Which Income Tax Return (ITR) form should you file ?

[Last Updated : 5-Jul-2017]
Its the same time of the year. Time to file your Income Tax Returns. Before you file, you got to be aware of which Form is relevant for you.

As an example, those who avail HRA, have availed LTA or had any other "exempted income" more than Rs. 5,000 in the entire year, need to be careful before choosing their form...Read on..

What are the available forms and which form is applicable for me?
Following are the available forms for tax return filing for the this Assessment Year (AY 2017-18), which also corresponds to the Financial Year FY 2016-17. Applicability of these forms depends on tax payer’s source of income. It is thus important to know the relevance of each of these forms.

ITR-1 Form (Sahaj)
Among the salaried this is one of the most widely used income tax return forms. It is the simplest form, and the easiest to submit without any complications.

Who can use this form:
a) You have income from salary.
b) You have Income from One House Property 
c) You have income from other sources like interest income.

Who cannot use this form:
a) You own more than one house property.
b) You have 'loss' brought forward from previous years.
c) You have income from other sources includes winning from lottery and income from race horses.
d) You earn agricultural income exceeding Rs 5,000
e) You have income under the head 'Capital Gains'.
f) You earn any exempted income in excess of Rs. 5,000 (Please look at a later section in this post - "What is Exempt Income" for more details)
g) Income from Business or Profession
h) You are claiming relief for foreign tax paid
i) You own a financial asset outside India.

Those who are not eligible to fill this form may file the newly introduced ITR-2A or ITR-2.


ITR-2 Form
This form used to exist earlier as well.

Who can use this form:
a) You have salary income
b) You may own more than one house property and earn income from house property, c) c) You have earned 'capital gains' arising out of sale of any of your houses. 
d) You have earned long-term capital gains from sale of shares on which STT (securities transaction tax) is paid, since these are exempt from tax.
e) You have income from other sources including winning from lottery and income from race horses.
f) You earn agricultural income even if it is exceeding Rs 5,000/-
g) You have 'loss' brought forward from previous years.
h) You are claiming relief for foreign tax paid
i) You own a financial asset outside India.
j) NRIs can also file this form if they meet the above listed conditions

Who cannot use this form:
a) There is partnership income (ITR-3)
b) business income (ITR-4 or ITR-4S)

ITR-3 FormThis Return Form is to be used by an individual or an Hindu Undivided Family who is a partner in a firm and where income chargeable to income-tax under the head “Profits or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm. In case a partner in the firm does not have any income from the firm by way of interest, salary, etc. and has only exempt income by way of share in the profit of the firm shall use this form only and not Form ITR-2.


ITR-4 Form
This form is applicable, both, to Individuals and HUFs who carry out any business or professional activity in addition to having sources of income applicable to ITR-3.
This form is also called as Sugam form, and is applicable for small businessmen and professionals covered under presumptive taxation. 
Presumptive Taxation is a special scheme of the Income Tax Department for small tax payers. Those who opt for this scheme don't have to maintain accounting records. 
In this case, the profits are assumed to be certain percentage of total sales.

As per the latest rules of presumptive taxation in Form 4, you need to fill in either of the following:
1/ Sec 44AD : You are doing a business with turnover / sales less than INR 2 Crores per annum. Profits are assumed to 8 per cent of gross receipts.
2/ Sec 44ADA : You are providing professional services with turnover / sales less than INR 50 Lacs per annum. Profits are assumed to 50 per cent of gross receipts.
3/ Sec 44AE : You are providing transport services where you are plying, leasing or hiring trucks. The profits are assumed to be INR 7,500 per month for each vehicle 


ITR-5 Form
This Form can be used a person being a firm, AOP, BOI, artificial juridical person referred to in section 2(31) (vii), cooperative society and local authority. However, a person who is required to file the return of income under section 139(4) (a) or 139(4) (a) or 139(4) (b) or 139(4) (c) or 139(4) (d) shall not use this form


ITR-6 Form
This Form can be used by a company, other than a company claiming exemption under section 11.


ITR-7 Form
This Form can be used by persons including companies who are required to furnish return under section 139(4A) or under section 139(4B) or under section 139(4C) or under section 139(4D).


What is Exempt Income?
Section 10 of the Income Tax act is specifically dedicated to grant various exemptions to assesses of all class on Incomes earned by them. 

Some of the most common exempted incomes for an individual that fall under this head are as below. If your total income (which was tax exempted and paid to you) in this financial year is more than Rs. 5,000/-, you need to file ITR-2 or ITR-4 depending on whether you are salaried class or business professional respectively.

• Leave Travel Allowance
• Gratuity
• Interest on PPF balance
• Part or full payment from Life insurance policy
• Leave Encashment
• Pension
• VRS compensation
• Provident Fund payments
• House Rent Allowance
• Awards recd in cash or kind
• Income from Mutual Funds
• Dividends
• Long Term Capital Gains

Exempt Income need to be categorised under various heads while filing Income Tax Returns:

Sec 10(38) : This deals with exemption of long term capital gains in case of specified securities. Any income arising from transfer of long term capital asset being an

Equity share in a Company

Unit of equity oriented fund

Unit of business trust

where transaction of sale is chargeable to Securities transaction tax is exempt from capital gain tax.

Sec 10(34) : Any income received in the way of dividend from an Indian Company who is liable to dividend distribution tax, then such income from dividend is exempt. Which means all the income received by you from your investment in shares in different companies in India by way of dividend is tax free if those company are liable to dividend distribution tax. All listed companies are liable to DDT.

Sec 10(35) : Any income in the way of dividend from the shares of the securitisation trust, is exempt.

What are Sahaj and Sugam Forms?
SAHAJ is essentially your ITR 1 Form, simplified for straightforward salaried cases, which form a majority of the salaried tax payers chunk.
SUGAM is your ITR 4 Form for presumptive business cases, which forms a majority of small businesses.
ITR 1 and ITR 4 forms can also be filled, saved, and submitted online on the Income Tax Filing portal of Government of India.

From where can i download the forms?
You should download the forms and the instructions only from the Income Tax India gov website
Here is the link : http://incometaxindia.gov.in/download_all.asp
Please make sure that you download the correct forms for the correct Financial Year / Assessment Year since the website has forms for last 5 years.

What are the due dates?
31st July 2017 is usual the due date for filing, unless specifically notified by Income Tax department.


Cheers

Manoj Arora

Elevate your life.

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