How to choose the right Income tax return form for filing

Every year, Income tax return (ITR) forms are notified based on certain factors like nature of income, quantum of income, residential status and type of assessee.

Old ITR forms notified for earlier financial years can’t be used for the recent financial year as new forms incorporate changes brought out in recent amendments to finance act.

While filing with tax department, these ITR forms will contain information about your income as well as tax liability thereon in addition to certain general data.

You need to choose the right tax form that best suits to you as wrong selection can make your tax return defective and later gets rejected by the department.

In this article, we will discuss various income tax return forms applicable to an individual, partnership firm, private limited companies and others persons liable to file tax return in India.

We have 7 different type of tax return forms prescribed by the tax department for the financial year 2017-18.

In this article, we will discuss applicability of these tax return forms and how to choose your income tax return form for filing.

ITR-1 – Income tax form for Salaried individuals

ITR-1 can be used by an individual who is an Indian resident other than not ordinary resident and whose total income for the financial year includes salary, house property and income from other sources. This tax return form is popularly known as sahaj.

In case of clubbing, ITR-1 can be used where the income of another person like spouse, minor child, etc. is to be clubbed with the income of the assessee falls into the above income categories.

However, if he has brought forward house property loss or loss to be carried forward from previous year and/or income from winning from lottery and from Race Horses, taxable under section 115BBDA or of the nature referred to in section 115BBE, then ITR-1 can’t be used.

ITR-1 should not be used by an individual whose total income for the assessment year 2018-19 exceeds Rs. 50,00,000 or include following;

  • short-term capital gains or long-term capital gains from sale of house, plot, shares etc; or
  • Agricultural income in excess of Rs. 5,000; or
  • Profit or gains from Business or Profession; or
  • Person claiming relief under section 90 and/or 91; or
  • Income to be apportioned in accordance with provisions of Section 5A (i.e. apportionment under the Portuguese Civil Code)

A resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India or a resident having income from any source outside India can’t use ITR-1.

ITR-2

ITR-2 can be used by an individual or a HUF who is not eligible to file ITR-1 and who is not having any income under the head “Profits or gains of business or profession”.

This means, if an individual is having income from short-term or long-term capital gains from sale of house, plot, shares and/or agricultural activities then ITR-2 is to be used.

However, in addition to these if he has income under the head Profits or gains of business or profession, then ITR-3 or ITR-4, as applicable has to be used.

ITR-3 and ITR-4 – Form for individuals with income from PGBP

ITR-3 is to be used by an individual or a Hindu Undivided Family who is having income under the head “profits or gains of business or profession” and who is not eligible to file ITR-4 (popularly known as Sugam).

To understand better, we need to see who is eligible to file ITR-4.

As per the Indian tax law, ITR-4 is to be used by an individual or HUF or Partnership firm whose total income for the assessment year 2018-19 includes business income computed in accordance to section 44AD, 44AE or 44ADA.

This means, ITR-4 is applicable when income from business or profession is calculated on presumptive basis under section 44AD, 44AE or 44ADA. However, this tax return form can’t be used in following cases where income is from;

  • more than one house property or where there is brought forward loss or loss to be carried forward under this head; or
  • Winnings from lottery or Race horses; or
  • Short-term capital gains or long-term capital gains from sale of house, plot, shares etc.; or
  • Agricultural activities in excess of Rs. 5000; or
  • speculative Business and other special incomes; or
  • agency business or commission or brokerage; or
  • section 115BBDA or 115BBE

ITR-4 will also not be applicable if a person is claiming relief of foreign tax paid under section 90, 90A or 91 or having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India or having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India.

ITR-4 cab be used by professionals like doctors, engineers, chartered accounts, cost accountants, lawyers and architects who opted for presumptive income under section 44ADA.

ITR-3 can’t be used by companies and partnership firm having income from business or profession as it’s specifically applicable to individual or HUF.

ITR-5 – Income tax return form for partnership firm and LLP

ITR-5 can be used by a person being a partnership firm, LLPs, AOP, BOI, artificial juridical person referred to in section 2(31)(vii),persons referred to in section 160(1)(iii) or (iv) , cooperative society , registered societies and local authority.

However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4F) shall not use this form.

ITR-6 – Income tax return form for companies

ITR-6 can be used by a private and public limited company other than a company claiming exemption under section 11. This means,it can be used by a One Person Company or OPC.

Who can use ITR-7

This Form can be used by persons including companies who are required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F).

While filing your income tax return, we suggest you to check and download the latest version of excel or java utility, or else, it will show you errors while uploading.

You can find these tax return forms at tax department’s website under the option of Income Tax Return Preparation Utilities online.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.