7 Types of ITR Forms: Which One is Right for You?

Filing ITR correctly ensures your compliance with tax laws along with the accuracy of your tax calculations. The process of filing ITR sounds intimidating and a daunting task, but gaining a clear understanding of the process and different types of ITR forms can ease the process. There are 7 types of ITR forms  tailored according to the differing levels of income of every taxpayer. This blog aims to help you understand different types of ITR forms and guide you through determining which is the right one for you. For professional assistance in filing your ITR, you can search for expert services here.

Here are 7 types of ITR forms along with their specifications to help you understand which ITR to file as per your eligibility. 

Understanding ITR Forms

Let’s break down the different types of ITR forms:

ITR 1(Sahaj)

Who Should Use It?

• Income earned from salary, pension or one house property
• Taxpayers who have ordinary resident status and gross income up to ₹ 50 lakh 
• Those who have agricultural income or wages up to ₹5000

Who Should Avoid It?

• Individuals with more than one house property.
• Those with income from capital gains or business/profession.
• Individuals who are Non-residents or Residents Not Ordinarily Resident (RNOR) or possess foreign income or assets

ITR 2

Who Should Use It?

• Those who earn from more than one property, salary or pension up to ₹50 lakh 
• Individuals who have invested in equity share (but not listed) or have income from capital gains 
• Individuals who are Non-residents or Residents Not Ordinarily Resident (RNOR), part of Undivided Hindu Family or own foreign assets 

Who Should Avoid It?

• Those whose income source is business or profession 
• Hindu Undivided Family (HUFs) earning income from a company 

ITR 3

Who Should Use It?

• Individuals or HUFs with income from business or profession 
• Those who earn income from being partner in a firm 

Who Should Avoid It?

• Those who have no source of income from business or profession
• Individuals or HUFs without commercial source of profit

ITR 4(Sugam)

Who Should Use It?

• Individuals, firms, and HUFs (except LLPs) with corporate profits on presumed basis
• Those who earn income from salary, pension or house property less than ₹50 lakh
• Business or professional income as per presumptive income under section 44AD or 44AE

Who Should Avoid It?

• It is not applicable for those who have total income more than ₹50 lakh
• Those who have foreign assets 
• It is not suitable if signing authority to your accounts is located outside of India

ITR 5

Who Should Use It?

• Those who are not an entity, HUF, corporation filing ITR 7
• It is filled by LLPs, Artificial Juridical Person, Body of Individuals or Association of Persons 

Who Should Avoid It?

• Anyone who is filing ITR 7 form, should avoid filing ITR 5

ITR 6

Who Should Use It?

• Companies that are not claiming exemption under Section 11, i.e., income earned from property for religious or charitable purposes

*ITR 6 has to be filed electronically only 

Who Should Avoid It?

• Those companies claiming exemption from tax under Section 11

ITR 7

Who Should Use It?

• Companies and persons required to present returns under Sections 139(4A), 139(4B), 139(4C), 139(4D), 139(4E), or 139(4F) of the Income Tax Act.

Who Should Avoid It?

• Those with salaried income should avoid filing ITR 7 form

Let’s Break It Down

How to Select the Right ITR Form?

The selection of the right ITR form is dependent on your income source, taxpayer category, and residency status. Here are some tips to guide you:

1. Identify Your Income Sources: Salary, house property, business/profession, capital gains, etc.
2. Understand Your Taxpayer Category: Individual, HUF, partnership firm, company, etc.
3. Consider Residency Status: Resident, non-resident, RNOR.
4. Assess Specific Requirements: Foreign income/assets, presumptive taxation, etc.

Takeaways

Tax season can be stressful and complicated, filing the correct ITR form is essential to avoid the hassle and unnecessary scrutiny from income tax authorities. It is crucial to be aware about the types of ITR forms available and under which income condition they can be filled. Knowing and filing the correct ITR form ensures that you’re taking advantage of the appropriate deductions. There are 7 different types of ITR forms designed to meet your income category whether you’re a salaried individual or business owner, specific ITR forms are there for you. Make sure to review your financial details and choose the form that best fits your situation.

Happy filing, and may your tax season be smooth and hassle-free!

Frequently Asked Questions

Why is it important to file the correct ITR form?

Filing the correct ITR form ensures compliance with tax laws and accurate tax calculations, it also helps in avoiding penalties and taking advantage of relevant deductions.

What is presumptive taxation?

It means that you can pay your tax on presumptive income, i.e., you don’t have to maintain a detailed account to pay tax. You can pay tax at a prescribed rate without estimating your income by deducting expenses from revenue.

What should a partnership firm file?

Partnership firms should file ITR-5.

Do NRIs have specific ITR forms?

NRIs should use forms other than ITR-1, such as ITR-2 or ITR-3, depending on their income sources.

How do I choose the right ITR form?

Identify your income sources, taxpayer category, residency status, and specific requirements to choose the appropriate form.