The tax filing season has begun. It is the time to collect all important documents such as Form 16, bank statements and capital gain statements, in one place and start the process of filing an Income Tax Return (ITR). However, one of the critical points is to choose the right ITR, as the income tax department may consider your return defective asking you to rectify and fill the revised form.
The ITR forms are broadly classified into 6 categories and are chosen basis the nature of income and category of taxpayer whether an individual taxpayer or a company among others.
To avoid hassles at the later stage here are the key points shared by Yeeshu Sehgal, Head of Tax Markets, AKM Global, a tax and consulting firm on how to choose the right ITR form.
Read More: Types of ITR forms in India
ITR-1: It can be filed by a resident and ordinarily resident individual having total income up to Rs 50 lakh from salary, family pension, one residential property, other sources other than lottery winnings and race horses, and agricultural income of up to Rs 5,000. A breakup of the salary income into salary, perquisites, and exemptions shall also be given. A taxpayer is also required to furnish the details of income earned from ‘retirement benefit accounts’ maintained in notified foreign countries such as Canada, the UK, the US and in case of other countries as well in a separate column of other than notified countries. However, an individual who is either director in a company or has invested in unlisted equity shares or in cases where TDS has been deducted u/s 194N (TDS on cash withdrawal more than Rs 1crore) or if income-tax is deferred on ESOP cannot file the return under ITR-1 form.
ITR-2: This is applicable to individuals and HUFs (Hindu Undivided Families) with income above Rs.50 lakh and not having any income from profits and gains of business or profession. The nature of incomes to be disclosed include all incomes as required in ITR-1 and income from more than one house property, including brought forward loss, capital gains or loss on sale of investments, dividend income exceeding Rs 10 lakh and agricultural income exceeding Rs 5,000. This form is also used if one has interest accrued on the provident fund or deferred tax on ESOP.
Read More: How to file ITR-1 online for FY 2021-22
ITR-3: This is applicable to an individual or a HUF who is having income from ‘profits and gains of business or profession’. All the incomes covered under ITR 1 and 2 can be mentioned in this form as well except when an individual is a partner as there is a separate ITR form for the same. In the case of capital gains from the sale of shares or property, this form can be used further, in the case of interest income and dividends as well.
ITR-4 or Sugam: This form is only for Individuals, HUFs and Firms (other than LLP) being a resident having total income up to Rs.50 lakh and having income from business and profession which is computed under presumptive tax regime such as sections 44AD, 44ADA or 44AE. However, this form is not meant for an individual who is either director in a company or has invested in unlisted equity shares or if income tax is deferred on ESOP or has agricultural income of more than Rs.5000.
ITR-5: This is applicable to LLP (limited liability partnership) firms, AOP (association of persons), BOI (body of individuals), artificial juridical person, cooperative society and local authority.
ITR-6: This is for companies, excluding those claiming exemption under Section 11. Section 11 provides an exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purposes in India. This year onwards, several disclosures with respect to the computation of adjusted total income under the Minimum Alternate Tax regime, the applicability of section 92E, and the amount of share in the profit and capital balance as of 31 March needs to be reported.
