The Curious Case of Indian Income Tax Returns

Updated: Aug 4, 2019


Filing your return means furnishing details of incomes you have earned during the financial year, in the relevant forms to the Income Tax Department. The department has issued different sets of forms for different categories of persons.Right now, there are 7 forms that are to be used to furnish your Income Tax Returns every year. As you complete reading this you will have clarity as to which ITR to be used by whom. Let’s get started!





ITR-1 (Sahaj)

All resident individuals with income under the head Salaries, House Property (provided only 1 House Property and losses from Previous Year are not brought forward) and Other Sources (Excluding winnings from Lotteries and Race Horses) shall choose ITR-1 for furnishing their return. However that’s not it, the aggregate of all the incomes we’ve seen above, only if it is less than Rs 50 Lakhs, ITR-1 must be chosen. Also covered here are Agriculture Incomes up to Rs 5000. It is important to note that any person who was a director of a company and any person who has held any unlisted equity shares at anytime during the financial year also cannot file ITR-1. Confusing? See the chart below to understand it in a much simpler way.



Follow the chart to see whether ITR-1 is applicable to you!

ITR-2

ITR 2 is to be chosen when an individual or a Hindu Undivided Family (HUF) (Being a resident not ordinarily resident and non-resident) has

  • Income in the form of Salaries (including Pensions)

  • Income from House Properties and,

  • Also Income from Other Sources (including Winnings from Lottery and Income from Race Horses).

  • Agricultural Income More than Rs 5000

ITR-2 is also to be chosen by People who have incomes covered in ITR-1 but the aggregate of incomes is more than Rs 50 Lakhs.

If you were a director of any company or held on to unlisted equity shares at any point during the financial year you shall choose this return form.

Where the assessee has Capital Gains arising from the sale of assets or when foreign incomes/foreign assets exist ITR-2 can be chosen.

Where the individual’s minor child’s or spouse’s income is to be clubbed with the income of the assessee, ITR-1 can not be chosen instead you choose ITR-2.



The Second ITR Option (ITR-2)

ITR-3

ITR-3 is meant for Individuals or a Hindu Undivided Families (HUFs) who have income from proprietary business or are carrying on profession. This return form is also to be chosen if you were an individual director or if you held any unlisted equity shares anytime during the financial year. It may include Income from House property, Salary/Pension and Income from other sources. Also when any remuneration/income is received as a partner in a firm, this return form is applicable.

To summarise, ITR-3 is to be chosen when;

  • Every or Any Income covered in ITR-2 and Income from Business/Profession exist.

  • Any income is received as a partner in a firm

  • And when the assessee opts for the Presumptive Taxation Scheme but his income is more than Rs 50 Lakhs.


The ITR-3

ITR-4 (Sugam)


The ITR-4 is meant for individuals and HUFs, Partnership firms (other than LLPs) who/which are residents having income from a business or profession. Assessees who have opted the Presumptive Taxation Scheme shall also choose ITR-4 if the turnover is less than Rs.2 Crores (if it is more than this limit, ITR-3 must be chosen).

Check the chart below for the list of persons to whom ITR-4 is not applicable:



ITR-4 Is Not Applicable if any of the above is Satisfied

ITR-5

The 5th one, the ITR-5 is applicable for the following types of persons:

  • Partnership Firms

  • Limited Liability Partnerships

  • Association Of Persons

  • Body Of Individuals

  • Artificial Juridical Person

  • Estate Of Deceased

  • Estate Of Insolvent

  • Business Trust and;

  • Investment Fund


WHO SHALL CHOOSE ITR-5?

ITR-6

This return form is applicable for all companies, except companies claiming exemption under section 11 of the Income Tax Act, 1961.

A company that has income from properties held for Charitable or Religious purposes is covered under section 11. So all companies except these shall use ITR-6 for filing their returns.


ITR-7

ITR-7 is to be chosen by Companies, Firms, Local authority, Association of Person (AOP) and Artificial Judicial Person that are claiming exemption in any of the following categories :

  • Having income from charitable/religious trust - Covered under section 139 (4A)

  • Having income from a political party – Covered under section 139 (4B)

  • Having income from scientific research institutions – Covered under section 139 (4C)

  • Having income from university or colleges or institutions or khadi and village industries – Covered under section 139 (4D).



Special Cases where ITR-7 is Applicable

Still confused? Need any help filing your ITR? Contact us and we can sort it out together!




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