Filing income tax can be a long and arduous process in the event that one isn’t clued up on the variety of forms available and what each of these entails and to who they are applicable. Paying income tax is important. This article aims to arm readers with knowledge on the same such that no confusions arise at the time of filing income taxes.
What are ITR Forms?
An Income tax return (or ITR) form allows taxpayers to fill out information pertaining to the income they have earned for a specified time (ordinarily a financial year) and the tax applicable. This form is meant to be sent to the income tax department which has released 7 notified forms i.e., ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 thus far. Taxpayers are required to submit their ITR to the income tax department on or prior to the specified last date of submission. A number of factors determine which ITR form might apply to a given individual. Factors include but aren’t limited to the income of the taxpayer, the sources of said income, and the category to which they belong i.e., are they classified as an individual, HUF or company, and so on.
What are the varied types of ITR Forms?
As mentioned above, the types of ITR forms presently available are 7 in number, each of which has been examined below.
ITR Form 1
This income tax return form is meant to be filed by individual taxpayers. Those eligible to fill this form have one or more of the following factors apply to them –
- Accrue an income via a salary or pension
- Accrue an income from one housing property
- Do not earn any capital gains
- Accrue income from other sources
- Do not possess or own property in foreign lands
- Income earned is entirely from domestic ventures
- Agricultural income up to Rs. 5,000, if any
- Windfall income earned via horse races and / or lotteries is inapplicable
- This form is not for an individual who is either Director in a company or has invested in unlisted equity shares
- This form is not for individual whose TDS has been deducted u/s 194N of Income Tax Act 1961
ITR Form 2
This form applies to those who have earned an income by the sale of a property or and / or other assets. This form is relevant to those who earn income from foreign sources in addition to those who fall under the Hindu Undivided Family (or HUF) categorization. This form is applicable for Individuals/HUF who do not have any income form business or profession.
ITR Form 3
This form is applicable to both, individual taxpayers as well as HUF taxpayers. Those who generate an income from profession or business are entitled to fill out this form.
ITR Form 4
This form is applicable to individuals, HUFs and / or partnership firms who derive an income via the following means –
- Business earnings as classified under section 44AD and section 44AE
- Professional income earned on the basis of section 44DA
In short, this form is applicable for persons who opts for presumptive income from business or profession.
ITR Form 5
This form is used by the following entities to file returns –
- Local authorities
- Artificial judicial people
- Body of Individuals (or BOIs)
- Co-operative societies
- Limited liability partnerships (or LLPs)
- Association of Persons (or AOPs)
ITR Form 6
This form is meant to be filled out by all companies barring those that claim exemptions as per Section 11 of the Income Tax Act 1961. For organizations that are able to generate an income from property that is used for religious or charitable purposes, exemptions are permissible as per section 11.
ITR Form 7
This form is meant to be filed by individuals and entities with the following attributes –
- As per Section 139 (4A), individuals who generate an income from a property or site which is allocated for religious or charitable reasons and operates as a trust.
- As per Section 139 (4B), political parties that generate an income that exceeds non-taxable limits.
- As per Section 139 (4C), stipulates that institutions or associations as specified under Section 10 (23A), medical and / or educational institutes, scientific research associations, news agencies, and institutions specified under Section 10 (23B) are required to fill this form.
- As per Section 139 (4D), institutions like universities and colleges whose income returns, or losses incurred aren’t required based on the provision of this section are required to submit ITR Form 7.
- As per Section 139 (4E), those business trusts that aren’t required to furnish income returns or losses under the provisions of this section are required to fill out and submit ITR Form 7.
- As per Section 139 (4F), investment funds as specified in Section 115 UB are required to file returns on the basis of this section.
How to file an Income Tax Return
Income tax returns are filed on the basis of an individual’s income sources, the amount they are able to earn, and the category of the taxpayer under which they fall. These factors determine which form is to be filled out. Once there is an understanding of the same, individuals are required to follow through with the following steps –
- Form 26AS ought to be downloaded and read. Operating as a tax passbook it provides readers with insight on pertinent tax details which are to be deducted from income earned during a given financial year.
- Read form 26AS with care such that errors may be identified and can be rectified.
- All income earned is to be tallied in its entirety for the relevant financial year.
- Tax liability is to be calculated after tax rates have been considered.
This essay hopefully managed to successfully aid all those that need to navigate the complicated path of income tax return forms with ease.
Disclaimer: You are requested to consult your tax consultant and obtain independent advice before taking any decisions on your tax returns