Process of Filing Tax Made Simpler for Salaried Individuals

The government has made the process of filing taxes easier, hence it is good news for taxpayers. Individuals who are earning a salary upto Rs. 1.25 Lakh through long-term capital gains from equities or equity mutual funds. Previously, salaried individuals with income generated from capital gains were asked to file Income Tax Return (ITR)-2, where capital gains were not counted as taxable.

No More ITR 2 For Capital Gains?

Beginning from this year, the newly launched ITR-1 has been implemented with a small section for reporting long-term capital gains, in which tax is not required to be paid. In today’s time, ITR 1 is required to be filed by individuals having a salary upto 50 lakh, along with one house property, interest and agriculture income. But if they make a capital gain in a specified year and they will be required to file ITR-2.

In order to reduce the compliance burden, the income tax department has denied salaried individuals with long-term gains of Rs. 1.25 lakh yearly to file ITR-2.

The authorities have increased the limit for tax-free long-term capital gains from Rs. 1 lakh to Rs. 1.25 lakh with the launch of this year’s budget. The tax rate on long-term capital gains has also been raised from 10% to 12.5%.

One of the experts has said, “This change streamlines the tax filing process, making it more accessible and less burdensome for small investors and salaried individuals, encouraging timely compliance.”

If a taxpayer earns long-term capital gains of more than Rs. 1.25 lakh, or earns such gains from sources other than shares or business trusts, or has short-term capital gains, or has carried forward or brought forward capital losses or other income, then a salaried person must use Form ITR-2 to file their tax return.

A similar update has been made to Form ITR-4, which is used by people who choose presumptive taxation for their business income.