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A Beginner’s Guide to Choosing the Correct ITR Form

Submitted by admin on May 17th, 2024

Every tax season, taxpayers face several challenges, the most important of which is choosing the appropriate Income Tax Return form. This choice can produce a significant effect on the accuracy and efficiency of the tax filing procedure. In this blog, we will guide you through different ITR forms and help you figure out what best fits your financial decision.

What are ITR Forms?

The Income Tax Department in India has notified many ITR forms. Each of these forms is designed to serve some specific income sources and taxpayer profiles. The most common ITR forms include:

1. ITR-1 (Sahaj): This form applies to resident individuals having a total income of up to ₹50 lakh, sourced from one house property, salary, and other sources (for example, interest from fixed deposits) up to ₹5,000.
2. ITR-2: This form is applicable for individuals and Hindu Undivided Families (HUFs) having income derived from sources other than profession or business, such as house property, salary, capital gains, and other sources. Non-residents and those with foreign income or assets also choose this ITR form.
3. ITR-3: This form applies to individuals or HUFs with income from a profession or a business, besides other sources of income.
4. ITR-4 (Sugam): This form is for individuals, HUFs, and firms (including Limited Liability Partnerships) having income from a presumptive profession or business, with income up to ₹50 lakh for the profession and total turnover of up to ₹2 crore for the business.
5. ITR-5: This form is for Body of Individuals (BOIs), partnership firms, Association of Persons (AOPs), Limited Liability Partnerships (LLPs), and artificial juridical persons.
6. ITR-6: This form is for companies except for those claiming exemption under section 11 (charitable or religious trusts).
7. ITR-7: This form is applicable for individuals including companies required to furnish returns under sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act, 1961.

Choosing the Correct Form: Factors to Consider 

You should consider a few factors while choosing the correct ITR form. These factors include:

Residency Status: Your residency status (for example, a resident, non-resident, or not ordinary resident) will play a role in determining the applicable ITR form.

Sources of Income: The type of your income including salary, profession/business, house property, capital gains, and other sources will help you make the right decision.

Asset Ownership: If you work as a director in a company or own foreign assets, the ITR-2 form will be applicable to you.

Total Income: Your total income for the financial year, including all sources, will guide you toward identifying the correct ITR form based on income level.

Presumptive Taxation: If you meet the eligibility criteria for the presumptive taxation scheme under sections 44AD or 44ADA, ITR-4 is worth your consideration.

Final Words

Choosing the right ITR form is an important step in your tax filing process. Understanding different ITR forms and considering essential factors ensure accurate and efficient income tax return filing. You should stay informed about the latest requirements and changes in the ITR forms to avoid penalties and potential issues. Seek professional help if you really feel it and control your financial well-being through pragmatic tax planning and compliance.