Income Tax Return 2025: What’s New in the ITR-2 Filing Process for AY 2025-26

ITR-2

Income Tax Return 2025: What’s New in the ITR-2 Filing Process for AY 2025-26

ITR-2

As the new financial year kicks off, it also marks the beginning of the much-anticipated tax filing season for Assessment Year (AY) 2025-26, covering income earned during Financial Year (FY) 2024-25. The Income Tax Department has made a few notable updates this year, particularly with the ITR-2 form, which is crucial for a certain category of taxpayers.

Key Update: New Excel Utility for ITR-2

A significant change this season is the release of a new Excel-based utility for ITR-2, launched on March 25, 2025. This updated version includes enhanced features, one of which is the ability to file revised returns under Section 139(8A)—a move aimed at improving filing flexibility and compliance.

Who Should File ITR-2?

ITR-2 is specifically meant for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession. You should opt for this form if you:

  • Have total income exceeding ₹50 lakh

  • Earn income from multiple house properties

  • Have capital gains (long-term or short-term)

  • Are a director in a company

  • Hold shares in an unlisted company

  • Possess foreign assets or earn foreign income

If your income is solely from salary, pension, interest, dividends, or rent from a single property and is less than ₹50 lakh, you may be eligible to file using ITR-1 instead.

Revised Return Under Section 139(8A)

One of the key introductions this year is the facility to file a revised return under Section 139(8A) directly using the ITR-2 Excel utility. This provision helps taxpayers correct or update their returns with greater ease, ensuring better accuracy and compliance.

Choosing the Right ITR Form Matters

Your ITR form selection depends on two main factors:

  1. Total income

  2. Nature/source of income

Filing the correct form not only simplifies the process but also ensures that your return is processed smoothly without unnecessary notices or rejections from the Income Tax Department.

Read More: GST Amendments 2025: Impact and Implications from April 1

With the release of the updated ITR-2 utility and new provisions like Section 139(8A), the tax filing process for AY 2025-26 has become more structured and taxpayer-friendly. Ensure that you assess your income sources and choose the appropriate form for a seamless and compliant return filing experience.

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        Navigating HRA Claim Notice: FAQs and Solutions

        HRA

        Navigating HRA Claim Notice: FAQs and Solutions

        HRA

        The Income Tax Department has recently issued notices to taxpayers who have claimed House Rent Allowance (HRA) deductions exceeding ₹5 lakh in their Income Tax Returns (ITR). These notices request verification of HRA claims for the past three years, citing non-compliance with TDS provisions under Section 194IB.

        Understanding Section 194IB: TDS on Rent Payments

        Section 194IB mandates TDS deductions on rent payments under the following conditions:

        • Applicable to individuals and Hindu Undivided Families (HUFs) who are not required to undergo a tax audit under Section 44AB.

        • Triggered when the monthly rent exceeds ₹50,000 (even for a partial month).

        • The TDS rate is 5%, reducing to 2% effective October 1, 2024.

        How the Tax Department Identifies Non-Compliance

        The tax authorities utilize data analytics to detect non-compliance. The process includes:

        1. Identifying High HRA Claims: Cases where the HRA deduction surpasses ₹5 lakh are flagged.

        2. Verifying TDS Deduction: A cross-check is conducted to determine whether the taxpayer has deducted and deposited TDS using Form 26QC.

        3. Issuing Notices: Emails are sent to taxpayers who have not complied with TDS provisions while claiming substantial HRA deductions.

        This move underscores the department’s commitment to closing tax loopholes by leveraging the Annual Information Statement (AIS) to monitor discrepancies and enforce compliance.

        What to Do If You Receive an HRA Notice

        1. If You Have Incorrectly Claimed HRA Without Paying Rent

        If HRA was claimed without actually paying rent, the best course of action is to file an updated return, rectify the claim, and pay any additional tax due. Ignoring the issue could result in penalties of up to 200% of the tax amount, causing financial strain and stress.

        2. If You Have Genuinely Paid Rent

        For those who have legitimately paid rent but have not deducted TDS, the situation is more complex. The two main options are:

        A. Paying TDS on Rent by Filing Form 26QC (with Interest & Penalty)

        • Increased Financial Outflow: Interest and penalty charges will apply.

        • Recovering TDS from the Landlord: If full rent has already been paid, reclaiming the TDS amount from the landlord can be difficult, particularly if:

          • The lease has ended.

          • The tenant has relocated.

          • There is no amicable relationship with the landlord.

        • Challenges for the Landlord: Even if the landlord agrees to reimburse the TDS, they may struggle to claim the credit in their ITR if the deadline for filing a revised return has passed.

        B. Revising Your HRA Claim by Filing an Updated Return

        • Additional Financial Burden: Revising the return entails additional tax payments along with interest and penalties.

        • Ongoing TDS Liability: Even after revising the HRA claim, the taxpayer remains responsible for TDS deduction if rent was actually paid. Simply removing the HRA deduction does not absolve one from TDS obligations.

        An Alternative to Avoid Being Deemed as an Assessee-in-Default

        A provision under the Income Tax Act allows taxpayers to avoid being classified as an assessee-in-default even without deducting TDS. According to the first proviso to Section 201(1), a taxpayer will not be considered in default if the landlord:

          • Has filed their ITR.

          • Has included rental income in their total income.

          • Has paid the required tax on such income.

        HRA

        How to Avail This Benefit?

        To leverage this provision, the taxpayer must obtain a Chartered Accountant (CA) certificate from the landlord, confirming that the rental income has been reported in their ITR and the necessary tax has been paid. Upon submission of this certificate to the tax department, the taxpayer will no longer be treated as a defaulter, although they may still be required to pay interest under Section 201(1A) for the delay.

        Read More: How Minors are Taxed? Understanding the Income Tax Act

        Key Takeaways

        • The recent scrutiny of high HRA claims reflects the tax department’s increasing reliance on data analytics for enforcement.

        • Taxpayers receiving such notices must act promptly by evaluating their situation and choosing the most suitable course of action.

        • Ensuring TDS compliance on rent payments and maintaining proper documentation can prevent future tax complications.

        • If TDS was not deducted, obtaining a CA certificate from the landlord can provide relief from being deemed an assessee-in-default.

        By staying informed and proactive, taxpayers can effectively manage their tax liabilities and avoid unnecessary scrutiny from tax authorities.

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              Income Tax Update: ITR-U Filing Deadline Extended to 48 Months

              ITR-U

              Income Tax Update: ITR-U Filing Deadline Extended to 48 Months

              ITR-U

              The Indian government has extended the deadline for filing updated income tax returns (ITR-U) from 24 months to 48 months. This change, proposed in Budget 2025 by Finance Minister Nirmala Sitharaman, allows taxpayers more time to rectify errors, disclose omitted income, and comply with tax regulations.

              Understanding ITR-U and Section 139(8A)

              Introduced in 2022, the updated return facility under Section 139(8A) of the Income Tax Act, 1961, enables taxpayers to correct inaccuracies in previously filed returns or file a return if they had missed doing so. It applies in cases where income was omitted, losses or refunds were misrepresented, or the required threshold for filing a return was exceeded but no return was submitted.

              With nearly 90 lakh taxpayers voluntarily updating their income and paying additional taxes since its introduction, the government has now expanded the timeframe to encourage further compliance.

              Key Highlights of the Extended ITR-U Filing Timeline

              • Time Limit Extended: The window for filing an updated return has been extended from 24 months to 48 months from the end of the relevant assessment year.

              • Additional Tax Payable: Taxpayers filing an updated return must pay an additional tax, which increases over time:

                • Within 12 months: 25% of the total tax and interest due.

                • Within 24 months: 50% of the total tax and interest due.

                • Within 36 months: 60% of the total tax and interest due.

                • Within 48 months: 70% of the total tax and interest due.

              • Example: For the financial year 2023-24, the updated return can now be filed until March 31, 2029, instead of March 31, 2027.

              How to File ITR-U

              To file an updated return, follow these steps:

              1. Download Form ITR-U from the Income Tax Department’s website.

              2. Log in to the e-filing portal and select “Updated Return (ITR-U).”

              3. Enter the necessary details, including additional income and tax payable.

              4. Calculate and pay any applicable additional tax.

              5. Submit the form and verify the return using Aadhaar OTP, net banking, or DSC.

              Restrictions on Filing ITR-U

              Certain taxpayers are not eligible to file ITR-U, including those who:

              • Have already filed a revised return.

              • Intend to report a loss or zero income.

              • Seek to modify a previously claimed refund.

              • Aim to reduce their tax liability.

              • Are under investigation or assessment under Sections 132, 133A, or 132A.

              • Have no additional tax liability due to TDS or losses.

              Impact on Taxpayers

              Certain taxpayers are not eligible to file ITR-U, including those who:

              • Have already filed a revised return.

              • Intend to report a loss or zero income.

              • Seek to modify a previously claimed refund.

              • Aim to reduce their tax liability.

              • Are under investigation or assessment under Sections 132, 133A, or 132A.

              • Have no additional tax liability due to TDS or losses.

              Read More: Union Budget 2025: Key Tax, GST & MSME Updates Explained

              While this extension promotes voluntary compliance, the steep additional tax—ranging from 25% to 70%—may pose a significant financial burden. Many experts believe that a uniform 25% additional tax would have been sufficient as a deterrent while still encouraging timely compliance.

              Nonetheless, this amendment provides a crucial opportunity for taxpayers to rectify past errors and adhere to tax laws without severe penalties. Staying informed about these changes and ensuring accurate tax filing will help individuals and businesses maintain compliance with evolving tax regulations.

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