Do you need help determining which ITR form to file this financial year? Whether you’re into crypto transactions, managing income as a salaried employee, or running a business, choosing the correct ITR form is crucial to keeping yourself on the right side of the law.
Therefore, this blog will guide you through the types of ITR forms available and clarify which ones suit your financial situation. So, let’s understand the types of ITR forms together and ensure a smooth filing process!
What is ITR?
Before we move on to the types of ITR forms, it is imperative to understand what ITR is. An Income Tax Return (ITR) is a detailed statement where you share particulars about the income you’ve earned and the taxes you owe to the income tax department.
There are 7 ITR forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. It’s important to file your ITR before the specified due date.
The form you use depends on factors like your income sources, the amount you earned, and your taxpayer category (such as individuals, HUF, or company).
Which ITR to File?
Now that you’ve understood the basics of ITR filing let’s understand the types of ITR forms and their eligibility.
You can file ITR-1 or Sahaj if you satisfy any of the following conditions:
- If you have a regular Salary or Pension
- If you earn income from a Single House Property (excluding cases where losses are carried forward from previous years)
- If you have income from Other Sources (excluding winnings from lotteries and income from racehorses)
- If your agricultural income does not exceed INR 5,000
Who Cannot File The ITR-1 Form?
You are ineligible to file ITR-1 if:
- Your total income is more than INR 50 Lakhs
- Your agricultural income is more than INR 5,000
- You have taxable capital gains from crypto or shares
- You have business or professional income
- You are a company director
- You have unlisted equity shares during FY 2023-24
- If you have a foreign income
- If you are a resident not ordinarily resident (RNOR) or non-resident.
You are eligible to file ITR-2 if you satisfy the following criteria:
- If you are receiving a salary or pension
- If you are receiving income from House Property
- If you earn income from Other Sources, including lottery and horse racing.
- If you are a Directory in a company
- If you have earned capital gains by selling cryptocurrencies or stocks.
- If you earn income from foreign sources.
- If you have an agricultural income of more than INR 5,000.
- If you have a Tax deduction under Section 194N
- If you have Deferred payment or tax deduction on Employee Stock Ownership Plans (ESOPs)
- If you have brought forward losses or losses to be carried forward under any income category
- If you are a resident who is non-resident or not ordinarily resident (RNOR)
- If you own assets outside India, including financial interests in any entity and signing authority in foreign accounts
Note: The ITR-2 form also applies to you if another person’s income, like your spouse or child, must be combined with your income and fall into any of the above categories. Your total income can exceed 50 lakhs in INR for filing under this form.
Who Cannot Use ITR-2?
You should not use this Return Form if your total income for the Assessment Year 2024-25 includes Income from Business or Profession.
You should use the current ITR-3 Form if you’re an individual or part of a Hindu Undivided Family (HUF) in a proprietary business or profession. Specifically, you should file ITR-3 if:
- You have investments in unlisted equity shares at any time during the financial year.
- Your income includes earnings from House property, Salary/Pension, and other sources.
- You receive income as a partner in a firm.
If you do not meet the criteria for filing ITR-1, ITR-2, or ITR-4, filing ITR-3 is appropriate. This form accommodates individuals and HUFs with these specific income and investment situations.
The current ITR-4 applies to you if you are an individual or part of a Hindu Undivided Family (HUF) or a partnership firm (excluding LLPs) residing in India, and your total income includes:
- Business income under the presumptive income scheme as per sections 44AD or 44AE.
- Professional income under the presumptive income scheme as per section 44ADA.
- Income from salary or pension up to INR 50 lakh.
- Income from one house property up to INR 50 lakh (excluding any brought forward losses).
- Income from other sources does not exceed INR 50 lakh (excluding income from lottery and racehorses).
If you earn income from the above sources as a freelancer, you can also opt for the presumptive scheme if your gross receipts are at most INR 50 lakhs.
The presumptive income scheme under sections 44AD, 44AE, and 44ADA allows you to calculate your income on a presumptive basis, typically a minimum rate based on a percentage of gross receipts or turnover or ownership of commercial vehicles.
Important: However, if your business turnover exceeds INR 2 crore, you must file ITR-3 instead of ITR-4.
Who Cannot Use The ITR-4 Form?
You cannot file the ITR-4 form if you meet any of the following conditions:
- If your total income exceeds INR 50 lakh.
- If you earn income from more than one house property.
- If you own any foreign asset.
- If you have signing authority for any account located outside India,
- If you earn income from any source outside India.
- If you are a director of a company.
- If you have investments in unlisted equity shares at any time during the financial year.
- If you are a resident, not an ordinarily resident (RNOR) or a non-resident.
- If you have foreign income.
- If you are assessable concerning another person’s income where, tax is deducted from the source in their hands.
- If you have deferred payment or deduction of tax on the Employee Stock Ownership Plan (ESOP).
- If you have any losses brought forward or that need to be carried forward under any income head
ITR-5 is specifically designed for the following entities:
- Firms
- Business trusts
- AOPs (Association of Persons)
- LLPs (Limited Liability Partnerships)
- Investment funds
- BOIs (Bodies of Individuals)
- Estate of deceased individuals
- Artificial Juridical Person (AJP)
- Estate of insolvent individuals
These entities should file their income tax returns using the ITR-5 form in accordance with tax regulations applicable to their respective structures.
If your company is registered under the Companies Act 2013 or the earlier Companies Act 1956, you should file the ITR-6 Form. However, if your company’s income is derived from property held for religious or charitable purposes, it is exempt from filing the ITR-6 Form.
You can take the ITR-7 form if you fall under the said sections:
- Section 139(4A): If you receive income from property held under trust or legal obligation wholly or partly for charitable or religious purposes, you must file a return.
- Section 139(4B): If you are a political party and your total income exceeds the maximum amount not chargeable to income tax, you must file a return without considering the provisions of Section 139A.
- Section 139(4C): Returns are required from:
- Institutions covered under Section 10(23B)
- News agencies
- Associations or institutions covered under Section 10(23A)
- Scientific research associations
- Funds, universities, institutions, educational establishments, hospitals, or medical establishments
- Section 139(4D): If you are a university, college, or other institution not required to file returns under any other provision, you must file a return.
- Section 139(4E): If you are a business trust, you are not required to file returns under any other provision; you must file a return.
- Section 139(4F): If you are an investment fund as per Section 115UB and are not required to file returns under any other provision, you must file a return.
In India, you need to file your income tax returns in two cases:
When Must You File Income Tax Returns (ITR) in India?
1. If Your Income Is Above The Basic Exemption Limit
If your gross total income exceeds the basic exemption limit set by the tax authorities, you must file a tax return. The basic exemption limit varies depending on age and income sources, as defined by the Income Tax Act applicable to your jurisdiction. The exemption limit for FY 2023-24 are:
Age Group | Basic Exemption Limit (INR) |
If you are below 60 years | 2,50,000 |
If you are above 60 years but below 80 years | 3,00,000 |
If you are above 80 years | 5,00,000 |
2. If Your Income Is Below The Basic Exemption Limit, But You Satisfy Any Of The Given Conditions
High Deposits in Bank Accounts
If you have deposited INR 1 crore or more in one or more current accounts with a bank, you must file a tax return. Note that this requirement does not apply to deposits made in post office current accounts.
Large Savings Account Deposits
You must file a tax return if the total deposits in your savings bank account(s) exceed INR 50 lakh during the year.
Foreign Travel Expenses
If your total spending on foreign travel exceeds INR 2 lakh in a year, whether for yourself or someone else, you must file a tax return.
High Electricity Expenditure
You must file a tax return if your electricity consumption costs exceed INR 1 lakh during the previous year.
TDS/TCS Deductions
If the total TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) deducted from your income exceeds INR 25,000 (or INR 50,000 for senior citizens aged 60 years and above), you must file a tax return.
Business Turnover Threshold
Business owners must file a tax return if their total sales, turnover, or gross receipts exceed INR 60 lakh in the previous year.
Professional Income Limit
Professionals must file a tax return if their gross receipts from their profession exceed INR 10 lakh during the previous year.
Who are Exempted from Filing Income Tax Returns?
The central government can grant exemptions from filing income tax returns to specific classes of individuals, in addition to those already exempted, such as individuals with total income below the basic tax exemption limit and non-residents without income from India.
However, the government has not issued any notifications regarding additional exemptions.
Why Should You File ITR?
Filing your Income Tax Return (ITR) might seem like a chore, but it offers many benefits beyond avoiding penalties. Here’s why you should seriously consider filing your ITR, even if you think you don’t owe any tax:
Claim Your Refunds
Have you paid more tax than you owe? Filing an ITR allows you to claim a refund for any excess Tax Deducted at Source (TDS) you’ve paid throughout the year. This can be significant, especially if you’ve made investments or have other income sources.
Loan Applications Made Easy
Planning to buy a home or get a car loan? Many lenders require ITRs as proof of income. Filing regularly ensures you have a readily available record when you need it.
Carry Forward Losses
Did your business incur losses this year? Filing your ITR allows you to “carry forward” those losses and offset your taxable income in future years, potentially reducing your tax burden.
Build a Credit History
An ITR is a financial document that can help establish your creditworthiness. This can be beneficial when applying for loans, credit cards, or visas.
Now that you have read about the ITR forms available, we hope you have a smooth filing process. For crypto traders, using KoinX can simplify your tax reporting by generating accurate crypto tax reports. Register on KoinX today and ensure a hassle-free tax filing experience.
