Which ITR To File - Different Type of ITR & Eligibility

The taxes collected on the annual income of an individual or business from various sources are called direct taxes. They play an integral role in the economic growth of the country since they’re a source of revenue for the Government. You must file your Income Tax Return using the appropriate Income Tax Return form as it ensures that you pay all the tax due on your income in a financial year. In this article, you will understand the different types of ITR forms and who (individual or business) needs to file which ITR form to ensure full compliance with the Income Tax Act, 1961.

What are ITR forms?

Before we get into the nitty-gritty of different types of ITR forms, let’s first understand what are ITR forms. 

ITR forms are documents used by taxpayers to report their income, deductions, exemptions claimed, and the tax paid for a particular financial year. When you’re filing an ITR form, your tax liability for the financial year is calculated and then paid to the Income Tax Department. As a taxpayer, you need to submit the relevant ITR form with the proof of investments to the designated Income Tax Office.

The Income Tax department has notified 7 types of ITR forms - from ITR 1 to ITR 7. Which forms would be relevant to you will depend on multiple factors like the income source, the income earned, and the category of the taxpayer, among others. So, before filing your ITR, you need to identify the appropriate type of Income Tax Return form and then proceed accordingly.

So, let’s understand all the types of ITR forms so that you can easily decide which ITR form is relevant for you!

Types of ITR Forms

The type of ITR form that’s applicable to you will depend on your source of income, the income earned, and your category as a taxpayer. So, let’s go through all the ITR forms, understand their specification and eligibility to give you a better understanding of the ITR form that’s relevant for you. 

ITR 1 Form (SAHAJ)

The ITR-1 Form, also known as ‘Sahaj’, is applicable if you are an individual receiving income from the following sources:

• Salary or Pension;
• House Property, except in cases where loss is brought forward from the previous year;
• Income from other sources (except winning a lottery or through racehorses);
• Agricultural income up to ₹5000/-

Who is not eligible to file the ITR 1 form?

If you are an individual, you may not be eligible to file ITR 1 form if you satisfy any of the following conditions:

• Your income is more than ₹50 lakhs.
• Your agricultural income is above ₹5000/-.
• You have taxable capital gains.
• You are a Director of a Company.
• You have income from business or profession.
• You have income from more than one house property. 
• You have invested in unlisted equity shares during the financial year.
• You own assets abroad or have a financial interest in any foreign entity and signing authority in any account maintained abroad.
• You are an NRI and Resident Not Ordinarily Resident (RNOR).
• You are assessable with respect to the income of another person for which tax is deducted from the other person.
• The tax has been deducted under Section 194N.
• The payment of tax or deduction has been postponed for ESOP (Employee Stock Ownership Plan).
• The loss has been carried forward, or loss under any other income head has been carried forward.

ITR 2 Form

The ITR 2 form applies to an individual or a Hindu Undivided Family (HUF) if:

• They have income from Salary or Pension, House Property, and other sources, including income from winning a lottery or racehorses.
• They are individual directors in a Company.
• They have invested in unlisted equity shares at any time during the financial year.
• They are NRIs and Resident Not Ordinarily Resident (RNOR).
• They have income from capital gains or any foreign income.
• They have an agricultural income of more than ₹5000.
• They own assets outside India, including financial interest in any entity and signing authority in any account located outside India.
• The tax has been deducted under Section 194N.
• The payment or deduction of tax on ESOP has been deferred or postponed.

Moreover, you can also use the ITR 2 form if the income from other persons like spouse and child, falling under any of the above categories, have to be clubbed with the income of the assessee. Such income can be above ₹50.00 lakhs.

Who is not eligible to file the ITR 2 form?

If you are an individual whose total income for the assessment year includes Income from Business or Profession, then you cannot use the ITR 2 form. You will have to use ITR 3 or ITR 4 forms for declaring these types of Income.

ITR 3 Form

The ITR 3 form is relevant for individuals and HUFs who earn an income from a profession or a proprietorship business. Salaried individuals having income from the intraday Income from Options or futures also need to file this form.

ITR 3 form is applicable for an individual if: 

• He/she is generating an income from a profession or business.
• He/she is a Director of a company
• He/she is a partner in a firm.
• He/she has invested in unlisted equity shares at any time during the financial year.
• He/she has generated income from a pension or salary, house property, or any other source of income.

Who does not need to file the ITR 3 form?

All the assesses who are filing returns using either ITR 1, ITR 2, or ITR 4 forms need not file the ITR 3 form.

ITR 4 Form (Sugam)

The ITR 4 form, also known as ‘Sugam’, applies to individuals, HUFs, and partnership firms (other than LLPs), that are residents and whose total income includes:

• Business income or professional income as per the presumptive income scheme under Section 44AD or 44AE or 44ADA.
• Income from salary or pension up to ₹50 lakh
• Income from one house property, not exceeding ₹50 lakh (excluding the amount of brought forward loss or the loss to be carried forward)
• Income from other sources not exceeding ₹50 Lakh (excluding income from lottery and race-horses)

A note for freelancers: If you are a freelancer earning income from the above-mentioned sources, then you can also opt for a presumptive scheme if your gross receipts do not exceed ₹75 lakhs.

What is presumptive income scheme? The presumptive income scheme under sections 44AD, 44AE and 44ADA is when an individual or an entity opts to derive its income on a presumptive basis. This means that when the income is presumed at a minimum rate based on a percentage of gross receipts or gross turnover or based on ownership of commercial vehicles. Please note that if the business turnover exceeds ₹2 crore, then you need to file ITR 3.

Update as per Budget 2023: Budget 2023 amended Sections 44AD and 44ADA to revise presumptive taxation limits for FY 2023-24 (AY 2024-25) as follows:

• The previous limit for Section 44AD (for small businesses) was ₹2 crore which was revised to ₹3 crore. 
• The previous limit for Section 44ADA (for professionals like doctors, lawyers, engineers, etc) was ₹50 lakh which was revised to ₹75 lakhs.

Please note that these revised limits would only be applicable if the amount received in cash in the previous year does not go beyond 5% of the total turnover.

Who is not eligible to file ITR 4?

You are not eligible to file ITR 4 form if you satisfy any of the following conditions:

• Your total income exceeds ₹50 lakh
• You have income from more than one house property
• You own any asset abroad or have income from any source outside India
• You have signing authority in any account located outside of India
• You are a Director in a company
• You have investments in unlisted equity shares at any time during the financial year
• You are a Resident Not Ordinarily Resident (RNOR) or Non-resident Indian (NRI)
• You are liable for the income of another person for which the tax has been paid already.
• Your payment or deduction of tax on ESOP has been postponed
• You have any brought-forward loss or loss that needs to be carried forward under any income head

ITR 5 Form

The ITR 5 form is relevant for the following entities: 

• Firms
• LLPs (Limited Liability Partnership), 
• AOPs (Association of Persons), 
• BOIs (Body of Individuals), 
• Artificial Juridical Person (AJP), 
• Estate of deceased, 
• Estate of insolvent, 
• Business trust, and 
• Investment fund

Who cannot file the ITR 4 Form?

Individual assessees, Hindu Undivided Families (HUFs), Companies, and taxpayers who have to file returns using the ITR 7 form under Sections 139(A), 139(B), 139(C), 139(D), 139(E), and 139(F) - cannot file ITR 4 form.

ITR 6 Form

The ITR 6 form is relevant for all the Companies registered under the Companies Act 2013 or the earlier Companies Act 1956. If you are using ITR 6 form then you must do the filing of returns electronically.

Who cannot file the ITR 6 form?

All the companies that are claiming exemption under Section 11, that is, with income from property held for charitable or religious purposes, then all such companies cannot file the ITR 6 form. 

ITR 7 Form

ITR 7 form is relevant for all the individuals and companies that have furnished returns under Section 139(4A), Section 139(4B), Section 139(4C), Section 139(4D), Section 139(4E), or Section 139(4F). Here are the details of the returns that you need to file under each section:

• Section 139(4A): The individuals who receive an income from a property that belongs to a trust or other legal obligations and the income generated is solely used for religious or charitable purposes must file returns under this section.
• Section 139(4B): A political party must file returns under this section if the total income generated is more than the maximum amount.
• Section 139(4C): The following entities need to file returns under this section:
  - Institutions or associations falling under the purview of Section 10(23A)
  - Scientific Research associations
  - Medical institutions, hospitals, universities, funds, and other educational institutions
  - News agencies
  - Institutions that fall under the purview of Section 10(23B)
• Section 139(4D): Any university, college, or other institution that’s not required to furnish any income or loss must file returns under this section.
• Section 139(4E): Business trusts that are not required to furnish their income or loss must file their returns under this section.
• Section 139(4F): Investment funds present under Section 115UB that are not required to furnish any income or losses must file returns under this section.

Who should not file the ITR 7 form?

All those who are not seeking exemptions under Sections 139(4A), 139(4B), 139(4C) or 139(4D) do not need to use the ITR Form 7.

It is mandatory to file your income tax returns in order to claim a refund from the Income Tax Department and avoid any penalties or interest charges. Before filing, it is important to know which ITR form you need to file and who is eligible to use the relevant Income Tax Return form. If you choose the wrong form, it will make your ITR filing defective and it can also be treated as an invalid return. So, if you are confused about the type of Income Tax Return Form to use, it is best to seek a professional’s advice in filing your income tax returns accurately. You can connect with our professionals today to get answers to all your queries! 

Frequently Asked Questions (FAQ)