Who can use ITR 1

Form ITR 1 popularly known as Sahaj is used by significant majority of tax payers. I am writing this article to help the taxpayers understand who can file it and who cannot.

Who can submit ITR 1

ITR 1 can be used by an individual who is resident of India for tax purposes only. Moreover all the taxpayers who have income only under any of or all three heads of income i.e. “Salaries”, “Income From House Property” and “Income From other sources” can use ITR 1. Since pension is taxed as salary, all the retired persons who do not have any income under the head “Capital Gains” or “Profits and gains of business or profession” can also use ITR 1. In case income of some other person is required to be clubbed in your income, you can use  this form only if the nature of the income to be clubbed falls under any of the three heads of income enumerated above.

Who cannot use ITR 1

HUFs cannot use ITR 1 even if their income does not include any capital gains or profits and gains of business or profession. In case you are a non resident for income tax purpose, you cannot use ITR 1. Likewise in case you own more than one property, whether self occupied or let out, you cannot use ITR 1.

All the individuals who hold directorship in any company or have investments in shares of any unlisted Company also cannot use ITR 1. Likewise all those who have any signing authority in respect of any account outside India or have asset or income from outside India also cannot use this form. In case you have even a very small balance in a bank account outside India even if it is an Indian bank or have invested in shares of foreign company or foreign mutual schemes, you cannot use this simple form ITR 1..

Moreover there is restriction based on income levels and in case your total income after all the deductions and exemption exceeds 50 lakhs, you cannot use this form because in case your income exceeding 50 lakhs, you are required to submit details of certain assets and liabilities which are not covered under ITR 1.

In case you are an agricultural income over Rs. 5,000/- you are ineligible to use this form. In case you have won any lottery during the year, you can not use this ITR form. Likewise all those who own and maintain race horses are not eligible to file ITR 1. In case you have income under the head “Income from other sources” and wish to claim deduction against such income, you cannot avail the facility to use this simple ITR 1 except in case of family pension for which you are entitled to claim 1/3 of the pension subject to a maximum of Rs. 15,000/-

You cannot also use ITR even if you have any brought forward losses which you wish to set off against the current income or have losses in current year and wish to carry forward the same in future.

I have come across cases where retired people who are retained as consultant have, used ITR 1 which in my opinion is wrong because the consultancy charges received cannot be taxed under the head “Income From Other Sources” as the activity of rendering consultancy is not one off a transaction and the consultancy is an activity carried out in systematic manner and is in the nature of professional income which has to be taxed under “Profits and Gains of Business or Profession.” For which you can either use ITR 3 or ITR 4 if you are eligible to avail the benefit of presumptive taxation.

I am sure the above discussion will help you in deciding whether you can use ITR 1 or not.

The writer is a tax and investments expert and can be reached on jainbalwant@gmail.com