As a citizen of India, you are liable to present to the Income Tax Department your tax obligations. You can do this through income tax return filing using the right ITR form. If those last three words stopped you in your tracks and reread them, it is probably because you think there’s only one ITR form. However, you couldn’t have been more wrong. IT officials have provisioned multiple ITR forms each specific for a particular kind of income.
We will explore the different ITR forms that are available for tax return filing and how taxpayers can claim a refund of excess TDS deducted using the correct form.
What are ITR forms?
ITR is a form issued by the IT authorities to facilitate you to file your income tax returns by declaring information like your income, expenses, and other tax-relevant details. ITR forms are a way for taxpayers to understand their tax liability, and plan how they will pay their taxes along with requesting refunds for overpayment. The first step of tax return filing is to determine the right ITR form and then fill it out to submit the returns.
The IT department has conceptualized a total of seven forms for ITR filing: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. It is important that every taxpayer learns about these forms, the details they need to fill and the process of filing the ITR before the deadline to avoid any penalties.
Why is tax return filing important?
Filing ITR is often considered a tedious and technical process. The majority of taxpayers rely on a chartered accountant to take care of their tax filings. There is also a small section of people who unfortunately skip the process. However, it is essential that you submit the applicable ITR form. Firstly, it is compulsory by law to file income tax returns (if applicable) in our country. Secondly, it becomes a crucial part of the process when you apply for a loan or visa. Also, you can use this as an opportunity to claim a refund in case you ended up paying more taxes than you need to.
ITR filing is also mandatory for taxpayers who,
- Have more than one source of income like capital gains
- Earn an income from foreign assets during the financial year
- Are a company or a firm regardless of profit or loss.
Types of ITR forms & their eligibility criteria
As mentioned earlier, there are seven different types of ITR forms. You can find the one you are eligible for after understanding the criteria for each one. We will explore each form in detail for you to select the most relevant form.
ITR-1, also known as Sahaj, is for individuals who are residents of India and have a total income of up to Rs 50 lakhs. The income sources could be anything from salary, housing property, or other means. Working professionals can select ITR-1 to claim TDS returns for salary using Form 16. The eligibility criteria for using this form are listed below:
- An individual who earns income through salary, pension or rental from one property.
- An individual with earnings from capital gains, foreign assets, and other business ventures.
- An agriculturalist with an income of up to Rs. 5000.
- An individual who has additional sources of income like investments and fixed deposits, etc.
ITR 2 is for the taxpayers who sell assets and properties to make their earnings. If you have income sources from outside of India, you can use this form to file ITR. Even HUFs (Hindu Undivided Families) are eligible to use ITR-2. The detailed eligibility criteria are listed below:
- If the individual’s total income exceeds Rs 50 lakhs.
- If an individual’s income sources include salary, pension, more than one house property and capital gains.
- If an individual owns unlisted equity shares or ESOPs or is a director of a company.
- If an individual earns income from capital gains, sale of assets, foreign assets, and sources outside of India.
- If an individual has income accrued from more than one house property.
- If an individual is a non-resident and RNOR.
You can choose ITR-3, if you are an individual, partner in a firm or HUF. Salaried professionals can use this form for tax return filing if they earn from the intraday stock exchange or futures. ITR-3 typically acts as a record of your earnings from capital gains, real estate, and other trading sources. The eligibility criteria are mentioned below:
- If an individual is earning an income from his/her profession or business.
- If an individual is a partner in a firm or a company director.
- If the business turnover is more than Rs 2 crore.
- If an individual’s income sources include pension, salary and house property.
Individuals, HUFs and partnership firms with an income through salary or business must opt for ITR-4. In case you applied for a presumptive income scheme under Section 44ADA, Section 44AD, and Section 44AE of the Income Tax Act 1961, then you need ITR-4. If your organization is Limited Liability Partnerships (LLPs) then this form isn’t applicable to you. The form is not applicable in following cases;
- If an individual’s gross income exceeds Rs 50 lakhs.
- If an individual has losses to show from the previous year.
- If an individual made investments in equity bonds unlisted at any time during the financial year.
- If an individual has income from foreign sources.
- If an individual is an NRI or RNOR.
- If an individual has generated income from multiple house properties.
Every business trust, or firm, must select ITR-5 to tax returns filing. It is applicable for below entities:
- LLPs (Limited Liability Partnerships)
- Co-operative societies
- Local authorities
- BOIs (Body of Individuals)
- Artificial judicial persons
- AOPs (Association of Persons)
- Estate of the deceased and insolvent
- Investment funds
- Business trusts
Any company that is not claiming any exemptions allowed under Section 11 can use ITR-6 to file ITR. Also, if you are choosing this form, then you can only submit the filing electronically. Companies that are eligible for ITR-6 are:
- All companies except the ones claiming exemption under Section 11.
- Incomes earned from housing property.
- Business incomes.
- Incomes from multiple sources.
If an individual for a company is required to submit returns under any of the following sections, then ITR-7 must be used to file income tax returns.
- Section 139(4A): Returns are filed by individuals who earn income from any property that is owned by a trust, and the income produced is used for religious activities or charity.
- Section 139(4B): A political party must submit returns under this section if their total income exceeds the maximum amount allowed.
- Section 139(4C): This is applicable for Scientific Research associations, institutions or associations that come under Section 10(23A), medical institutions, hospitals, universities, funds, and other educational institutions, news agencies, and institutions that come under Section 10(23B).
- Section 139(4D): Applicable for college, university, or other institution that is not required to submit any income.
- Section 139(4E): Business trusts that are not required to file their income or loss.
- Section 139(4F): This is for investment funds represented by Section 115UB and is not required to submit any income or losses must file returns under this section.
If you are still confused about the different ITR forms or require more information, reach out to TaxSpanner, the most trusted e-filing website in India. We help you with your tax return filing and make sure that you get the best returns possible.