Income Tax Returns (ITR)- Comprehensive Guide

What is ITR:

ITR stands for Income Tax Return. The Income Tax Act, 1961 governs all the ITR forms and procedures to be followed. This article gives an in-depth understanding of the ITR definition and types of ITR forms.

Income Tax Return (ITR) is a form in which the taxpayers file information about their income earned and tax applicable to the income tax department. The department has notified 7 various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till today.

Who has to file ITR:

It is mandatory to file income tax returns (ITR) in India if any of the conditions mentioned below apply to you:

1. If your gross total income is more than the basic exemption limit as specified below-

(The above limits are only for a resident individual. For a non-resident- BEL is 2.5 Lakhs)

2. If you have more than one source of income like house property, capital gains, etc.

3. If you want to claim an income tax refund from the department.

4. If you have earned from or have invested in foreign assets during the FY.

5. If you wish to apply for a visa or a loan

6. You want to carry forward a loss under a head of income

7. If the taxpayer is a company or a firm, irrespective of profit or loss.

Penalties for Late filing of income tax return

1. According to Section 234F,

• if you fail to file your returns on time, you have to pay a penalty of up to Rs 10,000.
• If the Income Tax returns are filed after the return filing deadline but before December 31, the penalty would be Rs 5,000.
• If the returns are filed on or after January 1, the penalty goes up to Rs 10,000.

However, if the taxpayer’s total income is less than Rs 5 lakh, the amount of penalty will be a maximum of Rs 1,000, a move meant to provide relief to the small taxpayer.

2. If you are late in filing your taxes, you cannot carry forward your losses (except loss from house property) from ‘Capital Gains’ or the ‘Profits and Gains of Business/ Profession’.

3. If you are late in filing your taxes, you also have to pay interest on unpaid tax.

4. Further, if you are eligible for a refund and interest on that refund, you will not be receiving any interest on the refundable amount if you do not file your tax returns on time.

Different types of ITR forms

In total, there are broadly 7 types of ITR forms available for a taxpayer to file his taxes. However, only the following forms are to be taken into consideration by individuals when filing returns as per the Central Board of Direct Taxes in India:

• ITR-1
• ITR-2
• ITR-3
• ITR-4

The following income tax return forms are applicable only for companies and firms:

• ITR-5
• ITR-6
• ITR-7

ITR-1:

ITR-1 or Sahaj can be used by the below category of resident Indians.

• Salary/pension income
• Income earned from other sources excluding – lottery, horse race, etc
• Payment received for a single house property with certain exclusions.
• Income from Other sources (including winnings from lottery and income from horse race)
• Agricultural income of less than Rs 5000.

There are limitations to who can and cannot opt for this form. For example, individuals with income from foreign assets cannot file ITR 1 form.

ITR-2 :

Individuals and HUF with the below criteria can file ITR 2 form –

• Every income from ITR 1 > 50Lakhs
• Capital gains
• More than one house property
• Foreign Income/ Foreign Asset
• Agricultural income of more than Rs 5000
• Holding directorship in a Company
• Investments in unlisted equity shares
• Being a resident not ordinarily resident (RNOR) and non-resident

Clubbing– Further, in a case where another person’s income, like one’s spouse, child, etc., is to be clubbed with the income of the assessee, this Return Form can be used where such income falls in any of the above categories.

ITR-3

Individuals or HUF with income from the below sources can file ITR 3 form

• Every income from ITR-2
• A business or profession
• If you are an individual director in a company
• Income received as a partner in a firm
• Investments in unlisted equity shares
• Income from salary/pension/house property/other sources

ITR-4

Individuals, HUFs, Partnership firms having income from business and profession can opt for ITR 4 form.

Moreover, those who have chosen for presumptive income scheme under Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act can also file using the ITR4 form.

Turnover exceeding Rs 1 crore will have to be filed under ITR 3 form.

ITR-5

The ITR-5 form is used only by the following bodies to file income tax returns:

• Firms
• Limited Liability Partnerships
• Body of Individuals
• Association of Persons
• Co-operative societies
• Artificial Judicial Persons
• Local authorities
• Business Trust
• Investment Fund

ITR-6

ITR 6 form can only be filed electronically by companies, excluding companies claiming an exemption under Section 11, which is income from a religious or charitable property.

ITR-7

Companies filing the return under the below sections of the Income Tax Act can file using ITR-7:

Section 139(4A): Individuals holding property for charitable or religious purposes

Section139(4B): Political parties

Section 139(4C): Institutions or associations mentioned under section 10(23A),10(23B), medical institutions, news agencies, educational institutions, agencies involved in scientific research

Section 139(4D): Under this section, colleges, and universities, or any such institution where revenue and losses are not required to be reported as per the rules laid under this section of the Act.