What are ITR Forms
ITR forms, or Income Tax Return forms, are the prescribed forms through which taxpayers report information about their income and taxes to the Income Tax Department in India.
For the Financial Year 2023-24 (Assessment Year 2024-25), there are seven different ITR forms notified by the department: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7
Each form is applicable based on the type of income, the amount earned, and the category of the taxpayer, such as individuals, Hindu Undivided Families (HUFs), companies, etc.
The forms must be filed on or before the specified due date. Filing ITR forms is mandatory if your gross total income exceeds the basic exemption limit, which varies based on age groups.
It’s also required under certain conditions like having foreign assets, applying for a visa or loan, or if you have high-value transactions in your bank accounts.
Filing your ITR forms is not just a mundane task; it is a legal obligation that every eligible individual must fulfill.
It’s a document that reports a person’s income, taxes paid on that income, and other relevant financial information for a specific financial year, which runs from April 1st to March 31st of the following year.
Types of ITR forms
In India, for the financial year 2023-24 (Assessment Year 2024-25), there are seven types of Income Tax Return (ITR) forms that taxpayers can use to file their returns.
Selecting the correct ITR form is essential to ensure accurate reporting of income and deductions. To determine which form to use, consider the sources of your income, the amount earned, and any specific deductions you may be eligible for.
These forms are designed to cater to different categories of taxpayers based on their income, source of income, and type of entity.
Here’s a brief overview of the ITR forms:
- ITR-1 (SAHAJ): For individuals being a resident (other than not ordinarily resident) having total income up to ₹50 lakh, having Income from Salaries, one house property, other sources (Interest, etc.), and agricultural income up to ₹5,000.
- ITR-2: For Individuals and HUFs not having income from profits and gains of business or profession.
- ITR-3: For individuals and HUFs having income from profits and gains of business or profession.
- ITR-4 (SUGAM): For Individuals, HUFs, and Firms (other than LLP) being a resident having total income up to ₹50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE.
- ITR-5: For persons other than Individual, HUF, Company, and persons filing Form ITR-7.
- ITR-6: For Companies other than companies claiming exemption under section 11 (Income from property held for charitable or religious purposes).
- ITR-7: For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F).
Why Should You File ITR?
Filing an Income Tax Return (ITR) is an important financial responsibility for individuals and entities in India. Here are some reasons why you should consider filing your ITR:
- Loan Applications: Regular ITR filing can increase your loan eligibility. Financial institutions often require ITRs as proof of income and financial stability.
- Income and Address Proof: ITR serves as a recognized proof of income and address, especially for self-employed individuals who may not have regular income documentation.
- Visa Applications: Many countries require proof of financial stability when applying for a visa. Filed ITRs can facilitate a smoother visa application process and increase the chances of approval.
- Avoiding Penalties: Filing your ITR on time helps avoid penalties and interest that can accrue due to late filing or non-filing.
- Carrying Forward Losses: If you incur losses, regularly filing your ITR allows you to carry forward these losses to subsequent years to offset against future income.
- Claiming Refunds: If you’ve paid more tax than necessary, filing an ITR is necessary to claim a refund
- Civic Responsibility: Filing ITR is a part of your civic duties and contributes to nation-building by ensuring the government has the necessary funds for public services
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Building a Strong Financial Profile: Consistently filing an ITR demonstrates financial responsibility and helps build a strong credit score. It also provides a clear financial history for future endeavors.
Who Should File the ITR?
In India, the criteria for filing an Income Tax Return (ITR) can be quite specific. Here’s a summary of individuals and entities who are required to file the ITR:
- Companies and Firms: Every company or partnership firm (including LLP) must file an ITR, regardless of their income.
- Individuals/HUF/AOP/BOI/Artificial Juridical Person: If your income (without claiming deductions/exemptions) exceeds the exemption limit, you need to file an ITR. The exemption limits are:
- Under the Old Scheme: ₹2,50,000
- Under the New Scheme (115BAC): ₹3,00,000
- High-Value Transactions: You must file an ITR if, in the previous year, you:
- Deposited more than ₹1 crore in one or more current accounts.
- Deposited ₹50 lakhs or more in savings accounts.
- Spent over ₹2 lakhs on foreign travel.
- Incurred more than ₹1 lakh in electricity consumption.
- Had total sales/turnover/gross receipts exceeding ₹60 lakhs in business or ₹10 lakhs in profession.
- Had TDS and TCS of ₹25,000 or more (₹50,000 for senior citizens).
- Residents with Foreign Assets or Income: If you have foreign assets or income, you’re required to file an ITR.
- Others: This includes individuals with taxable income above certain thresholds, NRIs with income in India, business owners, professionals, and those with foreign assets or income.
Types of ITR Forms and Which ITR Forms to File?
Who Can File ITR 1?
ITR-1, also known as Sahaj, is the Income Tax Return form for Indian residents whose total income for the financial year does not exceed ₹50 lakh.
Here are the eligibility criteria for filing ITR-1:
- Residency: Must be a Resident Individual.
- Income Sources: Income should be from salary, one house property, family pension income, and other sources such as:
- Interest from Savings Accounts
- Interest from Deposits (Bank/Post Office/Cooperative Society)
- Interest from Income Tax Refund
- Interest received on Enhanced Compensation
- Any other Interest Income
- Family Pension
- Agricultural Income: Agricultural income should be up to ₹5,000.
- Income Clubbing: Income of Spouse or Minor can be clubbed if it falls within the specified limits.
Who Cannot File ITR 1?
Individuals who cannot file ITR-1 include those who are:
- Non-Resident Indians (NRIs) or Resident Not Ordinarily Resident (RNOR).
- Have total income exceeding ₹50 lakh.
- Have agricultural income exceeding ₹5,000.
- Have income from lottery, racehorses, legal gambling, etc.
- Have taxable capital gains (short term and long term).
- Have invested in unlisted equity shares.
- Have income from business or profession.
- Are a Director in a company.
- Have tax deductions under section 194N of the Income Tax Act.
- Have deferred income tax on ESOP received from an employer being an eligible start-up.
- Own and have income from more than one house property
Who can file ITR-2
- Individuals and Hindu Undivided Families (HUFs) who are not eligible to file ITR-1 (Sahaj).
- Those who do not have income from profits and gains of business or profession.
- Individuals with income from salary/pension, multiple house properties, capital gains/loss on sale of investments/property, and other sources like lottery or racehorse winnings.
- Residents with foreign income, foreign tax credit, and foreign assets.
- Those with agricultural income over ₹5,000.
- Directors of a company or individuals who have invested in unlisted equity shares.
- Total income can exceed 50 lakhs in this ITR Form
- Any tax has been deducted under Section 194N
Who cannot file ITR-2
- Individuals or HUFs with income from profits and gains of business or profession.
- Those who are eligible to file ITR-1 (Sahaj).
- Individuals or HUFs who have income in the nature of interest, salary, bonus, commission, or remuneration from a partnership firm
Who Can File ITR 3
The ITR-3 form is applicable for individuals and Hindu Undivided Families (HUFs) who have income from profits and gains from business or profession. Here’s a brief overview of the eligibility criteria:
- Individuals or HUFs who are not eligible to file Form ITR-1 (SAHAJ), ITR-2, or ITR-4 (SUGAM).
- Those having income under the head “Profits or gains of business or profession”.
- This includes individuals or HUFs carrying on a business or profession (both tax audit and non-audit cases).
- The return may include income from house property, salary/pension, capital gains, and income from other sources.
- It also applies to those receiving remuneration from a partnership firm.
- Total income can exceed 50 lakhs in this case.
- If a person is the director of the company.
- Persons who had investments in unlisted equity shares at any time during the entire financial year.
Who Cannot File ITR 3
Individuals and Hindu Undivided Families (HUFs) who do not have income from a business, profession, or partnership firm are not eligible to file the ITR-3 form.
Additionally, the following entities cannot file ITR-3:
- Companies
- Charitable and religious trusts
- Limited liability partnerships (LLP)
- Firms
- Local authorities
- Bodies of individuals and associations of persons
Who Can File ITR 4?
ITR-4 can be filed by a Resident Individual / HUF / Firm (other than LLP) who has:
• Income not exceeding ₹50 Lakh during the FY
• Income from Business and Profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE
• Income from Salary/Pension, one House Property, Agricultural Income (up to ₹ 5000/-)
• Other sources which include (excluding winning from Lottery and Income from Race Horses):
- Interest from Savings Account
- Interest from Deposit (Bank / Post Office / Cooperative Society)
- Interest from Income Tax Refund
- Family Pension
- Interest received on enhanced compensation
- Any other Interest Income (e.g., Interest Income from unsecured loan)
Who Cannot File ITR 4?
ITR-4 cannot be filed by an individual / HUF / Firm (Other than LLP) who:
• is a Resident Not Ordinarily Resident (RNOR), and non-Resident Indian
• has total income exceeding ₹ 50 Lakh
• has agricultural income in excess of ₹5,000/-
• is a Director in a Company
• has income from more than one House Property
• has income of the following nature:
- winnings from lottery
- activity of owning and maintaining race horses
- income taxable at special rates u/s115BBDA or Section 115BBE
• has held any unlisted equity shares at any time during the previous year
• has deferred income tax on ESOP received from employer being an eligible start-up
• is not covered under the eligibility conditions for ITR-4
Who Can File ITR 5?
ITR-5 is an income tax return form that is to be used by certain entities to file their taxes in India.
The entities eligible to file ITR-5 include:
- Firms
- Limited Liability Partnerships (LLPs)
- Associations of Persons (AOPs)
- Bodies of Individuals (BOIs)
- Artificial Juridical Persons
- Cooperative Societies
- Local Authorities
- Additionally, it applies to the estate of deceased, estate of insolvent, business trust, and investment fund
Who Cannot File ITR 5?
The following entities cannot file their income tax returns using the ITR-5 form:
- Individuals and Hindu Undivided Families (HUFs)
- Companies
- Entities required to file returns under sections:
- 139(4A) (Charitable and Religious Trusts)
- 139(4B) (Political Parties)
- 139(4C) (Institutions, Research Centres, Universities, and other specified entities)
- 139(4D) (Entities such as hospitals, educational institutions that are not required to furnish return of income or loss)
- 139(4E) (Business Trusts)
- 139(4F) (Investment Funds)
Who Can File ITR 6?
ITR 6 is an Income Tax Return form that is to be filed by companies that are not claiming exemption under section 11 of the Income Tax Act. Here’s a brief overview:
- Who should file ITR 6? Companies registered under the Companies Act 2013 or the earlier Companies Act 1956 are required to file ITR 6, except for those companies whose income comes from property held for religious or charitable purposes.
- Exemptions under section 11: Companies with income from property held for charitable or religious purposes are exempt from filing ITR 6 and instead may have to file ITR 7.
Who Cannot File ITR 6?
The ITR-6 form is specifically designed for companies to file their income tax returns. However, there are certain entities that cannot file the ITR-6 form:
- Individuals
- Hindu Undivided Families (HUFs)
- Firms
- Limited Liability Partnerships (LLPs)
- Associations of Persons (AOPs)
- Bodies of Individuals (BOIs)
- Local Authorities
- Artificial Judicial Persons
- Companies that claim an exemption under section 11 (Income from property held for charitable or religious purposes).
These entities are required to file their income tax returns using different forms suitable for their status and nature of income.
Who Can File ITR 7?
ITR-7 is to be filed by entities including companies that fall under the following sections:
- Section 139(4A): This applies to the income of charitable or religious trusts, institutions, or funds applicable for exemption under Section 11.
- Section 139(4B): Political parties that have income exceeding the amount not chargeable to income tax without considering the provisions of Section 139A need to file under this section.
- Section 139(4C): Associations such as scientific research institutions, news agencies, and certain funds, hospitals, educational institutions, etc., which are mentioned in Section 10, are required to file ITR-7.
- Section 139(4D): Universities, colleges, or other institutions that do not have income from profits or gains of business or profession are covered under this section.
Who Cannot File ITR 7?
ITR-7 is a specific form used for filing income tax returns in India, primarily by entities that receive income from charitable or religious trusts, political parties, scientific research institutions, and universities or colleges.
Entities that cannot file ITR-7 are those that do not claim exemption under sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act, 1961.
This includes companies or entities whose income is unconditionally exempt under various clauses of section 10 and are not mandatorily required to furnish their return of income under the provisions of section 139.
Short Chart which shows which ITR to file
| ITR Form | Applicability | Income Limit | Income Source |
|---|---|---|---|
| ITR-1 (SAHAJ) | For resident individuals | Up to ₹50 lakh | Income from salaries, one house property, other sources (Interest, etc.), and agricultural income up to ₹5,000 |
| ITR-2 | For Individuals and HUFs | No limit | Not having income from profits and gains of business or profession |
| ITR-3 | For individuals and HUFs | No limit | Having income from profits and gains of business or profession |
| ITR-4 (SUGAM) | For Individuals, HUFs, and Firms (other than LLP) | Up to ₹50 lakh | Having income from business and profession computed under sections 44AD, 44ADA, or 44AE, and agricultural income up to ₹5,000 |
| ITR-5 | For persons other than Individual, HUF, Company, and persons filing ITR-7 | – | – |
| ITR-6 | For Companies other than those claiming exemption under section 11 | – | – |
| ITR-7 | For persons including companies required to furnish return under sections 139(4A), 139(4B), 139(4C), and 139(4D) | – | – |
Please note that the applicability of ITR forms varies depending on the sources of income,the amount of income earned, and the category of the taxpayer,such as individuals, HUF, company, etc
Key Changes in the New ITR Forms for FY 2023-24 (AY 2024-25)
The key changes in the new ITR forms for the Financial Year 2023-24 (Assessment Year 2024-25) are quite comprehensive. Here are some of the significant updates:
- Details of Legal Entity Identifier (LEI): Taxpayers will need to furnish details of LEI if applicable.
- Reason for Tax Audit: The new forms require taxpayers to furnish the reason for tax audit under Section 44AB.
- Disclosure of Cash Receipts: A new column has been added to claim the enhanced turnover limit for receipts in cash.
- MSME Payments: Disclosure of the sum payable to MSME beyond the prescribed time limit is now required.
- Capital Gains Accounts Scheme: Information pertaining to this scheme must be disclosed.
- Winnings from Online Games: There’s a new section for winnings from online games chargeable under Section 115BBJ.
- Political Contributions: Details of contributions made to political parties must be reported in the new Schedule 80GGC.
- ESOPs for Startups: A new column has been added for claiming deduction under Section 80CCH, and there’s a new schedule for tax deferred on ESOPs.
- Disability Deductions: New schedules have been inserted for claiming deductions if the assessee is a person with a disability (Schedule 80U) or for maintenance & medical treatment of a person with a disability (Schedule 80DD).
- Dividend Income from IFSC Unit: Reporting of such income is now required.
- Life Insurance Bonus Payments: Schedule-OS includes an additional column for the declaration of these payments.
- Business Trust Income: Reporting of sums received by a unitholder from the business trust is now necessary.
- Bank Account Reporting: All bank accounts held at any time during the year must be reported.
- Unabsorbed Depreciation Adjustment: There’s a provision for adjusting unabsorbed depreciation from the Written Down Value (WDV) of the block of assets as on April 1, 2023.
- New Schedules for Startups and Offshore Banking Units: These include Schedule 80-IAC for eligible startups and Schedule 80LA for offshore banking units or IFSC.
- Tax on Accreted Income: A new ‘Schedule 115TD’ has been inserted for reporting tax payable on accreted income.
- MSME Recognition: There’s a new field for taxpayers recognized as MSMEs.
- Concessional Tax Regime Option: Taxpayers can opt for a concessional regime under Section 115BAE.
These changes align with the amendments made by the Finance Act 2023 and aim to enhance transparency and compliance.
Conclusion
Filing Income Tax Returns (ITR) is a legal obligation and a critical step towards maintaining financial transparency and responsible citizenship.
Understanding the various types of ITR forms and the filing process is essential for taxpayers to fulfill their tax obligations accurately and efficiently.
The correct selection of ITR forms based on income sources ensures compliance with tax regulations and facilitates a smooth tax filing process. It’s important to stay informed about the latest changes in ITR forms and tax laws to ensure proper compliance and to take advantage of any applicable benefits
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