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Chapter 20 What is Income Tax Returns (ITR) And What Are The Various Forms?

When it comes to filing your income tax returns (ITR), it is important to fill all the right forms. The choice of the ITR form you use depends on the nature of your income, its source, and the nature of the assessee (individual, partnership, business, AOP, etc). Choosing the right form is very important because submitting the wrong one can lead to the Income Tax Department rejecting your returns claim. In this case, you will have to go through the entire process all over again.

The Income Tax website contains the details of the various forms and the conditions for using them. You can either download the physical form and fill it or you can fill it up in an Excel and then upload the utility as an XML file. Alternatively, you can also file the returns in the appropriate ITR form online through the Income Tax Department’s website itself. The demarcations and the conditions for using each form are quite clear and the decision is fairly simple.

What do we understand by Income Tax Return?

Filing your Income Tax Returns (ITR) is different from actually paying your tax. Even if you have paid all your tax in the form of TDS or Advance Tax, you still need to file your returns claim. Your taxation ordeal for a year is completed only when you file the ITR and the same is acknowledged by the Income Tax Department.

Your tax return form contains information about your income and tax liability thereon. The Income Tax Act, 1961, makes it obligatory for all citizens who fulfill certain conditions to file their tax returns with the I-T Department at the end of every financial year. Remember the concept of Financial Year (FY) and Assessment Year (AY) here. For example, income earned between April 2017 and March 2018 will be for the FY2017-18, which corresponds with AY2018-19, and has to be statutorily filed by July 31, 2018, unless the government postpones the date.

Tax filing is not mandatory for every citizen. There are different types of ITR forms and each is applicable to a certain section of assessees. These forms need to be filed on a specified due date. Furthermore, the I-T Department only processes those returns where forms have been properly filled and submitted within the due date. Effective FY2017-18, all returns filed after July 31 (unless postponed) will attract a penalty of up to Rs.5,000 and the same will have to be paid online before filing your returns.

How to decide which ITR form to file?

The Finance Ministry has introduced a simplified ITR-1 (Sahaj) form applicable only for individuals with income up to Rs.50 lakh. However, taxpayers with dividend income above Rs.10 lakh or unexplained credit cannot opt for ITR-1.

On the other hand, the ITR-2A form, which was introduced in 2016, has now been withdrawn and the old ITR-3 form has been merged with ITR-2. All individual taxpayers, except those eligible to use ITR-1 (Sahaj) or those earning business income, will be required to file ITR-2 only.

Furthermore, the old ITR-4 has now been replaced by ITR-3; as such, individual taxpayers with business or professional income are now required to use ITR-3. Till AY2016-17, taxpayers opting for presumptive taxation were required to file ITR-4S but now they are required to file ITR-4 (Sugam) for presumptive income. Remember, ‘Sugam’ is purely meant for the filing of tax returns based on presumption income only.

1. Filing of Form ITR-1 (Sahaj) – Who can file and who cannot file?

Who is eligible to file income tax returns using ITR-1 (Sahaj)?

  • Salary or pension
  • House property (except brought forward loss under this head)
  • Income from other sources

Who is not eligible to use ITR-1 (Sahaj)?

  • The assessee filing the returns is a resident and ordinarily resident (ROR) of India but has: any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India.
  • ITR-1 (Sahaj) also cannot be used if the assessee has any income from any source arising outside of India, irrespective of the nature and regularity of the income.
  • If the assessee has earned any business income or has earned income from practicing any profession like CA, engineer, doctor, lawyer, etc.
  • An individual with one house property can file Sahaj but if the person has more than one house property then this form cannot be used.
  • Has any loss to be carried forward or has any loss to be brought forward for setting off against any head of income.
  • If the total income from all sources exceeds Rs.50 lakh.
  • If the dividend income during the year exceeds Rs.10 lakh, which makes the assessee liable to pay tax at 10% on the dividend income.
  • Has unexplained credit or investment taxable at 60% under Section 115BBE.
  • Has agricultural income exceeding Rs.5,000 during the financial year.
  • Has any income from winning lotteries or horse racing or from any speculative activity (gambling).
  • Has claimed any relief u/S. 90 or 90A or 91A.

2. Filing of Form ITR-2 – Who can file and who cannot file?

Who can file returns using ITR-2?

ITR-2 can be used by all individuals and Hindu Undivided Family (HUF) not involved in any proprietary business or profession. This is normally the default ITR form for individuals and HUFs where the Sahaj conditions are not applicable. All individual assessees are covered between Form 1 and Form 2 of the ITR.

Who is not eligible to use ITR-2?

As stated earlier, the applicability of ITR-2 is limited to only individuals and HUFs. However, ITR-2 cannot be used by an individual and HUF with income that is chargeable to tax under the head “proprietary business or profession”.

3. Filing of Form ITR-3 – Who can file and who cannot file?

Who is eligible to file income tax returns using ITR-3?

  • ITR-3 can be filed by an individual or HUF deriving income from proprietary business or profession. Such persons, however, cannot file returns either using ITR-1 (Sahaj) or ITR-2.
  • ITR-3 can also be filed by an individual or HUF who is a partner in a firm deriving his income by way of any interest, salary, bonus, commission, or remuneration from a firm.

Who is not eligible to use Form ITR-3?

  • This is a very unique form for individual and HUF assessees. Only those not eligible for ITR-1 and ITR-2 can file their returns through ITR-3.

4. Filing of Form ITR-4 (Sugam) – Who can file and who cannot file?

Who is eligible to file income tax returns using ITR-4 (Sugam)?

Returns through ITR-4 form can be filed by an individual or HUF or a firm (other than a limited liability partnership {LLP}) if the total income of the assessee includes:

  • Presumptive income computed as per the provisions of Sections 44AD, 44ADA, and 44AE, when opted for the Presumptive Scheme at 8% assumed income
  • Salary or pension
  • Income from one house property (except brought forward loss under this head)
  • Income from other sources (except winnings from lotteries or horse races or losses under this head)

Who is not eligible to use Form ITR-4 (SUGAM)?

Return in ITR-4 cannot be filed by a person who:

  • Is a resident and ordinarily resident of India and has: any asset, including financial interest in any entity, located outside India; or signing authority in any account located outside India; or income from any source outside India.
  • Has income under the head “capital gains”.
  • Has income from professions as referred to in Section 44AA.
  • Has income from agency business, or commission, or brokerage.
  • Has dividend income above Rs10 lakh taxable u/s 115BBDA.
  • Has unexplained credit or investment taxable at 60% u/s 115BE.
  • Has claimed any relief u/s 90 or 90A or Section 91.
  • Has income from more than one house property.
  • Has agricultural income above Rs.5,000.
  • Has income from speculative business and other specified business.

5. Filing of Form ITR-5 – Who can file and who cannot file?

Who is eligible to use ITR-5?

If you are an association of persons (AOP), body of individuals (BOI), limited liability partnership (LLP) firm, or an artificial judicial person as per Sections 2(31)(vii) and 160(1)(iii) /(iv), local authority, cooperative society, and/or registered society, you must file ITR-5 with your income tax return. ITR-5 is also applicable to those who need to file u/s 139(4A), (4B), (4C), (4D) or (4F).

Who is not eligible to use ITR-5?

If you are an individual, company, HUF, or have to file ITR-7, then ITR-5 is not for you.

Filing of Form ITR-6 – Who can file and who cannot file?

Who is required to file ITR-6?

All limited companies registered under the Companies Act, 1956, and Companies Act, 2013, has to file ITR-6 as part with their income tax return.

Who is not required to file ITR-6?

If the said company has claimed exemption U/S 11 (income from property for religious/charitable purpose), then the company does not have to file ITR-6.

6. Filing of Form ITR-7 – Who can file and who cannot file?

Who is eligible or required to file ITR-7?

  • ITR-7 is filed by companies who need to file u/s 139 (4A), (4B), (4D), (4E), or (4F) for their income tax returns.
  • 139(4A) - for income from property under a trust or other legal representative for charitable/religious purposes.
  • 139(4B) - political parties whose income falls within the taxable income threshold.
  • 139(4C) - anyone belonging to an association of scientific research, news agency, hospital, medical institute, education institute, university.
  • 139 (4D) - universities, colleges, or institutions who are not required to file their tax return or report any losses under this or any other section.

Who is not eligible or required to file ITR-7?

Companies that do not file under the above-mentioned sections do not need to file ITR-7.

Applicability of ITR for Individual and HUF:

TR forms for Individual and HUF
Nature of income ITR 1 (Sahaj) ITR 2 ITR 3 ITR 4
Income from salary/pension Y Y Y Y
Income from one house property (excluding losses) Y Y Y Y
Income or losses from more than one house property - Y Y -
Agricultural income exceeding Rs.5,000 - Y Y -
Total income exceeding Rs.50 lakh - Y Y Y
Dividend income exceeding Rs.10 lakh taxable u/s 115BBDA - Y Y -
Unexplained credit or unexplained investment taxable at 60% u/s 68, 69, 69A, etc. - Y Y -
Income from other sources (other than winnings from lottery and horse races or losses under this head) Y Y Y Y
Income from other sources (including winnings from lottery and horse races) - Y Y -
Capital gains/losses - Y Y -
Share of profit of partner from a partnership firm - Y Y -
Income from presumptive business u/s 44AD/44ADA/44AE - - - Y
Income from business or profession (other than presumptive business) - - Y -
Income from foreign sources or foreign assets or having signing authority in any account outside India - Y Y -
Claiming foreign tax relief u/s 90, 90A or 91 - Y Y -

Acknowledgment

The tax process does not end until the Income Tax Department acknowledges the same. This can be done in one of the four ways:

  • By physically signing the acknowledgment and mailing it to the Income Tax Department in Bengaluru.
  • The acknowledgment can be obtained by digitally signing your returns using a Class-2 digital signature.
  • The acknowledgment can also be authenticated using your registered bank account which is Aadhaar- and PAN-mapped to the same number as your Income Tax records.
  • Finally, the Income Tax Department also permits you to acknowledge the IT Returns by using your Aadhaar and mobile number. This can be done by authenticating an OTP (one-time password) sent to your mobile number.

Few important things to know about filing your ITR forms

  • A PAN card is mandatory for all assessees. In the case of a company filing for returns, the PAN card of the entity as well as those of all the directors is a must.
  • Aadhaar-mapping has now been made mandatory for individual taxpayers. In the case of non-individual taxpayers, the Aadhaar card of the authorized person is required.
  • Personal details like name, mobile number, address, type of employment are all required to be provided.
  • You must furnish your complete bank account details, including the branch information, the IFSC code, and the account number. MICR is not required any longer. Ensure that the name matches the name on the bank account.
  • Self-assessment tax paid, advance tax paid, TCS, and TDS will be updated automatically. These can be accessed via Form 26AS in the login section of the Income Tax website.
  • If you deposited cash during the demonetization process post-November 2016, then the details of the same have to be provided as part of your returns.

Filing the tax return forms, despite not having to claim anything, is a practice each and every taxpayer should duly and diligently follow.

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