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Income Tax Return (ITR) is a form in which the taxpayer provides the details of income earned by him and the tax payable on such income.

The Income Tax department has notified 7 ITR forms i.e. ITR 1(Sahaj), ITR 2, ITR 3, ITR 4(Sugam), ITR 5, ITR 6 and ITR 7. The taxpayer shall, every year, file his income tax return on or before the due date using the ITR form applicable to him. The applicability of the ITR form depends on the sources of income, amount of income earned and the category of the taxpayer like individual, HUF, Company etc.

Who should file an ITR?

It is mandatory to file Income Tax Return if any of the conditions mentioned below are satisfied-

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

Which ITR Should You File for FY 2020-21

Particulars

Amount

For individuals below 60 years

Rs 2.5 Lakh

For individuals above 60 years but below 80 years

Rs 3 Lakh

For individuals above 80 years

Rs 5 Lakh

  1. If you want to claim an income tax refund from the department.
  2. If you have earned from or have invested in foreign assets during the FY.
  3. If you wish to apply for visa or a loan
  4. If the taxpayer is a company or a firm, irrespective of profit or loss.

Also, you are mandatorily required to file ITR even if your income is below the basic exemption limit but you meet one of the following conditions:

  1. Have deposited an aggregate amount of more than Rs.1 crore in one or more current bank accounts; or
  2. Have incurred an aggregate expenditure of more than Rs 2 lakh on foreign travel for self or any other person; or
  3. Have incurred an expenditure aggregate of more than Rs.1 lakh towards electricity consumption.

Which ITR to File?

Let us now discuss which ITR is applicable to whom based on the conditions laid down.

1. ITR 1 (Sahaj)

ITR 1 is for a resident individual whose total income for the A.Y 2021-22

  • Income from Salary/ Pension; or
  • Income from One House Property (excluding cases where loss is brought forward from previous years); or
  • Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
  • Agricultural income up to Rs.5000.

Who cannot use ITR 1 Form?

  • Total income exceeding Rs.50 lakh
  • Agricultural income exceeding Rs 5000
  • Income includes taxable capital gains
  • If you have income from business or profession
  • Having income from more than one house property
  • If you are a Director in a company
  • If you have had investments in unlisted equity shares at any time during the financial year
  • Owning assets (including financial interest in any entity) outside India if you are a resident, including signing authority in any account located outside India
  • If you are a resident not ordinarily resident (RNOR) and non-resident
  • Having foreign assets or foreign income
  • If you are assessable in respect of the income of another person in respect of which tax is deducted in the hands of the other person.
 

2. ITR 2

ITR 2 is for an individual or a Hindu Undivided Family (HUF) whose total income for the AY 2021-22 includes

  • Income from Salary/Pension; or
  • Income from House Property; or
  • Income from Other Sources (including Winnings from Lottery and Income from Race Horses).

(Total income from the above should be more than Rs 50 Lakhs)

  • If you are an Individual Director in a company
  • If you have had investments in unlisted equity shares at any time during the financial year
  • Being a resident not ordinarily resident (RNOR) and non-resident
  • Income from Capital Gains; or
  • Foreign Assets/Foreign income
  • Agricultural income more than Rs 5,000

Further, in a case where the income of another person 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.

Who cannot use this Return Form?

This ITR Form should not be used by an individual whose total income for the AY 2021-22 includes Income from Business or Profession.

3. ITR-3

The ITR-3 Form is to be used by an individual or a Hindu Undivided Family who have income from proprietary business or are carrying on any profession. The persons having income from the following sources are eligible to file ITR 3

  • Carrying on a business or profession
  • If you are an Individual Director in a company
  • If you have had investments in unlisted equity shares at any time during the financial year
  • Return may include income from House property, Salary/Pension and Income from other sources
  • Income of a person as a partner in the firm

4. ITR-4 or Sugam

The ITR- 4 is applicable to individuals and HUFs, Partnership firms (other than LLPs), having total income not exceeding Rs.50 lakhs in the financial year and this total income is earned from the following heads given below

  • Business income according to the presumptive income scheme under section 44AD or 44AE
  • Professional income according to presumptive income scheme under section 44ADA
  • Income from salary or pension
  • Income from one house property (excluding the amount of brought forward loss or loss to be carried forward)
  • Income from other sources (excluding income from lottery and race-horses)

Note- Any individual earning income from the above-mentioned sources as a freelancer can also opt for a presumptive scheme if their gross receipts are not more than Rs.50 lakhs.

Presumptive income scheme under sections 44AD, 44AE and 44ADA is when an individual or an entity opts to derive its income on a presumptive basis, i.e. when the income is presumed at a minimum rate based on a percentage of gross receipts / gross turnover or based on ownership of commercial vehicles. However, if the business turnover exceeds Rs 2 crore, the taxpayer will have to file ITR-3.

 

Who cannot use ITR 4 Form?

  • If your total income exceeds Rs 50 lakh
  • Having income from more than one house property
  • If you have any brought forward loss or loss to be carried forward under any head of income
  • Owning any foreign asset
  • If you have signing authority in any account located outside India
  • Having income from any source outside India
  • If you are a Director in a company
  • If you have had investments in unlisted equity shares at any time during the financial year
  • Being a resident not ordinarily resident (RNOR) and non-resident
  • Having foreign assets or foreign income
  • If you are assessable in respect of the income of another person in respect of which tax is deducted in the hands of the other person.

5. ITR-5

ITR 5 is for firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.

6. ITR-6

For Companies other than companies claiming exemption under section 11 (Income from property held for charitable or religious purposes), this return has to be filed electronically only.

7. ITR-7

For persons including companies required to furnish returns under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F).

  • Return under section 139(4A) is required to be filed by every person 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.
  • Return under section 139(4B) is required to be filed by a political party if the total income without giving effect to the provisions of section 139A exceeds the maximum amount, not chargeable to income-tax.
  • Return under section 139(4C) is required to be filed by every –
    • Scientific research association;
    • News agency;
    • Association or institution referred to in section 10(23A);
    • Institution referred to in section 10(23B);
    • Fund or institution or university or other educational institution or any hospital or other medical institution.
  • Return under section 139(4D) is required to be filed by every university, college or other institution, which is not required to furnish return of income or loss under any other provision of this section.
  • Return under section 139(4E) must be filed by every business trust which is not required to furnish return of income or loss under any other provisions of this section.
  • Return under section 139(4F) must be filed by any investment fund referred to in section 115UB. It is not required to furnish return of income or loss under any other provisions of this section.

Below is the Tabular representation of the ITR Applicability

Form

Applicability

Salary

Exempt Income

Capital Gains

House Property

Business Income

Other Sources

ITR 1

Resident Indian individuals and HUFs

Yes

Yes. However, income from agriculture cannot be more than Rs.5,000.

No

Yes. However, it can be only for one house property.

No

Yes

ITR 2

HUFs and individuals

Yes

Yes

No

Yes

No

Yes

ITR 3

Partner in a firm, HUF, or individuals

Yes

Yes

No

Yes

Yes

Yes

ITR 4

Firm, HUF, or individual

Yes

Yes. However, income from agriculture cannot be more than Rs.5,000.

Yes

Yes. However, it can be only for one house property.

Only for business income that is presumptive

Yes

ITR 5

LLPs or Partnership Firms

No

Yes

No

Yes

Yes

Yes

ITR 6

Companies

No

Yes

No

Yes

Yes

Yes

ITR 7

Trusts

No

Yes

No

Yes

Yes

Yes

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