The Indian Income Tax Department provides various income tax return (ITR) forms tailored to different taxpayer scenarios. Selecting the appropriate form ensures precise and streamlined reporting of your income.
The Central Board of Direct Taxes (CBDT) released seven ITR forms for FY 2023-24 (AY 2024-25). The determination of which ITR form to use depends on factors such as individual income sources, taxable earnings, and taxpayer categories, including individuals, Hindu Undivided Families (HUFs,) companies, etc. It can be challenging to determine the correct form to use.
Here’s a brief overview of when to use several common ITR forms:
Who can file ITR-1 (Sahaj)?
Resident and ordinarily resident individuals can file ITR-1. Their total income from all sources must not exceed ₹50 lakh, and their income should originate from
- Salary or pension
- One house property (with exceptions for jointly owned properties)
- Other sources such as interest, dividends, or family pension (with a cap of ₹5,000 on agricultural income).
The following individuals cannot file ITR-1:
– Non-resident Indians (NRIs)
– Resident Not Ordinarily Resident (RNOR) taxpayers
– Individuals with income exceeding ₹50 lakh
– Individuals with income from business or profession
– Individuals with agricultural income exceeding ₹5,000
– Individuals with income from capital gains (short-term or long-term)
– Individuals with investments in unlisted equity shares
– Individuals claiming tax deduction under Section 194N of the Income Tax Act
– Individuals with deferred income tax on ESOPs received from eligible startups.
Who can file ITR-2?
The ITR-2 form applies to a broader spectrum of taxpayers in comparison to ITR-1. Here’s an overview of individuals who can file ITR-2:
Individuals and Hindu Undivided Families (HUFs): This category encompasses the majority of individual taxpayers and family units.
ITR-2 is suitable for individuals with income from diverse sources, including:
Salary/Pension: Regular income from salary or pensions.
House property: Income generated from one or multiple house properties.
Capital gains: Income derived from the sale of investments or property, both short-term and long-term.
Other sources: Income from various sources such as lottery winnings, horse racing, or legal gambling (including agricultural income exceeding Rs. 5,000).
Foreign income: Income earned from sources outside India.
NRIs can also file ITR-2 under specific conditions. However, ITR-2 does not apply to individuals earning income from businesses or professions operated as sole proprietorships, partnerships, etc. (There is a separate ITR form designated for business income).
There is no fixed income limit for eligibility to file ITR-2. However, it is generally recommended for individuals whose income structure is more complex than what is covered under the simpler ITR-1 criteria.
Who can file ITR-4 (Sugam)?
The ITR-4 form is tailored for a specific category of taxpayers with multiple income sources. Individuals, HUFs, and partnership firms (excluding Limited Liability Partnerships or LLPs): This category includes various individual taxpayers, family units, and certain types of business entities.
ITR-4 is suitable for individuals with income from:
- The form is specifically applicable if income is computed under presumptive taxation schemes provided by sections 44AD, 44ADA, or 44AE of the Income Tax Act. These schemes are intended for small businesses and professionals with turnover thresholds.
- Income from regular salary or pensions can also be reported in ITR-4.
- You can include income from up to one house property in ITR-4.
- Income from other sources such as interest on savings accounts, deposits, or tax refunds can be reported, with certain restrictions (excluding income from lottery and horse racing wins).
The key criterion for eligibility to file ITR-4 is utilizing presumptive taxation schemes for business or professional income. If your business does not qualify for these schemes or if you maintain regular books of accounts, ITR-4 may not be appropriate for you.
The presumptive taxation schemes under ITR-4 have defined turnover thresholds for businesses or professions. Ensure that your business meets these limits to qualify for filing under this scheme.
There are additional ITR forms available for companies and specific circumstances, but these are the most commonly used forms for individual taxpayers. If you are uncertain whether ITR-4 applies to you, it is advisable to verify on the Income Tax Department website or seek advice from a tax advisor who can provide personalized guidance based on your specific income circumstances.
