Which ITR form to Choose for Filing Income Tax Return?

Filing of Income tax return could be complicated especially for those who are doing it for the first time. Thankfully over the years the forms used for Income tax returns (ITR Forms) have become simpler but still the question which ITR form to choose keeps baffling people.

In this post I help you choose the right ITR form.

Types of income:

We might not differentiate in our income, but Income Tax Department classifies your income as follows:

1. Income from Salary/ Pension: This is income that an employee receives from his employer. Pension is also treated as salary for Income tax

2. Income from Home/Real Estate: This is the income from any property – residential or commercial by renting/leasing it out

3. Income from Capital Gains: The profits on selling of an asset like equity, mutual funds, gold, NCDs, Bonds or real estate. The capital gains are further classified as Short Term or Long Term depending on the time frame of transactions and asset under consideration.

4. Income from Business/ Profession: This is income for professional such as lawyers, doctors etc which they generate through freelancing or private practice. Income from running a business is profits that the business generates after deduction of expenses such as rent, salary to staff, etc.

5. Income from Other Sources: All other income other than the above falls under this category. This might cover interest received on fixed deposits, gifts, winning of prize or lottery

6. Exempted Income: There are some categories of income which are exempted from income tax. Below is the list of exempted Income:

• Interest on PPF
• Interest on Tax Free Bonds
• Dividend from Stocks and Equity Mutual Funds
• Payment on Maturity of Life Insurance/ULIPs
• Gratuity
• Gift from Relatives
• Income up to Rs 1,500 of a minor child (up to 2 Children allowed)
• Compensation for Retrenchment or VRS up to Rs 5 lakhs
• Compensation received on death or injury 
• Income from Agriculture

Which ITR form to Choose?

A person of HUF might have income from any or all of the above sources. The choice of ITR forms depends broadly on what are sources of your income.

If you have only Salary or Pension Income and No Business income you need to use ITR Form 1 or 2.

ITR 1 (Sahaj)

You should choose this form when:

1. You have income from Salary/Pension
2. Income from only One house property (except where losses are brought forward from previous years)
3. Income from other sources (except winning lottery and income from race horses)

You should not choose this form when:

1. Have income from more than 1 property
2. Income from winning lottery or from race horses
3. Capital gains by sale of assets
4. Exempted Income of more than Rs 5,000
5. Carry forward losses from previous years
6. Any income from assets located in foreign countries

ITR 2

An individual or HUF (Hindu Undivided Family) can use ITR2 when:

1. Have income from salary/Pension
2. Income from one or multiple house properties
3. Capital Gains
4. Income from other sources (including winning lottery and income from race horses)

ITR 3

An individual or HUF can use ITR3 when:

1. The income is through partnership in a firm
2. Income from one or multiple house properties
3. Capital Gains
4. Income from other sources (including winning lottery and income from race horses)

Should not use ITR3 when:

1. The income is through Income from Business or Profession under sole proprietorship

If your income is from business and also have income from salary/pension, you need to choose from ITR 4S or ITR4.

ITR 4S (Sugam)

An individual or HUF can use ITR 4S when:

1. Income from Small Business where the annual turnover is less than Rs 1 crore.
2. Income for professionals like Doctors, Lawyers, CA, etc
3. You have income from Salary/Pension
4. Income from only One house property (except where losses are brought forward from previous years)
5. Income from other sources (except winning lottery and income from race horses)

You should not choose this form when:

1. Have income from more than 1 property
2. Income from winning lottery or from race horses
3. Capital gains by sale of assets
4. Carry forward losses from previous years
5. Any income from assets located in foreign countries

ITR 4

An individual or HUF who has income from business or profession and do not qualify to fill ITR4S can fill up ITR 4

ITR 5 / ITR 6/ ITR 7

to be filled by companies/ cooperative societies etc

Which ITR form to Choose – Infographic?

I hope this post would help you the right ITR form for filing your tax return. Any question please put down your comments!