WHICH ITR FORM TO FILE ??? COMPREHENSIVE GUIDE FOR ITR 1 – ITR 7

Filing Income Tax Returns (ITR) is a crucial obligation for every taxpayer in India. The government mandates the submission of ITR forms annually to report their income, deductions, and tax liabilities. However, with multiple ITR forms available, it can be challenging to determine which one is the most suitable for your specific financial situation. In this article, we will provide a comprehensive guide to help you understand which ITR form to file based on your income sources and individual circumstances.

Understanding Income Tax Returns (ITR)

Income Tax Returns (ITR) is a formal statement filed by individuals and entities to the Income Tax Department of India, declaring their income, deductions, and taxes paid. The ITR forms vary based on the nature and amount of income earned during the financial year. Understanding which ITR form to file is the most complicated task these days.

Which ITR Form to File? A Comprehensive Guide

Govt provides special services for taxpayers for filing ITR known as Tax e-Service.

Which ITR Form To File

ITR-1 (Sahaj)

ITR-1, also known as Sahaj, is the most basic ITR form applicable to individuals with income from salary, one house property, other sources (excluding lottery and racehorses), and total income up to Rs. 50 lakh.

ITR-2

ITR-2 applies to individuals and Hindu Undivided Families (HUFs) having income from salary, house property, capital gains, and foreign assets, among others.

ITR-3

ITR-3 is for individuals and HUFs with income from business or profession.

ITR-4 (Sugam)

ITR-4, also known as Sugam, is designed for individuals, HUFs, and firms (other than LLP) with a presumptive income from business and profession.

ITR-5

ITR-5 is for LLPs (Limited Liability Partnerships), Association of Persons (AOPs), Body of Individuals (BOIs), and artificial juridical persons.

ITR-6

ITR-6 applies to companies that are not claiming exemptions under Section 11 (income from property held for charitable or religious purposes).

ITR-7

ITR-7 is for entities and individuals that are required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act.

Eligibility Criteria for ITR Forms

In this section, we will outline the eligibility criteria for each type of ITR form.

ITR-1 (Sahaj)

  • Individuals with income from salary, pension, one house property, or other sources.
  • Total income should not exceed Rs. 50 lakh.
  • Not suitable for individuals earning income from business or profession.

ITR-2

  • Individuals and HUFs with income from salary, house property, capital gains, foreign assets, and more.
  • Applicable to those not eligible for ITR-1.

ITR-3

  • For individuals and HUFs with income from business or profession.
  • Not for individuals with income from salary or capital gains.

ITR-4 (Sugam)

  • Applicable to individuals, HUFs, and firms with presumptive income from business and profession.
  • Total turnover or gross receipts should not exceed Rs. 2 crore.

ITR-5

  • For LLPs, AOPs, BOIs, and artificial juridical persons.

ITR-6

  • For companies that are not eligible for ITR-7.

ITR-7

  • For entities and individuals required to furnish returns under specific sections of the Income Tax Act.

Choosing the Right ITR Form

Choosing the correct ITR form is essential to ensure accurate reporting and avoid potential penalties. Here are some scenarios to help you determine the right form for your income sources:

Salaried Individuals with no Other Income Sources

If you earn a salary and do not have any other income sources like business, profession, or capital gains, ITR-1 (Sahaj) is suitable for you.

Individuals with Income from House Property

If you own a house property and earn rental income, ITR-2 is the appropriate form to report such income along with other sources of income.

Business and Profession Income

For individuals and HUFs with income from business or profession, ITR-3 is the form that needs to be filed.

Income from Capital Gains

Individuals with income from the sale of assets such as property, stocks, or mutual funds should use ITR-2 for filing their returns.

Income from Foreign Assets

If you have foreign assets or foreign income, ITR-2 is the form you should use to report such income.

Trusts, Associations, and Political Parties

ITR-5 is applicable to LLPs, AOPs, BOIs, and artificial juridical persons, such as trusts and political parties.

Income Earned by NRIs

Non-Resident Indians (NRIs) should file their returns using ITR-2 if they have income from Indian sources, except for income from lottery or racehorses.

How to Fill Out the ITR Form Correctly

Filling out the ITR form correctly is crucial to avoid discrepancies and ensure a smooth tax filing process. Follow these steps to fill out the form accurately:

1. Gather all necessary documents, including Form 16, bank statements, investment proofs, and rent receipts, depending on the applicable ITR form.
2. Provide accurate personal details, including name, address, PAN (Permanent Account Number), and Aadhar number.
3. Report income from all sources under the appropriate sections of the form.
4. Carefully calculate deductions and exemptions eligible for claiming.
5. Cross-check all the provided information for accuracy and completeness.

Common Mistakes to Avoid While Filing ITR

Filing ITR can be complex, and mistakes can lead to penalties or scrutiny by tax authorities. Avoid these common mistakes while filing your ITR:

1. Providing incorrect personal details and contact information.
2. Failing to report income from all sources.
3. Incorrectly calculating deductions and exemptions.
4. Using the wrong ITR form for your income sources.
5. Not verifying the ITR-V (Acknowledgment) within the stipulated time.

The Benefits of Filing ITR Correctly

Filing ITR correctly has several advantages:

1. Complying with legal requirements.
2. Facilitating loan approvals and visa applications.
3. Claiming tax refunds, if applicable.
4. Building a reliable financial record.

Penalties for Not Filing ITR or Filing Incorrect ITR

Not filing ITR or filing it with errors can attract penalties, such as:-

1. A penalty of up to Rs. 10,000 for late filing.
2. Interest on tax payable.
3. Disqualification from certain deductions and exemptions.

Conclusion

Filing the right ITR form is essential for taxpayers in India to fulfill their tax obligations accurately. Understanding which ITR form to file and their eligibility criteria is crucial for a seamless tax filing experience. Ensure that you gather all the necessary documents and file the correct ITR form to avoid penalties and stay compliant with tax regulations. Other than Income Tax Returns one also needs to file Wealth Tax Returns for the Net Wealth of an Individual. Forms to file Wealth Returns.

Read More Finance News

Read More Articles

FAQs – Which ITR Form to File?

Can I use ITR-1 if I have income from a house property?

A: No, ITR-1 is not suitable for reporting income from house property. Use ITR-2 for such income.

Q: Can a company file ITR-4 (Sugam)?

A: No, ITR-4 is applicable to individuals, HUFs, and firms, not companies. Companies should file ITR-6.

Q: Is it mandatory to file ITR if my total income is below the taxable limit?

A: It depends on various factors. Even if your income is below the taxable limit, you may need to file ITR to claim certain deductions or carry forward losses.

Q: Can an NRI file ITR-1?

A: No, NRIs should use ITR-2 to file their returns if they have income from Indian sources.

Q: What happens if I file the wrong ITR form accidentally?

A: Filing the wrong ITR form may lead to processing delays or the tax department seeking clarification. It is essential to amend the return with the correct form as soon as possible.

2 thoughts on “WHICH ITR FORM TO FILE ??? COMPREHENSIVE GUIDE FOR ITR 1 – ITR 7”

  1. Pingback: DON'T MISS ITR LAST DATE: INCOME TAX RETURN AY 2023-24 - MUDRA MANTRA

  2. Pingback: MISSED LAST DATE TO FILE ITR? GUIDE TO LATE FILING OF INCOME TAX RETURN - MUDRA MANTRA

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top