Which ITR Should I File? Understanding the Different ITR Forms for FY 2023-24 (AY 2024-25)

ITR, or Income Tax Return, is a crucial component of tax compliance mandated by the Income Tax Act of 1961. This legislation not only outlines the various ITR forms but also provides clear directives on the requisite procedures. This article aims to provide a comprehensive insight into the definition of ITR (Income Tax Return) and the different types of ITR forms available.

What is ITR?

The Income Tax Return (ITR) is a document through which taxpayers provide details about their earned income and the corresponding tax obligations to the income tax department.

As of now, the department has issued seven different forms, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. It is mandatory for every taxpayer to submit their ITR by the designated deadline. The suitability of each ITR form depends on factors such as the sources and amount of income earned, as well as the taxpayer’s category, such as individuals, HUF (Hindu Undivided Family), company, etc.

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When is it mandatory to file income tax returns (ITR) in India?

• If your total gross income exceeds the basic exemption limit-

Age Group	Basic Exemption Limit
For individuals below 60 years	Rs 2.5 lakh
For individuals above 60 years but below 80 years	Rs 3.0 lakh
For individuals above 80 years	Rs 5.0 lakh

– If your income falls below the basic exemption limit, you are still required to file your tax return if any of the following conditions are met:

– Deposited more than Rs 1 crore in a ‘current’ bank account: Filing a tax return becomes mandatory if you have deposited a cumulative amount of Rs. 1 crore or more in one or multiple current accounts with a bank. However, there is no such stipulation for deposits made in post office current accounts.

– Spent more than Rs 2 lakh on foreign travel: Filing a tax return is mandatory if you have incurred a total expenditure exceeding Rs 2 lakh on foreign travel, whether for yourself or any other individual.

– Deposited more than Rs 50 lakh in a ‘savings’ bank account: It is mandatory to file a tax return if the total amount deposited in one or more of your savings bank accounts exceeds Rs 50 lakh.

– Electricity expenditure is more than Rs 1 lakh: Filing a tax return becomes mandatory if your expenditure on electricity surpasses Rs 1 lakh during the previous year.

– Business turnover is more than Rs 60 lakh: If you are involved in business activities and your total sales, turnover, or gross receipts exceed Rs 60 lakh during the previous year, you are required to file a tax return.

– Professional income is more than Rs 10 lakh: Filing a tax return is mandatory if you are engaged in a profession and your gross receipts exceed Rs 10 lakh during the previous year.

– TDS or TCS is more than Rs 25,000: If the total tax deducted at source (TDS) or tax collected at source (TCS) amounts to more than Rs 25,000 in the previous year. For individuals above 60 years of age, this limit is Rs 50,000.

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ITR-1

This return form is intended for a resident individual whose total income for the Assessment Year 2023-24 comprises:

– Income from Salary/Pension

– Income from One House Property (excluding cases with brought forward losses from previous years)

– Income from Other Sources (excluding winnings from lottery and income from racehorses)

– Agricultural income up to Rs 5000

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Who cannot use ITR-1 Form?

 Gross earnings surpassing Rs 50 lakh

– Agricultural revenue surpassing Rs 5000

– Possessing income from multiple house properties

– Holding a position as Director within a corporate entity

– Incurring taxable capital gains

– Generating income from business or professional endeavors

– If you’ve made investments in unlisted equity shares at any point during the fiscal year

– If you’re liable for assessment regarding income belonging to another individual, for which tax has been deducted at the source in the hands of that individual

– If tax has been withheld under Section 194N

– If there has been a deferral of payment or tax deduction related to Employee Stock Ownership Plan (ESOP)

– If you qualify as a resident not ordinarily resident (RNOR) and non-resident

– Having any form of foreign income

– If you have any carried forward losses or losses to be carried forward under any income category

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ITR-2

ITR-2 is designated for individuals or Hindu Undivided Families (HUFs) whose total income for the Assessment Year 2023-24 comprises:

– Income from Pension or Salary

– Revenues derived from Property Ownership

– Income sourced from Various Other Streams (inclusive of Lottery Winnings and Race Horse Income)

– If you serve as an Individual Director in a corporation

– Having made investments in unlisted equity shares at any point during the financial year

– Being as a resident not ordinarily resident (RNOR) or non-resident

– Profits gained from Capital Investments

– Possessing foreign income sources

– Agricultural earnings surpassing Rs 5,000

– Ownership of assets (including financial interests in entities) abroad, with authority over accounts situated outside India

– If there are any carried forward losses or losses slated for carry forward under any income category

– If tax has been deducted as per Section 194N

– If there has been a deferral or deduction of tax related to Employee Stock Ownership Plan (ESOP)

Additionally, in situations where the income of another individual, such as a spouse or child, is to be combined with the income of the taxpayer, this particular Return Form can be utilized, provided that such income aligns with any of the aforementioned categories.

The total income may exceed Rs 50 Lakhs.

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Who cannot use ITR-2?

This particular Return Form is not suitable for individuals whose total income for the Assessment Year 2023-24 encompasses Income from Business or Profession. To report such income types, one may need to utilize either ITR-3 or ITR-4. Refer to our detailed guide on ITR-2 for instructions on completing the ITR-2 form.

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ITR-3

The present ITR-3 Form is designated for use by individuals or Hindu Undivided Families (HUFs) with income generated from a proprietary business or professional activities. Individuals with income from the following sources are eligible to submit ITR-3:

Engaging in business or professional activities

– If you serve as an Individual Director in a corporation
– Having made investments in unlisted equity shares at any point during the fiscal year
– The return may encompass income from Salary/Pension, House property, and Income from various other sources
– Income derived from being a partner in a firm

Simply, individuals or Hindu Undivided Families (HUFs) who do not meet the eligibility criteria for filing ITR-1, ITR-2, and ITR-4 should opt for filing ITR-3.

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ITR-4

ITR-4 is intended for use by residents who are individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs), and whose total income comprises:

– Earnings from business under the presumptive income scheme as per sections 44AD or 44AE
– Professional income under the presumptive income scheme as per section 44ADA
– Salary or pension income up to Rs 50 lakh
– Income from a single house property, not exceeding Rs 50 lakh (excluding any carried forward loss or loss to be carried forward)
– Other sources of income not surpassing Rs 50 lakh (excluding earnings from lottery and racehorses)

Kindly note that individuals earning income from the previously mentioned sources, particularly freelancers, have the option to choose the presumptive scheme provided their gross receipts do not exceed Rs 50 lakhs.
The concept of a presumptive income scheme outlined in sections 44AD, 44AE, and 44ADA entails individuals or entities choosing to compute their income on a presumed basis. This implies that income is calculated at a minimum rate, typically determined as a percentage of gross receipts or turnover, or based on the ownership of commercial vehicles. However, if the business turnover surpasses Rs 2 crore, the taxpayer is required to file ITR-3.

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Who cannot use ITR-4 Form?

 If your total income exceeds Rs 50 lakh

– Earning income from any source beyond India’s borders

– If you serve as a Director within a company

– Having made investments in unlisted equity shares at any point during the fiscal year

– Qualifying as a resident not ordinarily resident (RNOR) or non-resident

– Having foreign income

– If you have income from multiple house properties

– Owning any foreign assets

– If you hold signing authority in any account situated outside India

– If you are liable for assessment regarding another individual’s income, for which tax has been deducted in that individual’s hands

– In cases where payment or tax deduction on Employee Stock Ownership Plan (ESOP) has been deferred

– If there are any carried forward losses or losses slated for carry forward under any income category

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ITR-5

ITR-5 is designated for use by entities such as firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), Artificial Juridical Persons (AJPs), Estates of deceased individuals, Estates of insolvents, Business trusts, and investment funds.

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ITR-6

For companies, excluding those eligible for exemption under section 11 (pertaining to income from property held for charitable or religious purposes), electronic filing of this return is mandatory.

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ITR-7

For individuals, as well as companies mandated to submit returns under section 139(4A), section 139(4B), section 139(4C), section 139(4D), section 139(4E), or section 139(4F).

The filing requirements under section 139(4A) required to individuals receiving income from property held under trust or other legal obligation, either entirely for charitable or religious purposes or partially for such purposes.

Under section 139(4B), political parties must file a return if their total income, excluding the provisions of section 139A, exceeds the maximum amount not subject to income tax.

Section 139(4C) necessitates filing by the following entities:

– News agencies

– Scientific research associations

– Associations or institutions specified in section 10(23A)

– Institutions specified in section 10(23B)

– Funds, institutions, universities, educational institutions, hospitals, or medical institutions. The filing required under section 139(4D) applies to every university, college, or institution that isn’t mandated to submit a return of income or loss under any other provision of this section.

– Under section 139(4E), every business trust must file a return if it isn’t required to furnish a return of income or loss under any other provisions of this section.

– Similarly, under section 139(4F), any investment fund mentioned in section 115UB is required to file a return if it isn’t required to furnish a return of income or loss under any other provisions of this section.

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