“Nothing is certain in this world,
Except for Death and Taxes!”
As rivalling as it sounds, no man has ever been exempted from the brunt of paying taxes since the dawn of mankind, no matter how rich or poor he may be. Income Tax levied directly on an individual/entity’s earnings, has been an instrumental part of the revenue of the Government’s treasury.
An Income Tax Return (ITR) is a form in which the taxpayers provide information and other significant details regarding their income earned and tax applicable, to the income tax department in the said financial year. The ITR form that a taxpayer is eligible to use is primarily decided by the class of taxpayer to which he belongs – such as individuals, HUFs, corporate entities, or trusts and they can choose the ITR based on their entity class and type of total income.
Seven Income-Tax Return (ITR) forms – ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-7 have been notified by the Income Tax Department to date. Until a few years back quite recently, ITR forms were required to be manually filled by hand in pen-and-paper mode and submitted by hand delivery to the concerned ward to which the assessee belongs. This used to unnecessarily delay filings otherwise considered simple and thus make the entire process quite tedious and cumbersome.
Let’s have a look at the various ITR forms and the entities that are required to file the same (for AY 2023-24): –
Also known as SAHAJ, ITR-1 is a simplified version of an Income-Tax Return (ITR) form that contains the bare minimum essentials required for an individual assessee to file his return. Such ITR-1 forms can only be filed by a resident assessee and not by an NRI. This shall include the following income components of an individual: –
ITR-1 cannot be filed by individuals who have a total income exceeding Rs. 50 lakh or agricultural income exceeding Rs. 5000. It cannot be filed by individuals having income from business/professional activities, owning more than one house property, holding directorship in one or more companies, non-residents, earning foreign income or owning a foreign asset, being a resident not ordinarily resident (RNOR) and Non-Resident (NR) if tax is deducted under sec. 194N, if deduction of tax has been deferred on ESOP or if any brought forward loss or other loss needs to be carried forward under any other income head.
ITR-1 forms can easily be filled by assessees themselves using Form-16 (Part-B) provided by their employer.
The ITR-2 form is required to be filled by all the other assessees who do not fit the abovementioned criteria eligible to file ITR-1. This return form is also to be used where such income falls in any of the criteria where the income of another person such as spouse/child is also to be clubbed with the income of the original assessee.
Simply put, individuals and NRIs earning income from a salaried job, rental income from house property, capital gains from the sale of owned assets, or other sources thus specified are required to file Form ITR-2. It is also required to be filed by salaried people who have made profits or incurred damages from stock purchases and sales.
Assessees earning any form of business income or professional receipts are not eligible to fill out this form.
In form ITR-3, assessees are required to disclose their income from a proprietary business or profession. The following classes of persons are deemed eligible to file ITR-3: –
ITR-3 may also include Income from House property, Income from Salary, and Income from other sources as well, in addition to the abovementioned business/professional income. Individuals or HUFs who are not eligible to file ITR-1, ITR-2, and ITR-4; are expected to file ITR-3. Assessees may use ITR-3 for income from jobs, real estate (residential and commercial property), capital gains on assets & investments, dividends from companies, trading income (including presumptive income), and other sources as well.
Also known as SUGAM, ITR-4 is used for assessees subject to presumptive taxation on their earnings, ITR-4 is used to report revenue for a company with a turnover of up to Rs 2 crore subject to tax under section 44AD/44AE. Similarly, ITR-4 can also be used for assessees earning revenue from an occupation with a turnover of up to Rs 50 lakh subject to tax under section 44ADA. ITR-4 can also be used by freelancers working in specified occupations earning a maximum of Rs 50 lakh as gross receipts during the financial year.
The upper limit criterion of Rs 50 lakh also applies to income earned from one house property (excluding the amount of brought forward loss or loss to be carried forward) and income from other sources (excluding income from lottery and race-horses). A presumptive income scheme under sections 44AD, 44AE, and 44ADA is applicable when an individual/entity opts to calculate its income on a presumptive basis, i.e. when the income is presumed at a minimum rate based on a percentage of gross receipts/turnover or based on the number of commercial vehicles owned.
An assessee becomes ineligible to use form ITR-4 in cases specified as the same in ITR-1.
As in the case of the above ITR forms with individuals and HUFs, ITR-5 is used by Limited Liability Partnerships (LLP), partnership firms, Artificial Juridical Persons (AJP), Estate of deceased, Estate of insolvent, Business Trust and Investment Funds, Association of Persons (AOP) and Body of Individuals (BOI) to disclose profits from their businesses and professions, as well as other sources of income.
ITR-6 is a tax return used by business entities to report revenue from industry or occupation, as well as all other forms of income. This form is to be used by companies other than those claiming exemption under section 11. (Income from property held for charitable or religious purposes)
ITR-7 is a tax return required to be filed by the following entities: –
a. Section 139(4A): – Required to be filed by an assessee in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes specified.
b. Section 139(4B): – Required to be filed by a political party if the total income (without giving effect to the provisions of section 139A) exceeds the basic maximum amount not chargeable to income tax.
c. Section 139(4C): – required to be filed by an assessee who is a Scientific Research Association, a News agency, an association/institution referred to in section 10(23A) & 10(23B), and by Funds/institution/university/other educational institution/any hospital or other medical institution.
d. Section 139(4D): – required to be filed by every university, college, or other institution, which is otherwise not required to furnish a return of income or loss under any other provision of this section.
e. Section 139(4E): – must be filed by every business trust which is not required to furnish a return of income or loss under any other provisions of this section.
f. Section 139(4F): – must be filed by any investment fund referred to in section 115UB and which is not required to furnish a return of income or loss under any other provisions of this section.
Another form, ITR-U (U for Updated) was introduced by the Union government in Budget 2022 and is available for up to 2 years from the end of the relevant assessment year. This form allows a taxpayer to report any income he/she may have failed to in the previous return. Whereas ITR-V (V for verification) is a single-page document received by the assessee when an ITR is filed online without using a digital signature which needs to be verified and submitted electronically to the Income Tax Department.