Major change in ITR utility: New ‘Other Income’ column introduced under Exempt Income—why is it important for taxpayers?

ITR Utility Update: The Income Tax Department has introduced a significant change to the ITR utility for taxpayers filing Income Tax Returns (ITR). A new column labeled ‘Other Income’ has been added under Schedule EI (Exempt Income). This provides relief to taxpayers who have tax-free income that does not fit into any of the pre-existing specific categories. This change has been implemented based on suggestions from taxpayers and tax experts.

This update is particularly useful for taxpayers filing ITR-2 and ITR-3 who have received tax-free income—such as proceeds from the sale of rural agricultural land or gifts from relatives—and wish to voluntarily disclose these details in their ITR.

What is the new change?
According to an ET Wealth report, many professionals previously used to voluntarily report tax-free receipts—like proceeds from the sale of rural agricultural land or gifts from relatives—under the 'Exempt Income' schedule to avoid future notices or inquiries from the Income Tax Department. Although this option was previously removed, it has now been reintroduced in the updated ITR utility.

What does the ‘Other Income’ column signify?
The initial ITR utility lacked a specific option to report tax-free income that did not fall under the predefined categories. With the addition of the ‘Other Income’ column, taxpayers can now voluntarily declare such exempt income.

Which incomes are tax-free?
Proceeds from the sale of rural agricultural land and gifts received from specified relatives are not taxable. If rural agricultural land does not fall under the category of a ‘capital asset’ as defined in Section 2(14) of the Income Tax Act, 1961, its sale does not attract capital gains tax. Similarly, gifts received from specified relatives remain outside the tax net under Section 56(2)(x).

What should taxpayers do?

Now that the ‘Other Income’ option is available in Schedule EI, taxpayers should consider voluntarily disclosing substantial tax-free receipts—especially when such transactions might appear in the AIS, SFT, bank statements, or other records of the Income Tax Department. Doing so can reduce the likelihood of receiving notices or facing inquiries due to data mismatches in the future, while also demonstrating that the taxpayer took the transaction into account when filing their ITR.