Major Changes Introduced in ITR Utility - Why is it Important for Taxpayers?

For taxpayers filing Income Tax Returns (ITR), the Income Tax Department has introduced a significant change to the ITR utility. This new change is the introduction of a new column labeled as "Other Income. It offers relief to taxpayers who have tax-exempt income that does not fit into any of the pre-existing categories.

This new column is labeled as "Other Income' and is introduced based on the suggestions given by taxpayers and tax experts. This update is mainly useful for taxpayers filing ITR-2 and ITR-3 with tax-free income (like sale proceeds received from the sale of rural agricultural land or gifts received from relatives) and taxpayers who wish to report these details in their ITR voluntarily. Keep reading further to know about the major change in ITR utility, what income is considered tax-free, what taxpayers need to do, and much more.

What is the New Change?

As reported by ET Wealth, many professionals previously chose to report tax-free income voluntarily under the 'Exempt Income' section to avoid future notices or inquiries from the Income Tax Department, such as proceeds from the sale of rural agricultural land or gifts from relatives. This option was removed before, but it has now been reintroduced in the updated ITR utility.

What Does the 'Other Income' Column Signify?

The earlier version of the ITR utility did not provide a specific option to report tax-free income that didn’t fit into predefined categories. However, taxpayers are now able to voluntarily declare such exempt income with the introduction of the 'Other Income' column.

Which Income is Considered Tax-Free?

Income acquired from the sale of rural agricultural land and gifts received from specified relatives are considered tax-free. According to Section 21(14) of the Income Tax Act, 1961, if rural agricultural land does not qualify as a 'capital asset', its sale is exempt from capital gains tax.

Additionally, gifts received from specified relatives are not subject to taxation under Section 56(2)(x).

What Should Taxpayers Do?

Taxpayers are encouraged to voluntarily disclose significant tax-free receipts under the 'other income' option now available in Schedule EI, particularly when these transactions might appear in the AIS, SFT, bank statements, or other Income Tax Department records.

By taking this step, taxpayers can reduce the chances of receiving notices or facing inquiries due to potential data discrepancies in the future, while also showing that they accounted for the transaction when filing their ITR.

To Conclude

The reintroduction of the 'Other Income' column is a taxpayer-friendly update by the Income Tax Department. It fills an important gap that previously left taxpayers with no way to report their tax-free income voluntarily, often leading to unnecessary notices and inquiries from the department.

Taxpayers can use this column to report tax-exempt income like the sale of agricultural land or gifts from relatives. You can now file with more transparency and peace of mind.

However, if you want to file your taxes with more confidence, contact an expert at Savetaxs. At Savetaxs, we have a team of skilled and knowledgeable experts who can ensure you file your income tax returns (ITR) accurately and completely. Our experts can ensure you stay compliant and updated with the new changes and stay away from receiving any notices from the department. Contact us right away as we are working 24*7 across all time zones.