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Know which type of income tax return is suitable to you and what are the differences between each ITR forms. Click here to read this guide by H&R Block.

Choosing the Right ITR Form to File your Income Tax Return

Last Update Date : January 18, 2018

There are a lot of people out there who think filing income tax returns is not mandatory and cut it off their to-do list as they find it unnecessary and time-consuming. However, it is very important for you to file your taxes. Filing your taxes is just not a statutory duty but it is one of those moral and social duties that every citizen of a country should take care of rather as a responsibility.

What is Income Tax Return?

Tax return is a form that you are required to file and contains information about your income as well as tax liability thereon. You are required to file these tax return forms with the Income Tax Department. The Income Tax Act, 1961, obligates the citizens of India to file their tax returns, at the end of every Financial Year, with the I-T Department. However, it is not mandatory for every citizen. There are different types of ITR form and each form is applicable to a certain section of assessee. These forms need to be filed on a specified due date. Income Tax Department will process only those tax returns which are filed in proper forms and within the due date.

Which ITR Form to File

Budget 2017 has made several changes to push taxpayers to file their tax returns within time. Tax department is also doing its best to avoid any delays in tax preparation and filing. Following its path breaking trend from 2016 where CBDT has preponed the release of ITR forms to the month of March from traditional practice of releasing it in May-June, CBDT once again notified all the ITR forms for A.Y. 2017-18 in the month of March, 2017 itself.

The Finance Minister has promised to the individual tax payer that he will make tax filing simpler for them, fulfilling this promise CBDT has now introduced a simplified ITR 1 Form applicable only for individuals having income up to Rs. 50 lakh. But taxpayers having dividend income above Rs. 10 lakh or unexplained credit can’t opt for ITR-1. The ITR-2A introduced in 2016 has now been withdrawn and even the old ITR-3 is merged with ITR-2. As such all the individual taxpayers (except those who are eligible to use ITR-1 or those earning business income) would be required to file ITR-2 only.

Old ITR-4 is now replaced by ITR-3 as such the individual taxpayer earning income from business or profession are now required to use ITR-3. Till A.Y. 2016-17 taxpayer opting for presumptive taxation were required to file ITR-4S but now they are required to file ‘ITR-4 SUGAM’ for presumptive income.

[ Calculate Your Income Tax Liability ]

ITR-1 

Who can use Form ITR 1?

ITR 1 can be used by an individual taxpayer, having income from:

  • Salary or pension
  • House property (except brought forward loss under this head)
  • Income from other sources (except winnings from lotteries or income from horse races or losses under this head)

Who can’t use Form ITR 1?

Return in ITR 1 cannot be used by an individual if he:

  • Is resident and ordinarily resident of India and has, –
    Any asset (including financial interest in any entity) located outside India; or
    Signing authority in any account located outside India; or
    Income from any source outside India.
  • Has earned income from capital gains or business or profession
  • Has income from more than one house property
  • Has losses under the head income from other sources
  • Has total income above Rs 50 lakhs
  • Has dividend income above Rs 10 lakhs taxable under Section 115BBDA
  • Has unexplained credit or investment taxable at 60% under Section 115BBE.
  • Has agricultural income exceeding Rs 5000
  • Has income from winning from lottery or horse race
  • Has claimed any relief u/s. 90 or 90A or 91A

ITR-2

Who can use Form ITR 2?

ITR-2 can be used by all individuals and HUFs not carrying out Proprietary business or profession

Who can’t use Form ITR 2?

ITR 2 cannot be used by an individual and HUF having income chargeable to tax under the head ‘Proprietary business or profession’

ITR-3

Who can use Form ITR 3?

ITR-3 can be filed by an Individual or HUF deriving income from proprietary business or profession.
ITR-3 can also be filed by an Individual or HUF who is a partner in a firm deriving his income by way of any interest, salary, bonus, commission or remuneration from firm.

ITR-4 SUGAM

Who can use Form ITR 4 SUGAM?

Return in ITR 4 can be filed by an individual or HUF or a Firm (other than a LLP-limited liability partnership firm) if his total income includes:

  • Presumptive Income computed as per the provisions of section 44AD, 44ADA and 44AE and,
  • Salary or pension or
  • Income from one house property (except brought forward loss under this head) or
  • Income from other sources (except winnings from lotteries or horse races or losses under this head)

Who can’t use Form ITR 4 SUGAM?

Return in ITR 4 cannot be filed by a person who:

  • Is resident and ordinarily resident of India and has,-
    Any asset (including financial interest in any entity) located outside India; or
    Signing authority in any account located outside India; or
    Income from any source outside India.
  • Has income under the head capital gains
  • Has income from profession as referred to in Section 44AA
  • Has income from agency business or commission or brokerage
  • Has dividend income above Rs 10 lakhs taxable u/s 115BBDA
  • Has unexplained credit or investment taxable at 60% u/s 115BE
  • Has claimed any relief u/s 90 or 90A or Section 91
  • Has income from more than one house property
  • Has agricultural income above Rs 5000
  • Has income from speculative business and other specified business.

Summarised table showing applicability of ITR for Individual and HUF:

TR forms for Individual and HUF
Nature of income ITR 1 (Sahaj) ITR 2 ITR 3 ITR 4
Income from salary/pension
Income from one house property (excluding losses)
Income or losses from more than one house property
Agricultural income exceeding Rs. 5,000
Total income exceeding Rs 50 lakhs
Dividend income exceeding Rs10 lakhs taxable u/s 115BBDA
Unexplained credit or unexplained investment taxable at 60% u/s. 68, 69, 69A, etc.
Income from other sources (other than winnings from lottery and race horses or losses under this head)
Income from other sources (including winnings from lottery and race horses)
Capital gains/losses
Share of profit of partner from a partnership firm
Income from presumptive business u/s 44AD/44ADA/44AE
Income from business or profession (other than presumptive business)  ✓
Income from foreign sources or foreign assets or having Signing authority in any account outside India
Claiming  foreign tax relief u/s 90, 90A or 91

Summarised Table Showing Applicability of ITR forms for taxpayers other than individual tax payers:

Other Assessees ITR 5 ITR 6 ITR 7
Firm (including limited liability partnership firm)
Association of Persons (AOP)
Body of Individuals (BOI)
Companies other than companies claiming exemption under Sec. 11
Persons including companies required to furnish return under:

(1) Section 139(4A);

(2) Section 139(4B);

(3) Section 139(4C); and

(4) Section 139(4D)

[ Read: Guides on ITR Forms 1 to 7 ]

Important information required to file ITR

  • PAN card is mandatory for all the assessees
  • Aadhaar card has now been made mandatory for individual tax filers. In case of non-individual tax payers, the Aadhaar card of the authorized person is required to be provided
  • Income from salary, agriculture, other sources, house property, profession, capital gains
  • Personal details like name, mobile number, address, type of employment
  • Deductions under chapter 10, chapter VI-A and many other sections like Section 80U, 80C, 80D
  • Complete bank account details including branch, IFSC number along with account number
  • Self-assessment tax paid, advance tax paid, TCS and TDS will be updated automatically
  • Details of cash deposited of the old, demonetized notes made between 9th November to 31st December 2016 and exceeding Rs. 2 lakh
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