The ITR filing season is in full swing. Taxpayers are confused as to which ITR form to use. In this article, I will explain which ITR form you should use.
Who can submit ITR-1?
This is the most popular, simple, and most used ITR form so a major portion of the discussion is focussed on who can and who cannot use this form. ITR-1 can be used by an individual who is a resident of India and has income only from salaries, income from other sources, and does not own more than one house property and his total income does not exceed fifty lakhs for the year.
In case some other person’s income is required to be clubbed in your income, you can use this form only if the nature of the income to be clubbed falls under any of the three heads of income enumerated above.
Who cannot use ITR-1?
Though Individual and HUF are generally treated on par under tax laws still HUFs cannot use ITR-1. In case you are a non-resident you cannot use ITR-1. Likewise, in case you own more than one property, whether self-occupied or let out, you cannot use ITR-1.
All the individuals who hold directorship in any company or have investments in shares of any unlisted Company also cannot use ITR-1. If you have any signing authority in respect of any account outside India or have a beneficial interest in asset or have income from outside India you cannot use this form.
In case you have agricultural income over ₹5,000, you are ineligible to use this form though this is exempt.
In case you have won any lottery during the year, you cannot use this ITR form. Likewise, all those who own and maintain racehorses are not eligible to file ITR-1.
In case you have income under the head “Income from other sources” and wish to claim any deduction against such income, you cannot avail of the facility to use this simple ITR-1 except in case of family pension for which you are entitled to claim 1/3 of the pension subject to a maximum of ₹15,000 and can use ITR-1.
In the list of individual who cannot use ITR-1 come all those who have any brought forward losses which you wish to set off against the current income or have losses in the current year and wish to carry forward the same in the future.
Who can use Form ITR-2?
The ITR-2 can be used by all persons who are not eligible to use ITR-1 and do not have any business or professional income. Briefly stated ITR-2 cannot be used by an Individual or an HUF who has any business or professional income. HUF can also file ITR-2 if it does not have any business income.
The income here includes loss also and in case you have incurred any loss in your business howsoever small the amount is, you cannot use ITR-2 and have to invariably use ITR-3 or ITR-4. This form can also be used by individuals who are partners in a firm but are not carrying on any business or profession in their own name.
Who can use Form ITR-3?
You have to use ITR if you are an Individual or a HUF engaged in any business or profession, the income of which is not being offered for taxation under presumptive taxation.
However, in case you are offering your business or professional income on a presumptive basis but your total income exceeds 50 lakhs, you cannot use ITR-4 but have to use ITR-3 only.
Who can use Form ITR-4?
ITR-4, known as Sugam, can be used by any individual who is a resident for tax purposes, HUF, or a partnership firm who are resident and which wish to offer their income on a presumptive basis, where income is presumed at a minimum rate based on ownership of commercial vehicles or as a percentage of your gross receipts or turnover. Please note an LLP is not eligible to use ITR 4. In case you are a director in any company or own shares in any unlisted companies you cannot use ITR-4 and have to use ITR-3 in case you have business or professional income taxable eligible for presumptive scheme of taxation.
In case your actual business or professional income is lower than what is presumed by law, you cannot use this form and have to use ITR-3. Moreover, you have to get your accounts audited and get the report submitted before submission of the ITR.
From this discussion, I feel the doubt about the section of the appropriate form is cleared.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his Twitter handle.
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Updated: 20 Jul 2023, 12:43 PM IST