Which Tax Form Should I Use? Learning About the Different ITR Forms.

ITR, short for Income Tax Return, is an important part of following tax rules set by the Income Tax Act of 1961. This law not only explains different ITR forms but also tells you how to do them correctly. This article will help you understand what ITR means and the different types of ITR forms there are.

What is an ITR?

An ITR, or Income Tax Return, is a form where people tell the tax office about their money and taxes. There are seven different forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Everyone has to submit their ITR on time. Which form you need depends on things like how much you earned, where you got it from, and what kind of taxpayer you are, like an individual, HUF (Hindu Undivided Family), or a company.

Why file ITR?

• To get a refund on your income tax.
• If you made money from or invested in foreign stuff during the year.
• To apply for a visa or loan.
• If you’re a company or firm, you have to file even if you didn’t make money.
• If you lost money in business or investments, you can’t carry those losses to the next year unless you file on time.

When do you have to file income tax returns (ITR) in India?

If your total income is higher than the basic exemption limit.

Age Group	Basic Exemption Limit
For individuals below 60 years	Rs 2.5 lakh
For individuals above 60 years but below 80 years	Rs 3.0 lakh
For individuals above 80 years	Rs 5.0 lakh

Even if your income is lower than the basic exemption limit, you still need to file your tax return if any of these conditions apply:

• If you’ve deposited over Rs. 1 crore in a ‘current’ bank account: You must file a tax return if you’ve put in Rs. 1 crore or more in one or multiple current accounts. But there’s no such rule for post office current accounts.

• If you’ve spent more than Rs. 2 lakh on foreign travel: Filing a tax return is a must if your total spending on foreign trips goes beyond Rs. 2 lakh, whether for yourself or someone else.

• If you’ve deposited over Rs. 50 lakh in a ‘savings’ bank account: You need to file a tax return if the total amount you’ve put in your savings accounts is over Rs. 50 lakh.

• If your electricity expenses exceed Rs. 1 lakh: You must file a tax return if you’ve spent more than Rs. 1 lakh on electricity during the previous year.

• If your business turnover exceeds Rs. 60 lakh: If you’re in business and your total sales, turnover, or gross receipts go over Rs. 60 lakh in the previous year, you have to file a tax return.

• If your professional income surpasses Rs. 10 lakh: Filing a tax return is necessary if you’re a professional and your gross receipts are more than Rs. 10 lakh in the previous year.

• If your TDS or TCS amounts to more than Rs. 25,000: If the total tax deducted at source (TDS) or tax collected at source (TCS) is over Rs. 25,000 in the previous year. For individuals above 60 years of age, this limit is Rs. 50,000.

ITR-1

This form is for resident individuals whose total income for the Assessment Year 2023-24 includes:

• Salary/Pension Income
• Income from One House Property (except for cases with losses carried forward from previous years)
• Other Sources of Income (except lottery winnings and income from racehorses)
• Agricultural income up to Rs 5000

Who can’t use ITR-1 Form?

• If your total earnings are over Rs 50 lakh
• If your agricultural income exceeds Rs 5000
• If you have income from multiple properties
• If you’re a Director in a company
• If you have taxable capital gains
• If you earn from business or profession
• If you’ve invested in unlisted equity shares
• If you’re responsible for someone else’s taxed income
• If tax has been withheld under Section 194N
• If you’ve deferred payment or tax deduction from ESOP
• If you’re a resident not ordinarily resident (RNOR) and non-resident
• If you have any foreign income
• If you have carried forward or to-be-carried-forward losses

ITR-2

ITR-2 is for individuals or Hindu Undivided Families (HUFs) whose total income for the Assessment Year 2023-24 includes:

• Salary or Pension Income
• Revenue from Property Ownership
• Various Other Income Sources (including Lottery Winnings and Race Horse Income)
• Serving as an Individual Director in a company
• Investment in unlisted equity shares during the year
• Being a resident not ordinarily resident (RNOR) or non-resident
• Capital Gains
• Foreign Income
• Agricultural earnings exceeding Rs 5,000
• Ownership of assets abroad, including accounts outside India
• Carried forward or to-be-carried-forward losses
• Tax deducted under Section 194N
• Tax related to Employee Stock Ownership Plan (ESOP)

Additionally, if combining income with that of another individual, like a spouse or child, under the mentioned categories, ITR-2 can be used. Total income may exceed Rs 50 Lakhs.

Who can’t use ITR-2?

If your total income for the Assessment Year 2023-24 includes Income from Business or Profession, you can’t use this form. Instead, you might need to use either ITR-3 or ITR-4. Check out our detailed guide on ITR-2 for help with completing the form.

ITR-3

ITR-3 is for individuals or Hindu Undivided Families (HUFs) who earn money from their own business or professional work. You can use ITR-3 if you:

• Run a business or work as a professional
• Serve as an Individual Director in a company
• Invest in unlisted equity shares during the year
• Earn income from Salary/Pension, House property, and other sources
• Get income as a partner in a firm

Simply put, if you don’t qualify for filing ITR-1, ITR-2, or ITR-4, then ITR-3 is for you.

ITR-4

ITR-4 is for residents who are individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs), and earn income from:

• Business under the presumptive income scheme (as per sections 44AD or 44AE)
• Professional income under the presumptive income scheme (as per section 44ADA)
• Salary or pension up to Rs 50 lakh
• Income from a single house property up to Rs 50 lakh (excluding any carried forward losses)
• Other sources of income up to Rs 50 lakh (excluding lottery and racehorses)

If you earn income from these sources, especially freelancers, you can choose the presumptive scheme if your gross receipts are below Rs 50 lakhs.

Under the presumptive income scheme, income is calculated at a minimum rate based on gross receipts or turnover, or commercial vehicle ownership. But if your business turnover exceeds Rs 2 crore, you must file ITR-3.

Who can’t use ITR-4 Form?

• If your total income is over Rs 50 lakh
• If you earn income from outside India
• If you’re a Director in a company
• If you invest in unlisted equity shares during the year
• If you’re a resident not ordinarily resident (RNOR) or non-resident
• If you have foreign income
• If you earn from multiple house properties
• If you own foreign assets
• If you have signing authority in accounts outside India
• If you’re responsible for someone else’s taxed income
• If payment or tax deduction on Employee Stock Ownership Plan (ESOP) is deferred
• If you have carried forward or to-be-carried-forward losses

ITR-5

ITR-5 is for use by various entities including firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), Artificial Juridical Persons (AJPs), Estates of deceased individuals, Estates of insolvents, Business trusts, and investment funds.

ITR-6

Companies, except those qualifying for exemption under section 11 (related to income from property held for charitable or religious purposes), must file this return electronically.

ITR-7

ITR-7 is for individuals and companies that are required to file returns under specific sections: 139(4A), 139(4B), 139(4C), 139(4D), 139(4E), or 139(4F).

Under section 139(4A), individuals receiving income from property held under trust or other legal obligation, either entirely for charitable or religious purposes or partially for such purposes, need to file.

For political parties falling under section 139(4B), they must file a return if their total income exceeds the maximum amount not subject to income tax, excluding section 139A provisions.

Section 139(4C) requires filing by the following entities:

– News agencies

– Scientific research associations

– Associations or institutions specified in section 10(23A)

– Institutions specified in section 10(23B)

– Funds, institutions, universities, educational institutions, hospitals, or medical institutions.

Under section 139(4D), every university, college, or institution that isn’t required to submit a return of income or loss under any other provision of this section must file.

Similarly, under section 139(4E), every business trust must file a return if it isn’t required to furnish a return of income or loss under any other provisions of this section.

Likewise, under section 139(4F), any investment fund mentioned in section 115UB is required to file a return if it isn’t required to furnish a return of income or loss under any other provisions of this section.

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