this, index numbers are available in the instructions that come with ITR-2.

What about long-term capital loss on selling shares? Long-term capital gain on selling shares or units of equity mutual funds is tax-free. As a result, long-term capital loss on selling shares is also tax-free. Put simply, any long-term capital loss incurred on selling shares or units of equity mutual funds cannot be set off against any long-term capital gain, even taxable long-term capital gain made on selling units of debt mutual funds or for that matter property.

Income from short-term capital gains
Full value of consideration indicates the total value of sale of the assets. In his case, Mr. Ramesh Sharma sold shares for Rs 64,000 and liquid funds for Rs 50,000. So, the total value comes to Rs 1,14,000, which is the entry to be made here.

Cost of acquisition is the price at which the assets are bought. Mr. Ramesh Sharma bought the shares for Rs 84,000 and liquid fund units for Rs 48,000, putting the total cost of acquisition at Rs 1,32,000. The difference between sale value (Rs 1,14,00) and cost of acquisition (Rs 1,32,00) is the short-term capital gain or loss. This, in Mr. Ramesh Sharma’s case, works out to a loss of Rs 18,000.

Short-term capital gain under section 111 A is the capital gain made by selling shares. In Mr. Ramesh Sharma’s case, there is a loss of Rs 20,000 (Rs 64,000 — Rs 84,000).

Short-term capital gain other than section 111 A  is the remaining capital gain. In Mr. Ramesh Sharma’s case, this is Rs 2,000 ( Rs 50,000 — Rs 48,000).

Other income
Dividend income from stocks and mutual funds is tax-free. Hence, dividend entry should include only dividend from foreign stocks. In Mr. Ramesh Sharma’s case, this remains blank. Interest income includes interest received on fixed deposits (FDs) and money in the savings accounts. Mr. Ramesh Sharma receives an interest of Rs 4,000 on FDs.

Losses of current year
If an individual has made a loss under any of the sources of income, he can adjust these losses against other sources of income to reduce his tax liability. For Mr. Ramesh Sharma, the loss from house property is Rs 1,50,000.

Capital losses can be adjusted only against capital gains and not against any other source of income.

Mr. Ramesh Sharma has also suffered a short-term capital loss of Rs 20,000 on selling shares. He has been able to adjust Rs 2,000 against short-term capital gain and Rs 3,481 against long-term capital gain. This still leaves Rs 14,519.

This remaining loss cannot be set off this year as there are not enough capital gains available to do so. It will therefore have to be carried forward and entered in schedule CFL (carried forward loss) and also as entry 14 in computation of total income. The schedule CFL is not shown here.

Losses can be carried forward for a maximum of 8 years

Tax deductions
There are 13 sections (only 3 are shown below) under the schedule VIA of the Income Tax Act, which allow you to get tax deductions.

Section 80 C allows a maximum of Rs 1 lakh for investments into life insurance, Employees Provident Fund, tax saving mutual funds, Public Provident Fund, repayment of home loan principal etc. Mr. Ramesh Sharma has utilised this limit.

Section 80 D allows a deduction for payment of health insurance premium. The maximum limit is Rs 15,000 or Rs 20,000 for senior citizens. On his part, Mr. Ramesh Sharma pays a premium of Rs 7,500.

Section 80 E allows a deduction for repayment of education loan. The deduction is allowed only for the interest portion of the EMI up to a maximum of Rs 40,000. In case of Mr. Ramesh Sharma, the total interest on the education loan works out to Rs 10,000.

Total tax to be paid
As can be seen in entry 13 in computation of total income, the total taxable income is Rs 2,29,200. The entire amount will be taxed at normal taxes rates. This is primarily because Mr. Ramesh Sharma has no capital gain. As we have seen, he has suffered from capital loss. Since he has faced a loss, no special rates come into play.

The company has already deducted a tax of Rs 10,000 and his tax liability on Rs. 2,29,200 work out to Rs. 8,158 so  Sharma will get a refund of Rs 1,842. In case of refunds, it is mandatory to quote the MICR code.


43 Responses to “How to fill & file Income Tax Return ( ITR-2)”

  1. MD.ZAIULLA says:

    I HAVE 8 BUS OWNER I GIVE TO FACTORY FOR BUSS COMMISSION BASIS
    HOW TO FILE THE INCOME TAX

  2. R P Sharma says:

    I am a govt employee, but I also earn about Rs. 30,000 from my professional services (which comes to me after deducting TDS).

    Please guide me which ITR should I fill (ITR1 or ITR2)?

  3. wahid Ali says:

    Hello

    Sir please help me .how i fill ITR-1 . please give me example.

    Thank’s

    Regards

    Wahid Ali

  4. wahid Ali says:

    hello

    sir how i can fill ITR-2 form please example.

    thank’s

    Regards

    Wahid Ali

  5. Avinash says:

    I have filled my ITR form2 and got the refund amount calculation as well but I suspected that sheet does not have any calculation based on my INterest paid on borrowed capital part, Its is not deducted from the net income or interest.. even when I remove the interest paid part then too it remains same .. can some one please suggest .. how I would correct this
    Thanks in Advance

  6. L. K. Choudhry says:

    I have completed the form ITR2 and each sheet has been validated. When I click XML generate, I get verify from 26A and I do O.K. Then I get” complete red cell of TDS1″ I do it O.K. since there is no item in advance tax and self assessment tax. I again click generate XML I get the same message of verify 26A and of TDS1
    In TDS2 there is item and I filled it
    Please guide me how to proceed further as I am held up here
    L. K. Choudhry

  7. SAYEE says:

    thanks for the guidelines in filling up ITR2.very helpful

  8. G.K.Shukla says:

    hello,

    i have a come to itr filing,he give me for 16 A (tds deducted on fee for professional charges).
    i want to itr fillup income from other sources,can i do ,please guide me,

    regards
    G.K.shukla

  9. sentil kumar says:

    pl. let me know how to fill head cg in ITR2 form for the following details.
    1. a short term capital loss (shares) of -6954.25
    2. a long term capital loss of -1187.22 from the sell of shares on which STT have been paid

    i will be thankful for your help
    Thanks and regards
    senthil kumar

  10. Vinay says:

    I did not buy any share but our company (an MNC) allotted some fund to each employee in 2008 but was held all our shares in a foundation in their country for a period till it come up for valuation this year and we received our share in INR.
    1. Do I need to fill ITR1 or ITR2.
    2. In which column of the excel should I mention this gain?
    3. What is the percentage of tax that I need to pay for this gain?
    Kindly advice.

  11. sudhir gupta says:

    pl. let me know how to fill head cg in ITR2 form for the following details.

    1. a short term capital loss of 10000/-.

    2. a long term capital gain of 25000/- from the sell of shares on which STT have been paid.

  12. tanu says:

    I have paid Rs 136000 as pre-construction interest on emi and pre-emi in the fy 2010-11. The construction of house completed in fy 2011-12. I have paid interest of Rs 177000 in fy 2011-12 on home loan emi. Now the rebate i’ll get under sec 24 is Rs 150000 in the A.Y 2012-13 against the interest paid in fy 2011-12 . When and how will i be able to claim rebate against emi and pre-emi paid in fy 2010-11.

  13. nagendra says:

    i had purchase shares and sold out , more than 2,50,000/- lossed can i fill the tax return?

  14. Tuhin says:

    Please tell me Name of the section & serial No. in ITR-2 where I have to put following income/deduction for e-filing-
    1. Aggregate of 4 (serial No. 5 of form 16)
    2. Total Income from house property (Serial No. 7 of form 16)
    3. Total amount paid credited (506) as in form 26AS received from SBI.
    4. Total Tax deducted (507) as in form 26AS received from SBI.
    5. Total TDS deposited (508) as in form 26AS received from SBI

    Also I don’t have the clarity on form No. 26AS. Is it necessary to calculate the total amount credited to me and total tax deducted (as date wise credited amount & TDS provided in 26AS ) and put the total amount in ITR – 2?

    Requested to clarify please.

  15. Rajib says:

    1. I am a normal salaried person & having “Income from house recovery” & bank interest . Can you tell me, out of twelve schedules in ITR-2, which schedules would be required to fill. I don’t have any other income.
    2. I can’t understand where I have to put  ” Tax on Employment ” deducted in form 16 in ITR-2.
    3. What is Tax on Sec 234 A, B, C? How it is calculated?

    —requested to earliest reply please.

  16. Aditi says:

    While filing itr online which section of itr should contain travel allowance exemption

  17. H Khandelwal says:

    i sold out my house property and invested the same amount within the months. where to show thses figure in ITR 2

  18. Venkitachalam says:

    I had purchased a flat in my name in 2005 but not registered in my name as construction was going on. Since there was substantial delay in the construction I sold it in 2010 (even then not registered in my name) from which I have a Capital Gain of say Rs. X. I used the entire amount to buy a flat in 2011. How do I show this in tax declaration. As I understand this is a long term capital gains (over 3 years)so it should be totally exempt from tax since I used it to buy another flat

  19. Tapan Mazumdar says:

    I have my basic salary 2400 per month, allowance 1600 (Gross 4000), pf deduction- 288 (2400 @ 12%), esi deduction – 70 (4000 @ 1.75%), professional tax-30, net salary 3612 & also get extra / incentive per month 2500 so i am total earning per month 6112 from a private concern. And also getting bonus 8.33% on total earned in a whole year.

    I have no any assets.

    So I want to know that should i fill IT return?

    If i should do it so how would I fill ITR-1 to shown these transactions.

    Please help me as soon as possible.

    I wish you will definitely help me.

    Thanks & Regards,
    Tapan Mazumdar

  20. Dasharath says:

    Dear Sir
    I have given rs 2000000 as gift to my wife. Where this is to be shown in the ITR 2 and what is the tax liability on part of my wife
    please help
    regards
    PDReddy
    9934169239

  21. Jitendra says:

    Mention in Section VI-A
    Probably under 80C

    You will get the refund of 3000

  22. Pradeep says:

    I have salary income, Interest income from other sources, and long term capital gain which is non taxable. Can I fill ITR-1 as long term capital gain is not taxable.

    Are there any benefits of filing ITR-1 Versus ITR-2 ?

    Are chances of random audit more in case of ITR-2 ?

  23. KUMAR says:

    My office people forgot to add my one saving of Rupees 30000 and deducted the tax for same. Is there any provision or form available by which I can add those savings while filing my return and get the refund of Rs 3000 extra tax.

  24. Dakshinamurthy says:

    I will answer your question partly. I am not a CA.
    Capital gain of -33000 is correct as it is your capital loss this year. There is no tax whether it is Zero or -33000. I you donot have any other capital gain this year, you can set off this capital loss against your capital gain next year. on the tax preparation XL utility this will come up in CFL-xi ( carry formward loss) section. Next few years (7?) you can use this, provided you have declared this -33000 in this year return.

  25. Dakshinamurthy says:

    Where do I specify the current year short term capital loss( 111A ) in ITR 2.
    I have the following Short term capital gain.
    Till Sep 15 : 10000 ; Sep15- Dec15 : (5000)Loss ; Dec15-Mar15: Rs.9000 Mar15 to Mar 30 : Nil : Total capita gain after offsetting : Rs.14000

    I tried entering the following breakup into ITR II : CG-OS : C-i,ii,iii, iv and negative numbers are not allowed.

  26. Sally says:

    Hello

    I have invested in shares of a company in Germany through my employer. I am a resident Indian and am earning salary in India. I am using ITR2 to file my return.

    In January 2011, the company gave dividend on the shares. As per German laws, withholding tax was deducted. The balance amount was used to purchase additional shares of the same company.

    I want to know how to show this income & withholding tax in ITR2. I believe the total dividend received (before withholding tax) will be shown in Schedule OS and added to my total income and taxable as per my normal slabs. But how do I show the withholding tax and hence get benefit of taxes already paid? I believe there is a double taxation treaty between India & Germany, so I should get credit here for taxes paid in Germany.

    Thanks in advance

  27. rameshwar dayal sharma says:

    total salary 383049 less under sec.10-21268 House loan ints-37161 Deduction under chapter 6-A100000 I get Relie under section 89 -2530 PLEASE HOW I CAN FILL SARAL ITR-2 Ihave deducted TDS-4100

  28. Seema says:

    i have worked in canada from January 2010 to July 2010 foe which TDS is also deducted in Canada for 7 months. After that from August 2010 i am working in India. So i would like to know the how much canadain income i need to show in ITR for AY 2011-12.Should i show total canada income or only from April 10 to July 10. Also how much relief i can get from total tax payable under DTAA.

  29. Meenakshi says:

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  30. Swapan says:

    Hi,

    I have booked residential plot and paying interest free EMI – it will go for 4 years. How to shown this expenses on ITR-2? I would like to show it in IT terun file to avoid any complexcity later (like from where I got so much of money etc.).

    Please advise.

  31. Swapan says:

    Hi,

    I have booked residential plot and paying interest free EMI – it will go for 4 years. How to shown this expenses on ITR-2? I would like to show it in IT terun file to avoid any complexcity later (like from where I got so much of money etc.).

    Please advise.

    Thanks,
    Swapan

  32. Suresh says:

    Plz. tell me how can I upload I.T. Return(Annual) online?

    thanks

  33. Praveen says:

    My company don’t have TAN number, so they are not deducting our TDS. So i will not issue the Form-16, How can I fill the Schedule S of ITR-2.

  34. Ashok says:

    I have sold gold ETF 5 units with holding of 9 months and 10 units with holding of 4 years. What tax is to be paid and where should I mention this in ITR-2 form ?

  35. VIMAL says:

    I have my basic salary 9500 per month, pf deduction-1350(950 @10%), esi duduction-(167 i.e. 9500 @1.75%), professional tax-110, how would I fill ITR-1 to shown these transactions.

    please reply asap.
    vimal

  36. Deepak Gunjan says:

    i am a student. i want o fill income tax of my mother and father both are working in sahara india and lic.we are living in rented house.My gurdian have form 16.but i donot know which ITRis perfectformy gurdian and how ican fill itr.Thisyearmy gurdian is not purchasing any propertyor any assets.

    Plz helpme as soon as you can.

    i wish you will definetly helpme.

    Thanks
    Deepak

  37. PHOOL KUMARI says:

    I am having a rental income of 5000 pm apart from my pension, how would I show the amount earned from house property in the ITR2, I am also living in the same house.

  38. brij mohan khera says:

    Dear Sir: I am currently providing consulting services to an engineering consulting company. My terms of engagement stipulate that the service tax shall be reimbursed by the Company. On submission of my ST reimbursement claim, the Company has recovered TDS on the amount of ST paid by me. I have been informed that it is mandatory for the company to recover TDS on any amount released by it. Will the Service Tax – to be paid by the company- be treated like my income requiring me to pay the income tax? Your kind clarification will be very helpful. Thanks. BM Khera (bmkhera@gmail.com)

  39. Manishi Tiwari says:

    HI, I have a doubt regarding Schedule S of ITR2. In section 1 of my form 16, gross salary of 500000 is mentioned. Then in section2, exemption u/s 10 of Rs 9600 is mentioned. And in section 4, under deductions, tax on employement, rs 2400 is mentioned. So, my question is, where to put the amount of 2400 in ITR2, schedule S.Please help.

  40. Ashutosh says:

    Hello,

    I have a doubt regarding filling Section CG in ITR2.

    During the year, I sold shares and received Rs. 101,603.00. However, the purchase price for these shares was Rs. 134,903.00. This means that there was Short Term Loss of Rs. 33,300.00.

    In 2a) Full value of consideration – should I write Rs. 101,603.00

    In 2bi) Cost of Acquisition – Should I mention Rs. 134,903.00

    If so, then 2c) bcomes -33,300.00
    and 2f) also becomes -33,300.00.

    While in my opinion it should be Zero, as there is no Short Term Gain.

    Can you please advise, what should I mention in 2a), 2bi) , 2c) and 2f).

    Thanks very much.

  41. ksk says:

    very helpful for filing tax return..

  42. jose says:

    Hello,

    I have a doubt regarding filling Section CG-OS in ITR2.

    Suppose that I invested 10000 rupees in stocks and then sold the stocks at 11000 and then again rotated the money by reinvesting the 11000 again in stock, and then sold at 12000 rupees. So, my trade book would show as follows:

    Buy Amount Sell Amount

    10000 11000
    11000 12000

    Total 21000 23000

    But the money I originally invested is only 10000, and my net amount in hand after all transactions is 12000.

    So, in section A.2.b.i (Full value of consideration, should I enter 10000 rupees or 21000 rupees?
    In section A.2.a (Full value under consideration), should I enter 12000 rupees or 23000 rupees?

    Please guide.

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