Types of ITR Forms and Which One You Need to File

When it comes to filing your income tax return (ITR), it’s crucial to know which form is appropriate for your specific needs. The Income Tax Department provides various types of ITR forms, each catering to different categories of taxpayers and income sources. Understanding the types of ITR forms available and determining which one you need to file is essential for accurate and compliant tax reporting.

What Are ITR Forms?

ITR is an acronym for Income Tax Return. Salaried individuals and businesses have to disclose their income details and file for taxes as mandated by the Income Tax Department. In ITR forms, eligible people share the details of the income earned during that financial year and the quantum of tax that applies to the earnings.

Usually, these forms are made available in April. However, in 2023, the forms were available from February itself. 

Types of ITR 

According to the Income Tax Act, there are seven types of ITF forms: ITR1 to ITR 7

The taxpayers need to find out which category they belong to, to determine which ITR form they need to file. 

ITR 1 Form (Also Known as Sahaj)

ITR 1 form for salaried individuals applies when the individual’s salary includes:

• Earnings through salary or pension. The gross receipts of a salaried individual need to be worth INR 10 lakh or more. 
• Income by renting out only one home
• Earnings from sources like the lottery etc
• Income from agriculture (only up to INR 5000)

ITR1 form is not to be used in situations where:

• Individuals whose income exceeds INR 50 lakh
• If the taxpayer has capital gains to which taxes apply
• If the income is for the director of a company
• Investing in unlisted equity shares during that financial year
• Owning foreign assets, including any account outside of India
• If you are a non-resident Indian (NRI) or a resident not ordinarily resident (RNOR) 
• Having any kind of foreign income
• If there is a tax deduction under Section 194N
• If payment or tax deduction has been deferred on ESOP
• If there is a carry forward of loss under any income head

ITR2 Form

This ITR form is for salaried individuals and Hindu Undivided Family (HUF), in the following situations:

• Earnings through salary or pension. Total income has to exceed INR 50 lakhs.
• Earnings through renting out a house
• Any income from sources like winning a lottery etc 
• Income of an individual director of a company
• Investments in unlisted equity shares during the financial year
• If the taxpayer is either a Non-Resident of India (NRI) or a Resident Not Ordinarily Resident (RNOR) 
• Earnings from capital gains
• Having a source of foreign income
• Income from agriculture that surpasses INR 5,000
• Owning any asset outside of India, including any account located internationally
• For tax deductions under Section 194N
• For any payment or deduction of tax deferred on ESOP
• If there is any loss that is brought forward or a loss that needs to be carried forward in any income category

This form is also to be used if the income of a spouse or child needs to be conflated with that of the person being assessed for income tax (applicable to the conditions stated above). 

ITR 2 form does not apply to:

• Anyone whose income came from a business

Also Read: TDS on Salary: How to Calculate Deductions & Exemptions

ITR 3 Form

The ITR 3 form is meant for a salaried individual and a HUF if their income comes from the given sources:

• A proprietary business or profession
• Individual director of any company
• Investments in unlisted equity shares during the financial year
• Income from any house property, salary or pension and earnings from sources like the lottery or horse racing
• Income of a partner in a firm
• Any salaried individual or HUF who cannot file ITR 1, ITR 2 and ITR 4 is eligible for ITR 3.

ITR 4 Form (Also Known as Sugam)

ITR 4 forms are filled out by salaried individuals, HUFs and Partnership Firms (but not Limited Liability Partnerships or LLPs). This form is applicable only when their income meets these criteria:

• Earnings come from a business in accordance with the Presumptive Income Scheme (Section 44AD or Section 44AE)
• Earnings from a profession in accordance with the Presumptive Income Scheme (Section 44ADA)
• Salary or pension up to INR 50 lakh
• Income from other sources (excluding the lottery or from horse racing), which does not exceed INR 50 lakh
• Income earned from one house property but which doesn’t exceed INR 50 lakh.

Sidenote: People who work as freelancers, if they derive their income through the sources mentioned above, are also eligible for the Presumptive Income Scheme as long as their gross receipts do not surpass INR 50 lakh.

ITR 4 is not meant for:

• Income that comes from more than one house properties
• Income that exceeds INR 50 lakh
• Income from a foreign asset
• Any source of income from outside of India
• Having any account located outside of India
• Investments in any unlisted equity share during the financial year
• Income of the Director of a company
• Being a Non-Resident Indian (NRI) or a Resident Not Ordinarily Resident (RNOR) 
• If an individual is assessable with regard to the income of another individual when tax is deducted from the other person.
• Payment or tax deduction deferred on ESOP
• Any loss brought forward or loss carried forward under an income category

ITR 5 Form

ITR 5 Form is for the below-mentioned categories:

• LLPs (Limited Liability Partnerships)
• Local authorities
• BOIs (Body of Individuals)
• Co-operative societies
• Firms
• Artificial judicial persons
• Estate of the deceased and insolvent
• AOPs (Association of Persons)
• Investment funds
• Business trusts

ITR 5 is not applicable for these categories:

• A company
• An entity filing ITR 7 form
• HUFs
• Individuals filing ITR 1 form
• Taxpayers with earnings from capital gains

ITR 6 Form

This ITR form is for businesses filing income tax returns. It is applicable to all businesses except those that request exemption citing Section 11. An exemption is granted to taxes on income from property meant for charitable and religious uses.

Barred from using ITR6 are:

• Salaried individuals and HUFs
• Income derived from capital gains 
• ITR 7 Form

This ITR form is for salaried individuals and businesses that are to file their returns under any of these sections:

• Section 139(4A): for income from property that is under a trust or legal obligation and is utilised for charitable or religious purposes.
• Section 139(4B): for political parties when their income exceeds the amount beyond which taxes apply. 
• Section 139(4C): This is for the following entities:
  • News outlets
  • Research organisations dedicated to science
  • Institutions under section 10(23B) and section 10(23A)
  • Hospital or medical set-up
  • And educational institutions and universities 
• Section 139(4D): for any educational institute that doesn’t have to provide a return on income or loss as per any other provision under this act.
• Section 139(4E): this is for a business that doesn’t have to provide a return on income or loss as per any other provision under this act.
• Section 139(4F): for any investment fund under Section 115UB and it doesn’t have to provide a return on income or loss as per any other provision under this act.

ITR 7 is not for:

• Income derived from capital gains
• Salaried people or HUFs filing ITR 1 form or entities using ITR 5 form. 

Also Read: Income Tax e-Filing – Complete Procedure for ITR

Conclusion

ITR forms are the foundation of the Indian taxation system. These forms give the Income Tax Department necessary information on the different salaried individuals, HUFs and businesses in the country. Everyone with a source of income needs to have a sound knowledge of ITR forms so that they can act as law-abiding members and contributors to the country’s economy.