Income Tax
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Individual ITRs
Understanding Individual ITRs
Income Tax Returns (ITRs) are documents filed with the Income Tax Department to report one's income, deductions, and tax liability. There are different types of ITRs designed for various taxpayer profiles. Here, we'll focus on ITR-1 and ITR-2, along with their applicability:
ITR-1 :
ITR-1 is one of the simplest ITR forms and is designed for individual taxpayers with straightforward income sources. It is applicable to individuals who have income from the following sources:
Salary or Pension
One House Property (excluding cases with brought forward losses)
Other sources like interest income, family pension, etc.
Total income below Rs. 50 lakhs
ITR-2:
ITR-2 is a more comprehensive form and is applicable to individuals and Hindu Undivided Families (HUFs) with income from multiple sources or complex financial situations. It is suitable for those who have income from:
Salary or Pension
More than one House Property
Capital Gains (both short-term and long-term)
Foreign Assets or Income
Agricultural income exceeding Rs. 5,000
Any other source of income
Business ITRs
Understanding Business ITRs
Income Tax Returns (ITRs) play a crucial role in the financial compliance of businesses and entities. Various ITR forms cater to different types of businesses and taxpayers. Here, we'll delve into ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7, along with their applicability:
ITR-3:
ITR-3 is designed for individuals and Hindu Undivided Families (HUFs) who have income from a proprietary business or profession. It is applicable when the taxpayer has income from:
Business or Profession
Capital Gains
Any other source (excluding income from the lottery, racehorses, and speculative businesses)
ITR-4 :
ITR-4 is meant for individuals, HUFs, and firms (excluding Limited Liability Partnerships) with presumptive income from business and profession. It is applicable when:
Total turnover or gross receipts do not exceed Rs. 2 crores.
The taxpayer opts for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act.
ITR-5:
ITR-5 is for firms, Association of Persons (AOPs), Body of Individuals (BOIs), and Limited Liability Partnerships (LLPs). It is applicable to entities with income from:
Business or Profession
Capital Gains
Other sources of income
ITR-6:
ITR-6 is specifically for companies other than those claiming tax exemptions under Section 11 (Income from property held for charitable or religious purposes). It is applicable to companies with income from:
Business or Profession
Capital Gains
Other sources of income
ITR 7:
ITR-7 is meant for persons, including companies, who are required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act. It applies to entities that are:
Charitable or religious trusts
Political parties
Research institutions
Educational institutions
Hospitals
Frequently Asked Questions (FAQs)
ITR-1 FAQs
Q1: Who can use ITR-1 for AY 2023-24?
A1: ITR-1 is for Resident Individuals with total income under ₹50 lakh during the fiscal year, from sources like salary, one house property, and more, including family pension.
Q2: Who can't use ITR-1 for AY 2023-24?
A2: ITR-1 isn't for RNORs, NRIs, those with >₹50 lakh income, >₹5,000 agricultural income, lottery or capital gains, unlisted equity, business income, directors, and others not meeting ITR-1 criteria.
Q3: What income isn't part of ITR-1?
A3: ITR-1 excludes business profits, capital gains, income from >1 house property, and special-rate taxable income.
Q4: Is employment nature declaration mandatory?
A4: Yes, for Central/State Govt. employees, PSU employees, pensioners, private sector employees, and not applicable for family pension income.
Q5: What's needed for ITR-1, and is Aadhaar-PAN linkage required?
A5: Documents include AIS, Form 16, rent receipts, and investment receipts. Linking Aadhaar-PAN is advised but not mandatory.
Q6: What are the Precautions for filing income return?
A6: Verify AIS, review documents, check pre-filled details, choose the right ITR, file on time, and e-verify or send ITR-V.
Q7: How to determine the correct ITR form?
A7: Use "Help me decide which ITR Form to file" option on the portal and answer questions to find the suitable form.
Q8: What's Form 26AS, and why is it important?
A8: Form 26AS displays TDS, TCS, and tax credits. It's crucial for claiming deductions and understanding tax payments.
Q9: How to correct errors in Form 26AS?
A9: Correct errors via NSDL, request Deductors for TDS corrections, and ask banks to fix challan details.
Q10: Can joint property owners use ITR-1?
A10: Joint owners of one property can use ITR-1 if conditions are met.
Q11: How to avoid issues in ITR filing?
A11: Link Aadhaar-PAN, pre-validate bank account, choose the correct ITR form, file on time, verify, and respond to ITD notices promptly.
Q12: What's Advance Tax?
A12: Advance tax is for income not covered by TDS. Pay it quarterly if your annual tax liability exceeds ₹10,000.
Q13: How to calculate and pay Advance Tax and Self-Assessment Tax?
A13: Calculate Advance Tax based on percentages, pay in four installments. Self-Assessment Tax is paid before ITR submission.
Q14: What's the difference between allowance and perquisite?
A14: Allowances are periodic payments, part of taxable income. Perquisites are work-related benefits, either taxable or non-taxable.
Q15: Are all donations 100% tax-exempt?
A15: No, donation exemptions vary; check the category and limits on your donation receipt.
Q16: Is e-Filing the same as e-Payment?
A16: No, e-Filing submits your return, while e-Payment pays tax electronically.
Q17: Can I correct a mistake in a filed ITR?
A17: Yes, file a Revised Return within the specified timeframe.
Q18: Can I file ITR for the past three years?
A18: Yes, file ITR-U for previous years alongside your current year's ITR.
Q19: Consequences of filing ITR after due date u/s 139(1)?
A19: Late filing may incur a fee and interest on tax liability.
Q20: Should I file returns if tax is deducted by my employer or bank?
A20: Yes, If tax is deducted, disclose that income and claim TDS credit in your ITR.
Q21: Will I get a refund if I've overpaid tax?
A21: Yes, excess tax can be claimed as a refund by filing your ITR, subject to ITD verification.
ITR-4 FAQs
Q1: Who can use ITR-4 for AY 2023-24?
A1: ITR-4 is for Resident Individuals/HUFs/Firms (except LLPs) with income not over ₹50 Lakh, derived from businesses under Sections
44AD, 44ADA, or 44AE, plus other sources.
Q2: Who can't use ITR-4 for AY 2023-24?
A2: ITR-4 isn't for RNORs, NRIs, >₹50 Lakh income, >₹5,000 agricultural income, directors, >1 house property income, lottery/gambling
income, unlisted equity, deferred ESOP tax, or not meeting ITR-4 criteria.
Q3: Can business individuals opt for the new tax regime with ITR-4?
A3: Yes, for the new tax regime, file Form 10IE before ITR filing if you have business income.
Q4: Can business individuals switch between old and new tax regimes yearly?
A4: No, switching is a one-time choice for life once you opt for the new tax regime with business income.
Q5: When to file Form 10IE for opting/withdrawing the new tax regime?
A5: File Form 10IE before the ITR due date (July 31 for non-audit cases, Oct 31 for audited cases).
Q6: What documents are needed for ITR-4? Is Aadhaar-PAN linking required?
A6: Documents include Form 16, Form 26AS & AIS, Form 16A, bank statements, housing loan interest certs, donation receipts, rental
agreements, and investment receipts. Link Aadhaar-PAN for better access, but it's not mandatory.
Q7: What's the presumptive taxation scheme in ITR-4?
A7: ITR-4 uses Sections 44AD, 44ADA, and 44AE for presumptive taxation, simplifying tax calculations for specific businesses and professions.
Q8: Who can't use the Section 44AD presumptive taxation scheme?
A8: Section 44AD isn't for businesses plying goods carriages, agency businesses, commission/brokerage earners, or those with total
turnover >₹2 Crore, or those needing to maintain books as per Section 44AA.
Q9: Can gross receipts >₹2 Crore opt for Section 44AD?
A9: No, Section 44AD applies only if gross receipts don't exceed ₹2 Crore.
Q10: Who can opt for Section 44ADA presumptive taxation?
A10: Section 44ADA applies to specified professions with gross receipts ≤ ₹50 Lakh, such as legal, medical, engineering, and more.
Q11: Can deductions be claimed after using presumptive taxation schemes?
A11: No, deductions can't be claimed after using presumptive taxation, except for Chapter VI-A deductions.
Q12: Is Advance Tax required for income under Section 44AE?
A12: Yes, Advance Tax is needed for Section 44AE income; non-payment by March 15 incurs interest.
Q13: Are books of accounts required for Section 44ADA professions?
A13: No, Section 44ADA professions don't need to maintain books of accounts.
Q14: What's the tax treatment for realized unrealized rent?
A14: Realized unrealized rent is taxable in the year of realization, after deducting 30% of Aunrealized rent.
Q15: Can an employer's PAN replace TAN?
A15: No, PAN and TAN serve different purposes; TAN is for tax deduction/ collection, PAN is for individual transactions.
Q16: What's the due date for ITR-4 filing for AY 2023-24?
A16: For AY 2023-24, the due date for ITR-4 filing is July 31, 2023.
Q17: How to handle switching tax regimes if I've filed ITR-1 in the past?
A17: Your regime choice depends on the latest business return; use Form 10IE to opt in/out for the new tax regime, unless specified otherwise.