Income tax return forms: Here’s Your Definitive Guide to Various ITR Forms

Income tax return forms: November month makes one feel that the end of the year is close and it is time to start afresh for the new one soon. Everyone around sets their own countdown timer so that they can close all of their pending matters, targets and resolutions. With this comes the last minute hassle of filing ITR forms. Anyways the Government has extended the deadline to 31st December, 2020 and 31st January, 2021 for taxpayers. Mr. Rahul Jain, Head of Edelweiss Wealth Management guides taxpayers through the last minute hassle of filing various ITR forms. With proper classification, he has mentioned the 7 forms which needs to be filled as per the purpose.

The extension of income tax return filing for FY 2019-20, was one among the several relief measures announced by the Government, given the COVID-19 pandemic. The date was extended to November 30, for all taxpayers versus the usual deadline of July 31.

A common question among all taxpayers, is about the form that they should use while filing their respective returns. Note that there are seven types of ITR forms, whose applicability depends on the type of taxpayer and the nature of income earned.

Edelweiss Wealth Management highlights all you need to know about these forms to understand which one you should use to file your returns.

ITR 1
 
ITR 1 or Sahaj is the simplest of ITR forms meant for resident individuals whose total annual income is less than ₹50 lakhs. Also, if your source of income is salary/pension, one house property, or other sources such as interest income and agricultural income up to ₹5000, then you need to file your returns in ITR 1.
However, note that if your total income exceeds ₹50 lakhs and you have taxable capital gains, have income from more than one house property, then you can’t use ITR 1. Also, if you are the Director of any company and have foreign assets, you can’t use the Sahaj form.
In the re-issued ITR 1 form, you can now give details of tax-saving investments made between April 1 - June 30, 2020. It’s captured in Schedule D1 – Details of Investment. Note that for the investment made during this period, you can claim a deduction in the previous financial year.

ITR 2
 
This ITR form is applicable for individuals and Hindu Undivided Families (HUFs) without business income but not eligible for ITR 1. It means if you have income from capital gains, foreign assets and an agricultural income of more than ₹ 5000 then you need to use this form to file your returns.
You can also use this form, if you are the individual Director of a company or have had investments in unlisted equity shares during any time of the financial year. However, note that if your income is from business or profession, you can’t use this form.

ITR 3
 
Individuals or Hindu Undivided Families with income from proprietary business or profession are eligible to file their returns using ITR 3. Some of the eligibility criteria match those for ITR 2. The form may include income from house property, salary/pension, capital gains and income from other sources.
Most of the eligibility criteria for ITR 3, is the same as that of ITR 2. For AY 2020-21, i.e. FY 29-20, some major changes have been introduced in ITR 3. You need to disclose the amount of cash deposit above ₹1 crore in current accounts with the bank or expenditure incurred above ₹ 2 lakhs on foreign travel or expenditure above ₹ 1 lakh on electricity.
Also, if you are an individual director of the company or hold on to unlisted equity investments then you need to disclose the type of company.

ITR 4

ITR 4 or Sugam is applicable for individuals, HUFs, partnership firms (other than LLPs) with total income up to ₹50 lakhs and having it from small business or profession. This form is also applicable for tax payers opting for presumptive income schemes under section 44AD, 44ADA and 44AE under the Income Tax Act, 1961.
However, if there’s income from capital gains then ITR 4 can’t be used. Also, you can’t use ITR 4 if the total income exceeds ₹50 lakhs or you are the Director of a company. The form is also not applicable if you have had investments in unlisted equity shares at any time during the financial year, have income from any source outside India and own any foreign assets.

ITR 5, ITR 6 and ITR 7
 
All categories of taxpayers - other than individuals and HUFs- including companies and charitable trusts/institutions are required to use ITR 5. ITR 5 is applicable for partnership firms, LLPs, Association of Persons and Body of Individuals for whom no other form is applicable.
Companies who don’t claim exemption under section 11 of the Income Tax Act, 1961 use ITR 6 to file returns. Companies who claim under exemption under section 11 are those who have income from property held for religious or charitable purposes.
For those furnishing returns under section 139 (4A), section 139 (4B), 139 (4C) and 139 (4D) need to use ITR 7. These include political parties, scientific return institutions, news agencies, university, college, etc.

In Conclusion: 

Now that you know the various ITR forms, be mindful of filling them up with utmost caution and diligence. Furnish accurate details and file your returns honestly to avoid getting notices from the tax department.