IPR Related Services: Everything You Should...
17 Feb 2025
Filing your Income Tax Return (ITR) is an important annual obligation for many taxpayers in India. The Central Board of Direct Taxes (CBDT) regularly publishes various ITR forms, each suited to a specific category of taxpayers and types of income. For the Financial Year (FY) 2024-25, corresponding to Assessment Year (AY) 2025-26, there are seven forms—ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. This guide will help you understand which form applies to your situation and why filing on time matters.
An Income Tax Return is a form where individuals, Hindu Undivided Families (HUFs), firms, companies, and other entities report their earnings and the taxes due on those earnings to the Income Tax Department. By filing an ITR, taxpayers also provide details of tax-saving investments, deductions claimed, and other relevant information about their financial activities.
Key points about an ITR:
Filing an ITR is not merely a statutory requirement. Here are some significant reasons why you should do it:
Claim Refunds
If you have paid more tax than your liability, you can get a refund only by filing an ITR. This often happens when TDS (Tax Deducted at Source) is higher than the actual tax payable.
Record of Financial Health
An ITR is a documented proof of your income. It helps in keeping track of your earnings, and it can be used as a valid income proof for several financial transactions.
Visa and Loan Applications
Many foreign consulates ask for ITR receipts when you apply for a visa. Banks and other financial institutions also often request ITR details before approving loans or credit facilities.
Carry Forward of Losses
If you have a business or capital loss, you can carry it forward and offset it against future profits only if you file your return by the due date.
Legal Compliance
Companies and firms must file an ITR regardless of profit or loss. For individuals, not filing an ITR when required can lead to penalties and legal notices.
You must file your ITR if your gross total income exceeds the basic exemption limit. The exemption limits differ under the old and new tax regimes.
Even if your income is below the basic exemption limit, you must file an ITR if any of the following conditions apply:
Large Deposits in Current Bank Accounts
If the total deposits in one or more current accounts exceed ₹1 crore during the financial year, filing is mandatory. (No such rule is specified for post office current accounts.)
Substantial Deposits in Savings Bank Accounts
If the total deposits in one or more savings accounts exceed ₹50 lakh.
High Foreign Travel Expenditure
If you spend more than ₹2 lakh on foreign travel (this can be for yourself or for someone else).
High Electricity Bills
If your electricity consumption is more than ₹1 lakh during the previous year.
TDS or TCS Exceeds ₹25,000
If the total TDS (tax deducted at source) or TCS (tax collected at source) for you crosses ₹25,000 in a year. For senior citizens (age 60 or above), the limit is ₹50,000.
Business Turnover More than ₹60 Lakh
If you run a business and your turnover or gross receipts surpass ₹60 lakh in a financial year.
Professional Receipts More than ₹10 Lakh
If you are a professional (doctor, lawyer, consultant, etc.) and your gross receipts exceed ₹10 lakh.
While certain categories must file, there can be exemptions. For instance, individuals with incomes below the basic exemption limit are generally not required to file. Non-residents or certain foreign entities may also be exempt if they have no income arising in India. However, the central government has not announced any additional special exemptions as of now.
Examples of those who might be exempt:
If you do not fall under any mandatory filing criteria and your total income is below taxable limits, you can still consider filing an ITR as a good financial practice. It helps maintain official records of your earnings and can be helpful for future reference in case of any queries or requirements.
The Income Tax Department has specified seven forms for various categories of taxpayers. Knowing which one applies to you depends on factors such as your income source, total earnings, and your legal status (individual, HUF, company, etc.).
Who can use ITR-1?
Who cannot use ITR-1?
If you qualify for ITR-1, it is often the simplest form to use. However, you must make sure you meet all conditions.
Who can use ITR-2?
ITR-2 is appropriate if you do not have income from business or profession, but your total income can exceed ₹50 lakh. If you have capital gains (short or long term) or foreign financial interests, ITR-2 is typically the right choice.
Who cannot use ITR-2?
Who can use ITR-3?
ITR-3 is suitable when you are not eligible to file ITR-1, ITR-2, or ITR-4 because of business or professional income that is not covered by the presumptive tax scheme.
Who can use ITR-4?
This form simplifies reporting for small businesses and professionals who use the presumptive scheme, where you report income as a fixed percentage of turnover or receipts.
Who cannot use ITR-4?
Who can use ITR-5?
If your entity is not a company but functions as a firm, LLP, AOP, or BOI, ITR-5 is generally the correct form.
Who can use ITR-6?
Companies required to file returns electronically should use ITR-6. This return covers all income sources for a company, including profits and gains from business, capital gains, and income from other sources.
Who can use ITR-7?
ITR-7 is designed for trusts, not-for-profit organizations, political parties, and institutions that fall under these sections and need to report their income and any applicable exemptions.
Choosing the right form is essential to ensure your return is valid and processed efficiently:
Identify Your Income Sources
List all your income sources—salary, house property, capital gains, business or professional income, and other sources like interest or dividends.
Determine Your Category
Find out if you are an individual, HUF, partnership firm, LLP, company, or trust.
Check Annual Income
Your total annual income may determine if you can use a simpler form (like ITR-1 or ITR-4) or a more comprehensive form (like ITR-2 or ITR-3).
Look for Specific Inclusions
Each factor narrows down your form choice.
Review Exclusions
Each ITR has a list of exclusions that disqualify you from using that form. Make sure none of these apply to you. For instance, ITR-1 excludes anyone with capital gains or income above ₹50 lakh.
Seek Expert Help if Needed
If you’re unsure, it may help to consult with a chartered accountant or use a reliable tax filing platform. Accuracy is crucial because incorrect form usage might lead to a defective return notice.
The Income Tax Department provides all ITR forms on its official portal. For convenience, you can also find direct links on various tax-filing websites.
(These are indicative references; always verify you are accessing the official Income Tax website to avoid any outdated or incorrect forms.)
Filing the correct Income Tax Return form is vital for accurate tax computation and compliance with Indian tax regulations. Your choice of form hinges on various factors such as income source, income level, and your entity type. Submitting the right form also helps you receive refunds quickly and prevents future complications like notices from the tax department or interest and penalties for late or incorrect filings.
Pay close attention to deadlines. Typically, individual taxpayers must file by July 31 of the assessment year, while businesses requiring audits have a different due date. If you expect a refund or have foreign assets or high-value transactions, filing early ensures smooth processing and avoids last-minute rushes.
By understanding which form to use, you not only fulfill a legal requirement but also set a clear financial record for yourself or your organization. If in doubt, consider professional guidance. Whether you have a simple salaried income or a complex array of business and foreign transactions, there’s a specific ITR form that fits your needs.
1. If I incurred a loss during FY 2023-24, do I still need to file an ITR?
Yes. If you plan to carry forward or offset that loss in future years, you must file your ITR before the due date. Failure to do so means you lose the chance to adjust the loss against future profits.
2. Who can opt for the presumptive taxation scheme in ITR-4?
Small businesses with a turnover up to ₹2 crore can choose the Section 44AD scheme, professionals with receipts up to ₹50 lakh can select Section 44ADA, and those operating under Section 44AE (transporters) can file under ITR-4. In these cases, income is presumed as a percentage of turnover or receipts.
3. What documents should I attach with ITR-1?
Normally, you do not need to attach any documents (like Form 16 or investment proofs) with your return. However, it’s important to keep these records safe in case the tax department requests them in the future.
4. Which form should I file if I have capital gains from selling shares or property?
If you have any form of capital gains—long-term or short-term—you cannot use ITR-1 or ITR-4. Depending on whether you have other business or professional income, you may need to file ITR-2 (if you have no business income) or ITR-3 (if you do have business or professional income).
5. Which ITR should a salaried individual usually file?
A salaried individual without complex sources of income (no capital gains, foreign assets, or business/profession) can typically file ITR-1, provided total income is up to ₹50 lakh and not more than one house property is involved. If the individual’s income exceeds these limits, or if capital gains or foreign assets exist, they might have to file ITR-2 or ITR-3.
by Corporate Advisory, TRUSTLINK
