The Income Tax Department has made a major change to the ITR utility by adding a new column for other income under Schedule EI. This will allow taxpayers to disclose tax-free receipts that do not fall into any specific category. Self-disclosure can reduce the risk of data mismatches with AIS or other records and potential notices.

ITR Utility Update: The Income Tax Department has made a significant change to the ITR Utility for taxpayers filing their Income Tax Return (ITR). A new column titled "Other Income" has been added under Schedule EI (Exempt Income). This will provide relief to taxpayers who have tax-free income that does not fit into any of the existing categories. This change was made based on suggestions from taxpayers and tax experts.

This change is most useful for taxpayers filing ITR-2 and ITR-3 who have sale proceeds from rural agricultural land, gifts from relatives or other tax-free receipts and want to voluntarily show them in ITR.

What is the new change?

According to a report by ET Wealth, many professionals previously voluntarily included tax-free receipts, such as proceeds from the sale of rural agricultural land or gifts from relatives, in the Exempt Income Schedule to avoid future notices or inquiries from the tax department. However, this option was later removed. It has now been reinstated in the updated ITR utility.

What does the 'Other Income' column mean?

The initial ITR utility did not have a separate option to show tax-free income that did not fall into the specified categories. Now, with the addition of a new column called "Other Income," taxpayers will be able to voluntarily declare such exempt income as well.

Which income is not taxed?

Proceeds from the sale of rural agricultural land and gifts from specified relatives are not taxable. Capital gains tax is not levied on the sale of rural agricultural land if it does not fall under the category of "capital asset" under section 2(14) of the Income Tax Act, 1961. Similarly, gifts from specified relatives under section 56(2)(x) are also exempt from tax.

What should taxpayers do?

Now that the 'Other Income' option is available in Schedule EI, taxpayers should consider voluntarily disclosing large or significant tax-free receipts, especially if the transaction is reflected in the AIS, SFT, bank statements, or other Income Tax Department records. Doing so can reduce the likelihood of future notices or inquiries due to data mismatches and also ensure that the taxpayer has taken the transaction into account when filing the ITR.

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