Table of Contents
Introduction
Come April, and millions of Indian taxpayers find themselves buried in confusion choosing the right ITR form to file. The amount of paperwork and the different rules for each ITR form means picking the wrong one can cause major issues.
To simplify the ITR filing process, we’ve created the ultimate guide with expert tips on how to select the correct Income Tax Return Form for the assessment year 2023-24.
This comprehensive guide covers everything from the ITR definition, types of forms, step-by-step instructions to expert FAQs – ensuring you file the most suitable ITR form this year without hassle. Let’s get started!
What is ITR?
ITR stands for Income Tax Return – a form used by taxpayers to furnish information about their income earned and tax liability to the Income Tax Department.
The Income Tax Act has notified 7 ITR forms so far – ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 and ITR-7.
The applicable form depends on your income sources, amount and taxpayer category. All taxpayers must file their ITR by the specified due date. Late filing results in penalties up to Rs 10,000.
Why File ITR?
Here are the top 5 reasons to file your income tax returns correctly and on time:
- Claim Income Tax Refund: File your ITR to claim a refund if excess tax was deducted. The average refund per individual taxpayer was Rs 16,996 in 2022.
- Avoid Penalties: Late filing and non-filing of ITR invites hefty fines up to Rs 10,000 under Section 234F. Save yourself from unnecessary penalties.
- Visa Applications: Most countries require your ITR acknowledgments as proof of income for visa applications.
- Loan Approvals: Financial institutions ask for your ITRs for previous years as income proof before approving loans.
- Carry Forward Losses: Losses under income heads cannot be carried forward unless ITR is filed by the due date.
When is it Mandatory to File ITR in India?
You must file income tax returns in India if:
- Your total income exceeds the basic exemption limit:
- For individuals below 60 years: Rs 2.5 lakh
- For senior citizens (60-79 years): Rs 3 lakh
- For super senior citizens (above 80 years): Rs 5 lakh
- Your income is below the exemption limit, but you meet specific conditions like:
- Deposited over Rs 1 crore in current bank account.
- Spent over Rs 2 lakh on foreign travel.
- Total TDS/TCS deduction exceeds Rs 25,000
- You are a company, business, or professional with income from business/profession.
Not filing ITR even when mandated attracts penalties and makes you susceptible to scrutiny. So, ensure you file on time.
Which ITR Form Should I Use?
Here’s a quick overview of each type of ITR form:
ITR-1 (SAHAJ)
For resident individuals with total income up to Rs 50 lakh from:
- Salary/Pension
- One House Property
- Other Sources (excluding lottery, racehorses)
- Agricultural income up to Rs 5,000
Not allowed for: NRIs, foreign income, income from business/profession or more than one house property.
ITR-2
For resident individuals and HUFs not having income from business/profession. Can include:
- Salary, House Property
- Income from Other Sources
- Capital Gains
- Foreign income
- Agricultural income more than Rs 5,000
ITR-3
For residents having income under head ‘Profits and Gains from Business or Profession’. Can include income from other sources.
ITR-4 (Sugam)
For resident individuals, HUFs and firms with total income up to Rs 50 lakh having:
- Presumptive business income from section 44AD, 44ADA or 44AE
- Income from one house property
- Other sources income
ITR-5
For firms, LLPs, AOPs and other association of persons.
ITR-6
For Companies other than those claiming exemption under section 11.
ITR-7
For persons required to furnish returns under special sections like 139(4A), 139(4B) etc.
Confused between ITR-1 and ITR-2? Read our detailed guide comparing ITR-1 vs ITR-2 to pick the right one for you.
ITR Form Applicability Cheat Sheet
Here’s a quick cheat sheet to know which ITR form to use based on your income source and taxpayer status:
| Income Source | Individual | HUF | Firm/LLP | Company | AOP/BOI |
|---|---|---|---|---|---|
| Salary | ITR-1 | ITR-5 | |||
| House Property | ITR-1/ITR-2 | ITR-1/ITR-2 | ITR-2 | ITR-6 | ITR-5 |
| Business Income | ITR-3/ITR-4 | ITR-3/ITR-4 | ITR-5 | ITR-6 | ITR-5 |
| Capital Gains | ITR-2 | ITR-2 | ITR-5 | ITR-6 | ITR-5 |
| Other Sources | ITR-1/ITR-2 | ITR-2 | ITR-5 | ITR-6 | ITR-5 |
| Foreign Income | ITR-2 | ITR-2 | ITR-5 | ITR-6 | ITR-5 |
How to Choose the Right ITR Form?
Follow these 5 golden steps to select the most suitable ITR form:
Step 1: List all your sources of income during the financial year.
Step 2: Identify which taxpayer category you belong to – individual, HUF, company etc.
Step 3: Calculate your gross total income.
Step 4: Decide which ITR form matches your income sources and taxpayer status.
Step 5: Use the cheat sheet above for quick confirmation.
Pro Tip: If income from more than one ITR category – business income with capital gains for instance – file the detailed ITR form instead of simpler ones like ITR-1.
Quote from a CA:
“Review all your income sources carefully. Many taxpayers miss out on reporting income like interest from savings account or taxable investments which leads to filing an incorrect ITR form. Under-reporting income can attract scrutiny so be thorough and file the right form”. – CA Mukesh Kumar, Delhi.
Frequently Asked Questions
Confused about which ITR to file for 2023-24? Here are expert answers to common doubts:
Q1. I earn only salary income but have foreign investments. Which ITR should I file?
You must file ITR-2 even though your only income is salary, since you have foreign assets. ITR-1 does not allow foreign investments.
Q2. I have income from freelancing as well as a rental house property. Which is the correct ITR form?
Since you earn business income from freelancing, you have to file ITR-3 even though you have house property income. ITR-3 can report both incomes.
Q3. I have income under capital gains and won a lottery prize. Which ITR should I pick?
You must file ITR-2 and not ITR-1. ITR-1 does not allow you to report capital gains or lottery income.
Q4. I earn Rs 7 lakh as salary and Rs 2 lakh as freelance income. Which ITR form do I need?
Since your total income of Rs 9 lakh is above the basic exemption limit and you have dual incomes, file ITR-3.
Conclusion
I hope this guide has given you clarity and confidence to file your ITR in the correct form this year.
Remember – pick the ITR form that matches your taxpayer status and all income sources. Furnish accurate details and file before the due date.
If you need assistance filing ITR or have more queries, experienced tax experts at Filingwala.com can help. From ITR planning, verification to e-filing – count on Filingwala.com for all your taxation needs this ITR season!
