Decoding ITR forms: Which one should you use to file your taxes?

Tax filing season is here. On the income tax website there are various income tax forms available to file your returns. Here, we take a look at the different forms available, and the one you should choose to file your returns.

“The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned, and the category of the taxpayer like individuals, Hindu Undivided Family (HUF), company, etc,” says Archit Gupta, founder, and CEO, Clear, a fintech company.

ITR-1 (Sahaj)

You can use this form if you have a total income of up to ₹50 lakh through salary, one house property, and other sources like interest. You can also have agricultural income of up to ₹5000. “However, it will not apply to those who are directors in a company, or own unlisted equity shares.

ITR 1 does not apply to you for other conditions as well. “If you have income from business or profession, have income under capital gain, or have any foreign income, ITR 1 does not apply to you,” says Gupta.

ITR-2

You can use this form if you have income from salary/pension, and from more than one house property. You can also have agricultural income of more than ₹5,000, and have foreign income or income from capital gains. The total income can be more than ₹50 lakh.

“This form can be used by individuals, and HUF who are not eligible to file ITR-1, and whose income is not chargeable under head business or profession,” says Suneel Dasari, founder and CEO, EZtax.in, a tax portal.

Agrees Gupta, “This return form should not be used by an individual whose total income for the AY 2023-24 includes Income from business or profession. For declaring these types of income you may have to use ITR-3 or ITR-4.”

ITR-3

ITR-3 is meant for individuals, and HUFs having income from a proprietary business, or profession, or income from partnership firm.

The form also applies to you if you are an individual director of a company, or have unlisted equity shares at any time during the financial year. The return may also include income from house property, salary/pension, and income from other sources.

“In short, individuals or HUFs who are not eligible to file ITR-1, ITR-2, and ITR-4, should file ITR-3,” says Gupta.

ITR-4 (Sugam)

ITR-4 Sugam is an income tax return form specifically designed for individuals, and HUFs who have a presumptive business income. It offers a simplified approach to filing taxes by allowing taxpayers to report their income from business or profession based on a presumptive taxation scheme.

This form is applicable to taxpayers who have a total income of up to ₹ 50 lakh in a financial year, and have earned income from business or profession, which includes freelancers, small traders, and professionals such as doctors, engineers, and lawyers. It provides a convenient way to declare their income by offering predefined percentages of their turnover, or gross receipts as taxable income, without the need for maintaining detailed books of accounts.

“A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the tedious job of maintenance of books of account,” says Dasari.

ITR-5, ITR-6, and ITR-7 do not apply to individuals.