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Introduction:

The Income Tax Return (ITR) is a form where taxpayers report their income and corresponding taxes to the tax department. With seven forms, namely ITR 1 to ITR 7, individuals must file their ITR by the specified due date, considering factors like income sources and taxpayer category.

Importance of Filing Income Tax Returns:

• File your tax return promptly to secure an income tax refund.
• To apply for a visa or a loan
• If the taxpayer is a company or a firm, filing is required regardless of profit or loss.
• If you earned from or invested in foreign assets during the financial year, disclose it in your tax filing.
• Filing your return before the due date is crucial to carry forward losses from business/profession or under the capital gains head to the next years.

When Is Filing ITR Mandatory in India

Even if your income is below the basic exemption limit, you must file your tax return if you meet certain specified conditions.

• If you’ve deposited Rs 50 lakh or more in one or more savings bank accounts, filing a tax return is mandatory.
• Filing a tax return is mandatory if you’ve deposited Rs. 1 crore or more in one or more current accounts with a bank, excluding post office current accounts.
• Filing a tax return is mandatory if your electricity consumption during the previous year exceeds Rs. 1 lakh.
• You must file a tax return if the TDS/TCS deducted exceeds Rs 25,000 (or Rs 50,000 for senior citizens) in the previous year.
• Filing a tax return is mandatory if you’ve incurred over Rs 2 lakh in total expenditure on foreign travel, either for yourself or another person.
• If engaged in a profession and your gross receipts exceed Rs 10 lakh during the previous year, filing a tax return is mandatory.
• Mandatory tax return filing is required if you’re a businessman, and your total sales, turnover, or gross receipts surpass Rs 60 lakh during the previous year.

Which ITR Forms is Right for You?

ITR-1(SAHAJ): 

 ITR-1 is a one-page form designed for individuals with income up to Rs 50 lakh from specific sources.

• Income from salary or pension.
• Income from other sources, excluding winnings from lottery and income from racehorses.
• Income from one house property, excluding cases with brought-forward losses from previous years.
• Agricultural income up to Rs 5000.

ITR-2:

ITR-2 form is for individuals and HUF with income sources other than ‘Profits and Gains from Business or Profession,’ encompassing various income categories. individuals with income from the following sources are eligible to file Form ITR-2:

• The total income can be more than Rs 50 Lakhs.
• Income from salary or pension
• Income from other sources, excluding winnings from lottery and income from racehorses.
• Income from House Property
• Being an Individual  director in a company.
• If you invested in unlisted equity shares at any point during the financial year.
• Having taxable capital gains
• Exceeding Rs 5000 in agricultural income
• If tax has been deducted under Section 194N.
• Being a Resident Not Ordinarily Resident (RNOR) or non-resident.
• If payment or tax deduction on ESOP has been deferred.
• Having brought forward losses or losses to be carried forward under any income head.
• Having foreign income.

This Return Form can be used when the income of another person (e.g., spouse, child) is to be clubbed with the assessee’s income, falling within the specified categories.

ITR-3:

ITR-3 is for individuals or Hindu Undivided Families with income from a proprietary business or profession, including those earning from specified sources.

• Individual Director in company
• If you invested in unlisted equity shares at any point during the financial year.
• Engaged in a business or profession.
• The return may cover income from house property, salary/pension, and other sources.
• Income as a partner in the firm.

In summary, individuals or HUFs ineligible for ITR-1, ITR-2, and ITR-4 should file ITR-3.

ITR 4 or Sugam:

• The current ITR-4 is for resident individuals, HUFs, and partnership firms (excluding LLPs) with total income.
• Professional income under presumptive income scheme per Section 44ADA.
• Income from a single house property, not exceeding Rs 50 lakh (excluding any brought forward or to be carried forward losses).
• Business income under presumptive income scheme as per Section 44AD or 44AE.
• Salary or pension income up to Rs 50 lakh
• Income from other sources not exceeding Rs 50 lakh (excluding earnings from lottery and race-horses).
• Individual freelancers can opt for a presumptive scheme if their gross receipts from the mentioned sources are below Rs 50 lakhs.
• A presumptive income scheme under sections 44AD, 44AE, and 44ADA involves determining income at a minimum rate from gross receipts/turnover or ownership of commercial vehicles. If business turnover surpasses Rs 2 crore, ITR-3 must be filed.

ITR-5

ITR-5 is applicable to firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Person (AJP), estates of deceased or insolvent individuals, business trusts, and investment funds.

ITR-6:

Companies, excluding those claiming exemption under section 11(Income from property held for charitable or religious purposes), must file this return electronically.

ITR-7:

Applicable to individuals and companies filing returns under various sections (139(4A), 139(4B), 139(4C), 139(4D), 139(4E), 139(4F)).

• Section 139(4A) mandates the filing of a return by individuals receiving income from property held for charitable or religious purposes.

• Section 139(4B) necessitates a political party to file a return if its total income, without considering section 139A provisions, exceeds the non-taxable maximum amount.
• Return under section 139(4C) is mandatory for every specified person responsible for income of specified entities.
• Association or institution referred under section 10(23A)
• Scientific research association
• News organization
• Institution referred to in section 10(23B)
• Return under section 139(4C) is required to be filed by every fund, institution, university, educational institution, hospital, or medical institution.
• Section 139(4D) mandates the filing of a return by universities, colleges, or institutions not required to submit a return under any other provision of this section.
• Section 139(4E) necessitates a return filing by every business trust not obligated to submit a return under other provisions of this section.
• Section 139(4F) mandates the filing of a return by any investment fund mentioned in section 115UB, exempt from submitting a return under other provisions of this section.

Conclusion: 

Learn about the Income Tax Return (ITR) form and how to file it by the due date. With seven forms and various factors to consider, get all the information you need to file your taxes correctly and avoid penalties.