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 ITR Forms for FY 2023-24 (AY 2024-25): Choose the right one

03.04.24 06:22 AM By Saba Sorathiya

ITR, an acronym for Income Tax Return, which is governed by the Income-tax Act of 1961. This article speaks about various types of ITR forms available and it’s applicability. 

What's ITR?

ITR serves as a document through which taxpayers provide details regarding their income earned and the corresponding tax obligations to the income tax department.

Currently, the department has designated seven forms, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. It is mandatory for every taxpayer to submit their ITR on or before the stipulated deadline. The selection of the appropriate ITR form depends on factors such as the taxpayer's income sources, the total income amount, and the taxpayer category, which includes individuals, HUFs, companies, etc.

Reasons to file ITR include

1. Claiming an income tax refund from the department.
2. Having earned from or invested in foreign assets during the financial year.
3. Applying for a visa or a loan.
4. Mandatory filing for companies or firms, regardless of profit or loss.
5. If you've incurred losses from business/profession or under the capital gains category, filing the return before the due date is essential to carry them forward to subsequent years.

When is it mandatory to file Income Tax Returns?

1) If your gross total income exceeds the basic exemption limit:

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

2) Even if your income is below the basic exemption limit, you must file your tax return if you meet any of the following conditions:

a.    Deposited more than Rs 1 crore in 'current' bank account: If you have deposited a total of Rs. 1 crore or more in one or more current accounts with a bank, you are required to file a tax return. This condition does not apply to deposits made in post office current accounts.

b. Deposited more than Rs 50 lakh in 'savings' bank account: If the total amount deposited in one or more of your savings bank accounts exceeds Rs 50 lakh, you must file a tax return.

c. Spent more than Rs 2 lakh on foreign travel: If you incurred total expenditure of more than Rs 2 lakh on foreign travel, whether for yourself or any other person, filing a tax return becomes mandatory.

d. Electricity expenditure is more than Rs 1 lakh: If your expenditure towards electricity consumption during the previous year surpasses Rs 1 lakh, you are required to file a tax return.

e. TDS or TCS is more than Rs 25,000 (Rs 50,000 for senior citizens above 60 years):  If the tax deducted at source (TDS) or tax collected at source (TCS) exceeds Rs 25,000 in the previous year (Rs 50,000 for senior citizens above 60 years), you must file a tax return.

f. Business turnover is more than Rs 60 lakh: If you are engaged in business and your total sales, turnover, or gross receipt exceeds Rs 60 lakh during the previous year, filing a tax return becomes mandatory.

g. Professional income is more than Rs 10 lakh: If you earn income from a profession and your gross receipts exceed Rs 10 lakh during the previous year, you are required to file a tax return.

Individuals who fall under the following categories are exempted from filing Income Tax Returns

1. Individuals with a total income less than the basic tax exemption limit.
2. Non-residents who do not have income accruing or arising from India.

Additionally, the central government has the authority to grant exemptions to specified classes of persons from filing income tax returns. However, as of now, there are no specific exemptions notified by the central government in this regard.

Which ITR form to file depends on specific income and financial situation

1) ITR-1

Use ITR-1 (SAHAJ) if:
1.  You are a resident individual.
2. Your total income includes income from Salary/Pension, Income from One House Property (excluding losses brought forward from previous years), Income from Other Sources (excluding winnings from lottery and income from race horses), and agricultural income up to Rs 5000.

Do not use ITR-1 (SAHAJ) if:
1.  Your total income exceeds Rs 50 lakh.
2.  Your agricultural income exceeds Rs 5000.
3.  You have taxable capital gains.
4.  You have income from business or profession.
5.  You have income from more than one house property.
6.  You are a director in a company.
7.  You have invested in unlisted equity shares during the financial year.
8.  You own assets (including financial interest in any entity) outside India or have signing authority in any account located outside India.
9.  You are a resident not ordinarily resident (RNOR) or non-resident.
10. You have any foreign income.
11.  You are assessable with respect to the income of another person from which tax is deducted.
12.  Tax has been deducted under Section 194N.
13.  Payment or deduction of tax has been deferred on ESOP.
14.  You have any brought forward loss or loss that needs to be carried forward under any income head.

                   You can check out Zeal's Service of filing ITR-1

2) ITR-2

Use ITR-2 if:
1. You are an individual or a Hindu Undivided Family (HUF).
2. Your total income for the Assessment Year 2024-25 includes income from Salary/Pension, House Property, and Other Sources (including winnings from lottery and income from horse racing).
3. You are an Individual Director in a company.
4. You have invested in unlisted equity shares during the financial year.
5. You are a resident not ordinarily resident (RNOR) or non-resident.
6.   You have income from Capital Gains.
7.   You have any foreign income.
8.   Your agricultural income exceeds Rs 5,000.
9.   You own assets (including financial interest in any entity) outside India or have signing authority in any account located outside India.
10. Tax has been deducted under Section 194N.
11.  Payment or deduction of tax has been deferred on ESOP.
12.  You have any brought forward loss or loss that needs to be carried forward under any income head.
13.  You have income from trading of VDAs (Cryptocurrency).
14.  Additionally, if the income of another person like your spouse or child is to be clubbed with your income and falls into any of the above categories, ITR-2 can be used.

Do not use ITR-2 if:
Your total income for the Assessment Year 2024-25 includes Income from Business or Profession. In such cases, you may need to use ITR-3 or ITR-4 for declaring these types of income.

3) ITR-3

ITR-3 Form is designated for individuals or Hindu Undivided Families (HUFs) with income from a proprietary business or those engaged in a profession. Eligible individuals or HUFs for filing ITR-3 include:

1. Those engaged in a business or profession not opting for presumptive income.
2. Those engaged in a business or profession who are required to maintain books of accounts and/or undergo auditing.
3. Individual Directors in a company.
4. Individuals who have invested in unlisted equity shares at any time during the financial year.
5. The return may also include income from House property, Salary/Pension, and Income from other sources.
6. Income of a person as a partner in a firm.

In summary, individuals or HUFs ineligible to file ITR-1, ITR-2, and ITR-4 should file ITR-3.

4) ITR-4

ITR-4 is applicable to individuals, Hindu Undivided Families (HUFs), and Partnership firms (excluding LLPs) who are residents, and their total income comprises:

1. Business income under the presumptive income scheme as per sections 44AD or 44AE.
2. Professional income under the presumptive income scheme as per section 44ADA.
3. Income from salary or pension up to Rs 50 lakh.
4. Income from one house property, not exceeding Rs 50 lakh (excluding brought forward losses).
5. Income from other sources, not exceeding Rs 50 lakh (excluding income from lottery and horse racing).

Individuals earning income from the above mentioned sources as freelancers can also opt for the presumptive scheme if their gross receipts are under Rs 50 lakhs (from FY 2023-24, if the cash receipt is less than 5% of their gross receipt then the limit will be Rs.75 lakhs).

However, if the business turnover surpasses Rs 2 crore (from FY 2023-24, if the cash receipt is less than 5% of their gross receipt then the limit will be Rs.3 Crore), taxpayers must file ITR-3.

Who should not use ITR-4:
1.   Individuals with a total income exceeding Rs 50 lakh or 75 lakhs, as the case may be.
2.  Individuals with income from more than one house property.
3.  Those owning foreign assets or having signing authority in accounts outside India.
4.  Individuals with income from any source outside India.
5.  Directors in a company.
6.  Individuals who invested in unlisted equity shares during the financial year.
7.  Residents who are not ordinarily residents (RNOR) and non-residents.
8.  Individuals with foreign income.
9.  Those assessable for another person's income where tax is deducted at the source.
10. Individuals with deferred tax payments or deductions on ESOP.
11.  Those with any brought forward losses or losses to be carried forward under any income head.

5) ITR-5

ITR-5 is designated for the following entities:
1. Firms
2. LLPs (Limited Liability Partnerships)
3. AOPs (Association of Persons)
4. BOIs (Body of Individuals)
5. Artificial Juridical Person (AJP)
6. Estate of deceased
7. Estate of insolvent
8. Business trust
9. Investment fund.

6) ITR-6

For companies other than those claiming exemption under section 11 (Income from property held for charitable or religious purposes), this return must be filed electronically only.



You can check out Zeal's Service of filing ITR-6

7) ITR-7

For individuals and entities, including companies, obligated to submit returns under various sections:

I. Return under section 139(4A): Required for every individual receiving income from property held under trust or other legal obligation, wholly or partly for charitable or religious purposes.

II. Return under section 139(4B): Mandated for political parties if their total income exceeds the maximum amount not chargeable to income tax, without considering the provisions of section 139A.

III. Return under section 139(4C): Necessary for:
  - Scientific research associations
  - News agencies
  - Associations or institutions specified in section 10(23A)
  - Institutions specified in section 10(23B)
  - Funds, institutions, universities, educational institutions, hospitals, or medical institutions.

IV. Return under section 139(4D): Compulsory for universities, colleges, or other institutions that don't need to file under any other provision.

V. Return under section 139(4E): Must be filed by every business trust if not obliged to furnish a return of income or loss under any other provisions.

VI. Return under section 139(4F): Required for any investment fund referenced in section 115UB, if not obligated to submit a return of income or loss under any other provisions.

Conclusion

Understanding Income Tax Returns (ITR) is crucial for taxpayers. Choose the right form based on income sources and total income. Mandatory filing depends on income thresholds and specific circumstances.

If you want to know more, click on the link below and schedule a consultation with us.

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Saba Sorathiya

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