Different forms are required to be used for filing your ITR depending on whether you are a resident or not and what are the sources of your income. There are ITR 1, ITR 2, ITR 3 and ITR 4 which can be used by individuals.
This form can only be filed by an individual who is a resident in India and having income upto Rs. 50 lakhs under any of the heads “Salaries”, “Income From House Property” and “Income From other sources”. This can only be used if you own only one house property whether self occupied or let out. It is interesting to note that that even though you can not use this form in case you have any taxable income under the head “Capital Gains” but can still use it in case you have long term capital gains on equity shares and units of equity oriented which is exempt Section 10(38).
Since this ITR can only be used by an Individual, any other tax payer including an HUF can not use it. Likewise anyone having income under any of the heads “Profits and gains of business or profession” or “Capital gains” can not use ITR 1. For those whose taxable income exceeds Rs. 50 lakhs or own more than one house or have income from a source outside India or have agricultural income over Rs. 5000/- or own more than one house property can not use this form. Moreover if you are a resident and own any asset outside India or have any interest in an entity outside India or has authority to sign for any account outside India, you can not use ITR 1. So in case you have invested in shares of foreign company or mutual fund schemes of foreign mutual fund house, you can file your ITR in ITR 1. In case you have any brought forward losses or have losses for the current year which you wish to carry forward, you still can not use ITR 1 So even if you have only one property, bought with home loan, and which is let out you still can not use this ITR if the loss computed under the head “Income from house property’ exceeds Rs. 2 Lakhs, as loss only upto Rs. 2 lakhs can only be set off against other income and any unabsorbed loss has to be carried forward. Note that if you have won any lottery or have any income from a horse race in the last year, you cannot ITR 1. For the tax payers who wish to claim relief in respect of double taxation under Section 90 or 91 also can not use ITR 1.
This form can be used by individuals as well as an HUF unlike ITR 1 which can only be used by an Individual. ITR 2 can be used in case you have income taxable under the head “capital gains” in addition to the income under the head “salaries”, “income from House Property” and “Income from other sources”. Moreover you can use this form if your agricultural income exceeds Rs. 5,000/- and can not use the ITR 1. In case you have any source of income from abroad you can use ITR 2. Resident Individuals who own any asset or interest in any asset located outside India or have any signing authority for any account situated outside India can also use this form as long as they do not have any income under the head “Profits and gains of business or Profession”. One can also use ITR 2 if one wishes to avail rebate for taxes paid in any foreign country on any foreign income earned outside India under Section 90 or 91. In case of brought forward losses or losses for current year under any head except “Profits and gains of business or profession” then also you can use ITR 2. If you own more than one house property or have income from lotteries or horse you can use ITR 2. So Broadly any one who can not use ITR one even if does not have any business income or capital gains and can not use ITR 1 can use ITR 2.
There is only one restriction as to the who can not use ITR 2 and i.e. individual and HUF who has income under the head “Profit and Gains of Business or Profession”.
ITR 3 can be used by any Individual or HUF who has any income taxable under the head ‘Profits and gains of Business or Profession”. This form however can not be used in the cases of business or profession where taxes are required to be paid on presumptive basis for which a separate form is prescribed.
ITR 4 form is commonly called Sugam and can be used by any Individual, HUF or a firm but non an LLP, who are engaged in a business or profession on which tax is required to be paid at predetermine presumptive basis, business income which is taxable at certain predefined basis either as percentage of gross receipt/sales or your income is presumed at fixed amount per income yielding asset owned by you such as commercial vehicles etc. So in case you are owning trucks for carrying goods, this ITR 4 can only be used in case the total number of trucks owned by you is not more than 10 during the year where you have to offer income on fixed basis @ 7500/- per month for each truck owned by you. The form can also be used by a person whose total turnover in business during the year does not exceed an amount of Rs. 2 Crores and is willing to pay tax on net profit @ 8% of the total turnover under Section 44AD. The presumed net profit in case of business gets reduced to 6% in respect of the payments which have been received either through banking channels or through electronic payments including credit card. Even if you engaged in specified professions covered under Section 44ADA, you can also use this form if your gross receipts do not exceed Rs. 50 lakhs in the year and you are willing to offer 50% of your gross professional receipts as your profits and pay tax on it. In case your income is lower than that what is presumed by law, you have to get your accounts audited and get the audit report submitted before submission of the ITR. Moreover in that situation you can not use this form and have to use form no. 3 or 5 depending upon whether you are an Individual or HUF for which ITR form No. 3 is applicable or a firm where ITR form no. 5 is required to be furnished.
The Author is a tax and investment expert and can be reached on [email protected] and @jainbalwant on twitter