Filing your Income Tax Return (ITR) holds significant importance for several reasons. It is a legal requirement that individuals, businesses, and organisations must fulfil if their income exceeds the specified threshold. By adhering to this obligation, you demonstrate your compliance with the Income Tax Act of 1961.
Furthermore, filing an ITR enables you to assess and declare your income accurately for a given financial year. This comprehensive view of your income from various sources, such as salary, business profits, and capital gains, ensures transparency and accountability. It also facilitates the calculation of your tax liability, as the ITR form prompts you to provide details of income, deductions, exemptions, and tax-saving investments.
However, several taxpayers get confused while deciding the correct ITR form. Selecting the correct ITR form is of utmost importance for various reasons.
Using the appropriate form ensures the accuracy and completeness of the information provided in your tax return. Each ITR form is specifically designed to capture different types of income and financial situations, so choosing the right one ensures that you report your income, deductions, and tax liabilities correctly.
Archit Gupta, Founder and CEO of Clear, shared which ITR form should be filed by the taxpayers.
Gupta said for individuals there are four ITR forms available. All the forms are applicable for various instances applicable on the individuals.
ITR 1 – It is also known as Sahaj form. This ITR can be filed by an ordinary tax resident of India, who has income from salary, other sources (Dividend, Bank interest etc) and owns only one house property and agricultural income not more than Rs 5,000 annually. Further if the taxable income is more than Rs 50 Lakhs, ITR 1 form can not be filed by the individual. Therefore NRIs cannot file ITR-1.
ITR 2 – This form is used for reporting salary income, other sources income, house property income (more than one) and capital gains. This form can be used by both tax residents (both ordinary and not ordinary) and NRIs. In case the income taxable income is more than Rs 50 Lakhs ITR 2 needs to be filed instead of ITR 1 even if the condition of filing the ITR 1 is met.
Further, holders of unlisted shares or directors of a company need to file ITR 2 even if all the conditions of filing ITR 1 are fulfilled.
If any person is holding any foreign assets, then also ITR 2 needs to be filed instead of ITR 1.
ITR 3 – ITR 3 is the master ITR form, as all the types of income can be reported in ITR 3. Further it can be used to report all the types of tax situations applicable on an individual. In addition to covering all the incomes reportable under ITR 2, business income can also be reported using ITR 3.
This includes business income where books of accounts are kept, the individual opting for presumptive taxation u/s 44AD/ 44ADA/ 44AE, remuneration received from firms etc.
ITR 4 – It is also known as Sugam form. This ITR can be filed by an ordinary tax resident of India, who has income from salary, other sources (Dividend, Bank interest etc), owns only one house property and agricultural income not more than Rs 5,000 annually and reports business income under presumptive taxation scheme. Further if the taxable income is more than Rs 50 Lakhs, ITR 4 form can not be filed by the individual, instead ITR 3 shall be filed.
There shall be multiple combinations based on which the required ITR form shall change, therefore the filers have to be very careful while considering which ITR form should be filed.
When you file your ITR online with any e-filing portal, you don’t need to worry about choosing the right form, as this is done automatically based on the types of income reported by you, Gupta concluded.
Moreover, the Income Tax department has enabled online filing of income tax returns (ITRs) 1 and 4, filed by individuals, professionals and small businesses, for the financial year 2022-23 (or assessment year 2023-24).
Income Tax Return Filing Last Date
The last date for filing Income Tax returns for fiscal 2022-23 for people who do not need to get their accounts audited is July 31.
Disclaimer: The views and tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before taking any decisions.
