Income Tax Return (ITR) filing is a crucial responsibility for every taxpayer in India. The Income Tax Department offers different ITR forms based on the nature and source of income, the category of the taxpayer, and other criteria. Selecting the correct ITR form is essential to ensure compliance, avoid penalties, and process refunds smoothly. In this article, we will break down each ITR form and help you determine which ITR form to use for income return filing.
Understanding ITR and Its Importance
An Income Tax Return (ITR) is a form used to report income, deductions, exemptions, and taxes paid to the Income Tax Department of India. Every individual, company, partnership firm, LLP, or trust that earns income in a financial year must file their ITR, depending on the threshold and nature of income.
Choosing the right ITR form is the first and most important step. Filing with the wrong form can lead to a defective return or rejection by the department.
Types of ITR Forms for AY 2024-25 (FY 2023-24)
As per the latest guidelines, the Income Tax Department has notified seven types of ITR forms (ITR-1 to ITR-7). Let’s understand each form and who should use them.
1. ITR-1 (SAHAJ)
Who can use:
Resident Individuals (other than Not Ordinarily Resident) having:
- Total income up to ₹50 lakh
- Income from Salary/Pension
- Income from One House Property
- Income from Other Sources (like interest, etc.)
- Agricultural income up to ₹5,000
Who cannot use:
- Non-residents or RNORs
- Individuals with capital gains
- Income from more than one house property
- Income from business or profession
- If TDS is deducted under Section 194N
- If income includes winnings from lottery or race horses
Ideal for: Salaried individuals with simple income structure.
2. ITR-2
Who can use:
Individuals and Hindu Undivided Families (HUFs) having:
- Income from salary/pension
- Income from more than one house property
- Capital gains (short-term and long-term)
- Foreign income or foreign assets
- Agricultural income more than ₹5,000
- Income from other sources
Who cannot use:
Individuals having income from business or profession under PGBP (Profit and Gains of Business or Profession).
Ideal for: High-net-worth individuals, NRIs, and salaried persons with capital gains or foreign income.
3. ITR-3
Who can use:
Individuals and HUFs having:
- Income from business or profession (proprietorship, freelancing, consultancy)
- Income from salary, house property, capital gains, or other sources
- Income as a partner in a firm
- Presumptive income under Sections 44AD, 44ADA, or 44AE (if not opted for ITR-4)
Ideal for: Professionals, business owners, traders, and freelancers.
4. ITR-4 (SUGAM)
Who can use:
Resident Individuals, HUFs, and Firms (excluding LLPs) having:
- Presumptive income under Section 44AD (business), 44ADA (profession), or 44AE (transportation)
- Total income up to ₹50 lakh
- Income from salary/pension, one house property, and other sources
Who cannot use:
- Non-residents
- Those with more than ₹50 lakh total income
- If income includes capital gains or foreign assets
Ideal for: Small business owners and professionals availing presumptive taxation.
5. ITR-5
Who can use:
Firms, LLPs, AOPs, BOIs, and artificial juridical persons (excluding companies and individuals/HUFs)
- Includes those not filing under ITR-7
- Covers entities under partnership (registered or not)
Ideal for: LLPs, partnership firms, and trusts (not claiming exemption under specific sections).
6. ITR-6
Who can use:
Companies other than those claiming exemption under Section 11 (i.e., income from property held for charitable or religious purposes).
Who cannot use:
Companies claiming exemptions under Section 11 must use ITR-7.
Ideal for: Private limited companies, public limited companies, and other corporate bodies.
7. ITR-7
Who can use:
Entities including:
- Trusts, religious and charitable institutions
- Political parties
- Research institutions
- Colleges and universities
- Societies filing returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D)
Ideal for: NGOs, educational institutions, and Section 8 companies.
Table Summary of which ITR Form to Use for Income Return Filing
| ITR Form | Suitable For | Income Types | Not Suitable For |
|---|---|---|---|
| ITR-1 | Salaried individuals | Salary, one house, interest | Capital gains, business, NRIs |
| ITR-2 | Individuals/HUFs | Salary, house, capital gains | Business or professional income |
| ITR-3 | Individuals/HUFs | Business/profession, capital gains | NA |
| ITR-4 | Small businesses under presumptive tax | Presumptive business/profession | Capital gains, foreign assets |
| ITR-5 | Firms, LLPs, AOPs | Business income | Individuals, companies |
| ITR-6 | Companies | All taxable income | Charitable institutions |
| ITR-7 | Trusts, NGOs, political parties | Exempt income under Sec. 11 | Business or salaried individuals |
Common Mistakes to Avoid While Choosing ITR Forms
- Filing with the wrong ITR form – This can lead to a defective return notice.
- Skipping details on capital gains – Especially for ITR-2 and ITR-3.
- Wrongly opting for ITR-1 when having multiple house properties or capital gains.
- Using ITR-4 when actual income doesn’t fall under presumptive scheme.
- Not consulting a tax expert when dealing with foreign income or multiple income heads.
Final Thoughts
Online ITR Filing is not just about declaring your income – it’s also about ensuring you comply with the laws and avoid unnecessary hassles like notices or penalties. Choosing the correct form based on your income sources, residential status, and total earnings is crucial. If you’re unsure, consult a tax advisor or use the Income Tax Department’s utility for guided e-filing.
In summary, if you’re a salaried person with simple income sources, ITR-1 may be perfect for you. But if you’re dealing with business income, capital gains, or foreign income, you might need to look at ITR-2, ITR-3, or ITR-4. Businesses and firms should file using ITR-5 or ITR-6, and charitable institutions should go with ITR-7.
File wisely, file on time – and avoid penalties by choosing the correct ITR form!
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