Latest news with #Section112A
Mint
6 days ago
- Business
- Mint
Income Tax: ITR-1 or ITR-2? Which one should you choose when filing returns? Eligibility, differences and more explained
Selecting the right ITR form is essential when filing income tax returns. Filing your return using the wrong form can lead to rejection by the Income Tax Department and even a delay in refunds. Among individual taxpayers, the most common confusion arises between ITR-1 (Sahaj) and ITR-2, both designed for taxpayers with specific income profiles. Here's a detailed guide to understand the key differences between these two forms – Form ITR-1, also referred to as ITR-1 (SAHAJ), is the most appropriate form for salaried individuals. This form should be selected by taxpayers with a total annual income of up to ₹ 50 lakh, owning one house property, agricultural income not exceeding ₹ 5,000, deriving income from other sources and long-term capital gains of up to ₹ 1.25 lakh under Section 112A. Individuals ineligible to file the ITR-1 form are — Resident Not Ordinarily Resident (RNOR), and Non-Resident Indian (NRI) Receive income from other sources such as lottery, racehorses, legal gambling, etc. Taxable capital gains. Director in a company. Tax deduction under section 194N of the Income Tax Act. Deferred income tax on ESOP received from the employer, being an eligible start-up. ITR-2 covers a wider range of income sources than ITR-1. Form ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) with no business or professional income. Individuals and HUFs with a salaried income of more than ₹ 50 lakh, more than one house, all types of capital gains, foreign income, taxpayers owning unlisted shares, and agricultural income of more than ₹ 5,000 are eligible to file the ITR-2 form. Taxpayers ineligible for filing returns via ITR-2 are — Companies and trusts. ITR-2 cannot be filed by any individual or HUF if their total income for the year includes income from business or profession, as well as income from interest, salary, bonus, commission, or remuneration from a partnership firm Feature ITR-1 ITR-2 Income Up to ₹ 50 lakh Over ₹ 50 lakh Applicant Resident Individual Resident or non-resident indivduals and HUFs Capital gains Long-term capital gains under section 112A up to Rs.1.25 lakhs Both short-term and long-term gains Agricultural income Up to ₹ 5,000 Over ₹ 5,000 Income from property One house More than one house In conclusion, it is extremely important for every taxpayer to understand the eligibility criteria of every income tax return form before filing. In case of any doubts, a taxpayer must reach out to a professional or check the official guidelines on the Income Tax Department's website. Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Readers are advised to consult a qualified tax professional for guidance specific to their financial situation and compliance requirements.
Economic Times
02-07-2025
- Business
- Economic Times
Think market income below Rs 12 lakh is tax free? TaxBuddy founder warns how this common mistake could attract big tax notice
Many Indian retail investors are surprised to learn that earning under ₹12 lakh in the stock market doesn't guarantee tax exemption. Confusions arise from overlooking how different income types are taxed, such as intraday trading, F&O, STCG, and LTCG. Understanding income classification is crucial for accurate tax calculation and avoiding unexpected notices. Tired of too many ads? Remove Ads Breakdown of the investor's income ₹3 lakh in intraday losses ₹2.5 lakh from futures and options (F&O) gains ₹3.5 lakh in short-term capital gains (STCG) ₹4 lakh in long-term capital gains (LTCG) The total profit was under ₹12 lakh. However, that did not make it exempt from tax. Tired of too many ads? Remove Ads Tax confusion is common Retail investing surge meets tax surprises A growing number of retail investors in India are discovering that earning less than ₹12 lakh from stock markets does not automatically mean a tax exemption. According to Sujit Bangar, founder of investors often get caught off guard because they overlook how each type of income is taxed under different a recent example, Bangar highlighted the case of a full-time investor who earned ₹7 lakh from the market. Expecting zero tax, the investor instead received a tax notice demanding ₹74, investor's earnings included:How tax rules treat different incomesTax laws treat each income type separately:Intraday trading: Treated as speculative business income, taxed at slab rates, and losses can only be adjusted against speculative profits. Losses can be carried forward for four and Options (F&O): Classified as non-speculative business income, taxed at slab rates. Losses have broader set-off options and an eight-year carry-forward capital gains (STCG): Taxed at a flat rate of 20% under Section 111A. STCG losses can offset both STCG and capital gains (LTCG): Only ₹1.25 lakh is exempt under Section 112A. Any amount above that is taxed at 12.5%. No indexation benefits or Section 87A rebate confuse low income with low tax,' Bangar said in a detailed LinkedIn post. 'Understand how each income is classified—and taxed.'He pointed out that the investor's mistake was not the profit amount but how the gains were treated under tax law. 'What got him in trouble wasn't profit—it was classification.'Bangar's post comes at a time when millions of Indians are entering the stock market through trading apps, often without full knowledge of tax laws.'Tag someone who trades but thinks ₹12L = 'tax-free zone,'' Bangar wrote. His message underlines the importance of understanding tax rules before new and existing investors, the key takeaway is this: knowing how your income is classified matters more than how much you earn.
India Today
02-07-2025
- Business
- India Today
Investor earns Rs 7 lakh, faces Rs 74,000 tax despite Rs 12 lakh limit. Know why
A tax expert has explained how a retail investor who earned Rs 7 lakh in stock market profits ended up with a tax demand of Rs 74,375. The case highlights how misreading the nature of income can lead to unexpected tax liabilities, even when total earnings seem Bangar, founder of and a former IRS officer, shared the example on LinkedIn to warn investors against a common misconception. The investor, Rahul, believed that since his total income was below Rs 12 lakh, he would not be liable to pay tax. What he overlooked was how different types of market income are treated under the tax earnings included a Rs 3 lakh loss from intraday trading, a Rs 2.5 lakh gain from futures and options, Rs 3.5 lakh in short-term capital gains from equities, and Rs 4 lakh in long-term capital gains. After subtracting the losses, he assumed that his Rs 7 lakh net income was tax-free. However, Bangar pointed out that the tax system does not allow such aggregation. Each category of income is assessed and taxed separately, with its own rules, exemptions, and set-off trading is treated as speculative business income. It is taxed at the individual's slab rate, and any losses can be adjusted only against speculative gains. If not utilised, such losses can be carried forward for four and options are considered non-speculative business income under Section 43(5). These are also taxed at slab rates, but the losses can be set off against a wider range of incomes except salary, and carried forward for up to eight capital gains, such as those from selling equities within a year, fall under Section 111A. These gains are taxed at a flat rate of 20 percent. While losses in this category can be adjusted against both short- and long-term capital gains, they do not qualify for basic income capital gains from listed equities are covered under Section 112A. The first Rs 1.25 lakh in gains is exempt, but any amount above that is taxed at 12.5 percent. There is no indexation benefit, and losses here can only be set off against other long-term capital also clarified that the Section 87A rebate of up to Rs 12,500, available to individuals with taxable income under Rs 5 lakh, does not apply to long-term capital gains under Section real issue, according to him, was not how much Rahul earned but how that income was classified. Many investors make the mistake of treating their total earnings as one pool, ignoring the rules specific to each warning comes at a time when market participation by retail investors is surging, driven by app-based trading platforms. For many, the complexity of tax treatment remains an afterthought until the tax bill arrives.'Don't confuse low income with low tax,' Bangar wrote. 'Understand how each income is classified and taxed.'His message is clear: market profits are no guarantee of tax freedom unless investors understand the fine print.- Ends
Time of India
02-07-2025
- Business
- Time of India
Think market income below Rs 12 lakh is tax free? TaxBuddy founder warns how this common mistake could attract big tax notice
Many Indian retail investors are surprised to learn that earning under ₹12 lakh in the stock market doesn't guarantee tax exemption. Confusions arise from overlooking how different income types are taxed, such as intraday trading, F&O, STCG, and LTCG. Understanding income classification is crucial for accurate tax calculation and avoiding unexpected notices. Tired of too many ads? Remove Ads Breakdown of the investor's income ₹3 lakh in intraday losses ₹2.5 lakh from futures and options (F&O) gains ₹3.5 lakh in short-term capital gains (STCG) ₹4 lakh in long-term capital gains (LTCG) The total profit was under ₹12 lakh. However, that did not make it exempt from tax. Tired of too many ads? Remove Ads Tax confusion is common Retail investing surge meets tax surprises A growing number of retail investors in India are discovering that earning less than ₹12 lakh from stock markets does not automatically mean a tax exemption. According to Sujit Bangar, founder of investors often get caught off guard because they overlook how each type of income is taxed under different a recent example, Bangar highlighted the case of a full-time investor who earned ₹7 lakh from the market. Expecting zero tax, the investor instead received a tax notice demanding ₹74, investor's earnings included:How tax rules treat different incomesTax laws treat each income type separately:Intraday trading: Treated as speculative business income, taxed at slab rates, and losses can only be adjusted against speculative profits. Losses can be carried forward for four and Options (F&O): Classified as non-speculative business income, taxed at slab rates. Losses have broader set-off options and an eight-year carry-forward capital gains (STCG): Taxed at a flat rate of 20% under Section 111A. STCG losses can offset both STCG and capital gains (LTCG): Only ₹1.25 lakh is exempt under Section 112A. Any amount above that is taxed at 12.5%. No indexation benefits or Section 87A rebate confuse low income with low tax,' Bangar said in a detailed LinkedIn post. 'Understand how each income is classified—and taxed.'He pointed out that the investor's mistake was not the profit amount but how the gains were treated under tax law. 'What got him in trouble wasn't profit—it was classification.'Bangar's post comes at a time when millions of Indians are entering the stock market through trading apps, often without full knowledge of tax laws.'Tag someone who trades but thinks ₹12L = 'tax-free zone,'' Bangar wrote. His message underlines the importance of understanding tax rules before new and existing investors, the key takeaway is this: knowing how your income is classified matters more than how much you earn.
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Business Standard
05-06-2025
- Business
- Business Standard
ITR-1, ITR-4 forms go live: Know what has changed, who can file online
People can file their Income Tax returns (ITR) for assessment year 2025-26 as the Central Board of Direct Taxes (CBDT) has enabled the online filing of ITR-1 and ITR-4 forms on its e-filing portal The website has pre-filled data, aimed at simplifying the return filing process for millions of salaried and small business taxpayers. Who can file ITR-1 and ITR-4? Both ITR forms are designed for individuals with relatively simple income profiles, said Naveen Wadhwa, vice-president of Taxmann. ITR-1 (Sahaj) is for resident individuals (not Hindu Undivided Families, HUF) or firms) having: Salary or pension income One-house property (no carried-forward losses) Income from other sources (excluding lottery or racehorse winnings) Total income up to Rs 50 lakh Long-term capital gains under Section 112A up to Rs 1.25 lakh (new inclusion) ITR-4 (Sugam) is for resident individuals, HUFs, or firms (other than LLPs) having: Presumptive income under sections 44AD, 44ADA, or 44AE Total income up to Rs 50 lakh Income from one-house property and other sources Long-term capital gains under Section 112A up to Rs 1.25 lakh, with no capital losses carried forward According to CBDT's rules, individuals earning capital gains up to Rs 1.25 lakh under Section 112A (from listed equity shares, mutual funds, or business trusts) can now file ITR-1 or ITR-4, provided there is no carried forward loss. This change addresses a long-standing concern among small investors. Calculate Income Tax: Income Tax Calculator Tool 'This amendment will benefit a large number of small taxpayers who earlier had to switch to complex forms like ITR-2 or ITR-3 just because of minor capital gains,' said Wadhwa. Wadhwa explained the changes that taxpayers need to keep in mind this time: Aadhaar Enrolment ID not accepted: From October 1, 2024, only the actual Aadhaar number (not the enrolment ID) can be used for PAN applications and return filing. Capital gains disclosures: If your capital asset was sold after July 23, 2024, new tax rules apply. Taxpayers must now disclose the transfer date, as tax rates and indexation benefits differ based on that. Detailed tax regime disclosure: ITR-4 now requires more specifics on whether the taxpayer wants to opt out of the new tax regime under Section 115BAC. Where to file returns Taxpayers can log in to to access the pre-filled ITR-1 and ITR-4 forms and submit them online. With the ITR forms now live, experts suggest early filing to avoid last-minute rush or errors. 'Taxpayers should cross-check their prefilled data, especially TDS and bank interest, before submission,' said Wadhwa. For AY 2025–26, the deadline for most individual taxpayers is September 15 (for non-audit taxpayers).
