Understanding the Different Types of Income Tax Forms in India

Individual and business direct taxes are taxes collected on income from various sources and play a very important role in the country's economic growth. For the Government, it is an important source of revenue for funding welfare and infrastructure projects. All eligible entities must file an Income Tax Return using the appropriate Income Tax Return form by a specified date in a fiscal year in order to pay their taxes to the Government Through e-Filing of Income Tax Returns. 

What is the process for filing e-Filing of Income Tax Returns? It is a concern for users, and the ITR form contains information about the income of an entity for a financial year starting on April 1 and ending on March 31 of the following year.  Tax returns and payments according to income slabs should be filed and paid annually by every responsible citizen. 

For e-Filing of Income Tax Returns, you can choose from seven types of forms. To File Income Tax Return, the Central Board of Direct Taxes in India recommends using the appropriate form. This detailed guide to ITR forms for File Income Tax Return explains what they are, what types they have, and how they are used. 

What are ITR Forms?

Taxpayers use the ITR form to report their income, deductions, exemptions, and taxes paid for a particular year. A particular financial year's tax liability is calculated and paid to the Income Tax Department during e-Filing of Income Tax Returns Form. Income Tax Offices receive the relevant ITR form along with proof of investments from taxpayers.

Seven ITR form for e-Filing of Income Tax Returns types have been notified by the IT department, namely ITR 1 through ITR 7. A taxpayer's ITR form relevance depends on their income source, their earned income, and the category of their taxation, such as individual, HUF, etc. Prior to e-Filing of Income Tax Returns, you will need to determine which category you fall into and choose the appropriate form.

The different types of ITR forms

File Income Tax Return Forms are selected based on the taxpayer's source of income, income earned, and category of income. The form should be used when you File Income Tax Return, according to the Central Board of Direct Taxes. You can learn more about the types of ITR forms and who should use them in the infographic below.

1. ITR Form 1 or SAHAJ

The ITR-1 Formor Sahaj is applicable to individuals with income from the following sources:

Pension/Salary.

1. Losses brought forward from previous years do not apply to house property.

2. Other sources of income (other than lottery winnings or racehorse profits).

3. Income from agriculture up to Rs. 5000.

2. ITR Form 2 

Individuals and HUFs who are eligible for this type of ITR include:

1. Salary/pension, house property, and other sources of income, including winning a lottery and owning racehorses, provide them with income.

2. A company's directors are individuals.

3. At any time during the financial year, they invested in unlisted equity shares.

4. Residents not ordinarily resident (RNOR) and non-resident Indians (NRIs).

5. A capital gain or foreign income is the source of their income.

6. The family earns more than Rs. 5000 from agriculture.

7. In addition to their own income, they are liable for the income of others who have already paid tax.

8. Foreign income is part of their income.

9. Their assets are located abroad, and they have the authority to sign for accounts maintained abroad.

10. A deduction has been made under Section 194N for the tax.

11. A postponement has been made on the payment or deduction of tax on ESOPs.

12. A loss under any other income head, including losses that have been carried forward, must also be carried forward.

13. Using this ITR form, the assessee's income can be clubbed together with the income of spouses and children, which fall into any of the above categories.

3. ITR Form 3

Individuals and HUFs with proprietary firms or professionals should use this type of Income Tax Form. ITR 3 is among the types of ITR forms that taxpayers with income from business or profession may use if:

• They are individual Directors of a Company.

• In the past financial year, they have invested in unlisted equity shares.

• Salary/pension, house property, and other sources of income can also be included.

• Income as a partner in a Partnership Firm.

4. ITR Form 4 (Sugam)

Individuals, HUFs, and partnership firms other than LLPs must file the ITR 4 form. Income should come from the following sources:

1. Under the presumptive income scheme, business income and profession income are covered by Section 44AD and 44AE.

2. With an income of less than Rs. 50.00 lakhs, you are considered low income.

3. Within Rs. 50.00 lakhs, income from one house property, excluding losses carried forward.

4. The income from other sources cannot exceed Rs. 50.00 lakhs, excluding lottery and racehorse income.

5. In addition, freelancers earning income from any of the above sources can also opt for a presumptive income scheme if their income does not exceed Rs. 50.00 lakhs.

5. ITR Form 5

ITR Form 5 is for the following:

1. Firms

2. LLPs (Limited Liability Partnership)

3. AOPs (Association of Persons)

4. BOIs (Body of Individuals)

5. Artificial Juridical Person (AJP)

6. Estate of Deceased

7. Estate of Insolvent.

8. Business Trust And Investment Fund

6. ITR Form 6

The ITR 6 should be used by all companies registered under the Companies Act 2013 or the Companies Act 1956. It is recommended to file returns electronically if the Income Tax Return Form 6 is used. 

7. ITR Form 7

Income Tax Return Form 7 is for persons, including Companies that file returns under Sections 139(A), 139(B), 139(C), 139(D), 139(E), and 139(F).

File Income Tax Return under Section 139(4A) for individuals with income from trust property held for charitable or religious purposes.

If the total income of a political party exceeds the maximum exempt from income tax under Section 139(4A), the party must file a return under Section 139(4B).

The following have to file returns under Section 139(4C):

- News Agency

- Scientific Research Organisation

- Institutions that come under Section 10(23B)

- Fund, Institution, Educational Institution, University, and hospital or other medical institutions

1. 139(4D) requires universities and colleges to report income and loss even if no other provisions of this Section require them to do so.

2. This section 139(4E) requires businesses and trusts that do not have to file any other returns of income or loss to do so.

3. 139(4F) is applicable to investment funds referred to in Section 115UB that are not required to file returns under any other provision of this Section.

What are the key changes notified in the new ITR forms for FY 2022-23 (AY 2023-24)?

The types of File Income Tax Return forms have not changed significantly, but some updates have been made, as follows:

• Under Capital Gains in types of ITR forms except ITR 1, a new schedule has been included for reporting income from Virtual Digital Assets (VDA) such as cryptocurrencies. 

• In the ITR of types ITR 3 and ITR 4, taxpayers who opted out of the new regime in the last assessment year have to report the year they opted out.

• In the newly added disclosure for 'Income from retirement benefit accounts', taxpayers must disclose the taxable income for which relief under Section 89A was claimed in any of the previous years. 

• The turnover and income from intraday trading must be reported in the new section under the section titled 'Trading Account' on ITR form types ITR 3, ITR 5, and ITR 6.

• SEBI registration numbers have been required as a new disclosure measure for foreign institutional investors. 

• A small update has been made to the balance sheet reporting. Advances received from individuals specified in Section 40A(2)b of the IT Act and others should be reported under the 'Advances' section of the Source of Funds section.

How to Download the ITR Form Utility Online

Before filing an ITR, every new taxpayer wonders how to download the ITR Form utility online to File Income Tax Return. How to do it:

1. Visit the official website of the IT Department of India.

2. Select 'Downloads' from the right-hand menu.

3. Choose the year of assessment.

4. Click on "Common Offline Utility (ITR1 to ITR4)" to access ITR forms 1 to 4.

5. Click on 'Utility Excel based' to download the Excel file of the required ITR types.

Conclusion

The Income Tax Department requires you to file income tax returns in order to claim a refund. As per the Central Board of Direct Taxes guidelines, it is equally important to know which ITR to file and who is eligible to use the relevant Income Tax Return form. In addition to making the ITR defective, choosing the incorrect form may also result in it being treated as an invalid return. A professional from Tax Wink can assist you in e-filing of income tax returns accurately if you are confused about which Income Tax Return Form to use.