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Which ITR Form to Choose: Right Income Tax Return form for your profession / income type

Posted Date: 02 Aug 2012 |Updated: 02-Aug-2012 |Category: Income Tax and Exemptions |Author: |Member Level: Gold |Points: 60 (Rs40) |


Confused about which ITR form to choose while e-filing Income Tax Return? Which is the right Income Tax Return form for your income type or profession? Here we will answer these questions to help you find the correct ITR form for different professions.

Which ITR form to choose from the available options is often a puzzling question while e-filing Income Tax Return, especially for beginners. In the official website there are five ITR forms like ITR-1, ITR-2, ITR-3, ITR-4 and ITR-4S. Each one of these Income Tax Return forms are for different professions or income type, and choosing a wrong ITR form can lead you into troubles. It is therefore very essential to choose the right ITR form for your incomes. Moreover, under the present economic scenario, most people have more than one avenues of income. Things have changed a lot when people headed straight to their offices, came back home with the salary each month, and did nothing else. These days even salaried employees have different types of side incomes. Some of them offer private tuitions, some run a shop in the evening and on holidays, some earn from Google AdSense Revenue, some rent out properties like garages or houses, while some people might have a steady cash flow from renting out vehicles or even personal belongings. In brief, people make money from different ways these days instead of having a simple job or business. And these multiple sources of income make it even difficult to choose the right ITR form while filing Income Tax Return each year. Instead of heading to your IT lawyer to help you on choosing the right income tax return form, you can better read this article for free to find out yourself which ITR form you should fill in for your type of income.

Different types of income tax return (ITR) forms


As we have already mentioned there are generally five different kinds of income tax return (ITR) forms. Please note that when we say five ITR forms we are referring to individuals or members of a Hindu Undivided Family (HUF). Apart from these there are ITR-5, ITR-6 and ITR-7 for business firms, companies and trustees as well, but that is a different discussion altogether. We assume that if you are running a business you know which ITR form to choose for business entities. Here we have reproduced the chart from the official website of Income Tax that show the different ITR forms for different professions and income types. Side by side we have elucidated these various ITR forms further for a better understanding of which ITR form you should fill in for your income type.



How to choose the right income tax return form in India

ITR Form 1: Who should choose Income Tax Return Form I?


You should choose the most basic income tax return form, ITR-1, if you have the most basic income. Here we have explained which persons should fill in ITR-1 form, which persons should not, and which professionals usually fills in ITR-1.

You should choose ITR-1 form for e-filing IT return, if...
  1. You are a salaried person, or retired person drawing pensions, or family pensions.
  2. You are earning money from interest bearing instruments. In plain language, you are enjoying interests from savings accounts, fixed deposits, recurring deposits, National Savings Certificates (NSC) and so on.

You should not choose ITR-1 form for e-filing IT return, if...
  1. You are filling in the form on behalf of a Hindu Undivided Family (HUF).
  2. You earned money from gambling, horse races, or any other way of betting.
  3. You earned money from any business.
  4. You earned money from monetizing your skill sets, like practising medicine or law, repairing instruments, blogging, selling paintings and so on.
  5. You made money selling shares or mutual funds in the last financial year.
  6. You made money selling or renting out house(s), land(s) and so on. In technical terms, you had capital gains.
  7. You have paid EMI for your house.


ITR Form 2: When should you fill in Income Tax Return Form II?


Income Tax Return Form 2 or ITR-II covers more avenues of income and for most people, this is the right ITR form to choose. In the last generation, more people had to file ITR-1 form because they simply had their jobs and some basic investments in banks or post offices. They were less careful about mutual funds as well, and investments often were forgotten for years (as has been the case for my own father!). However as I said under the present socio-economic scenario, incomes are more diverse and have complicated choosing the right ITR form. These days, most young people invest in properties and rent them out, or buy and sell shares and mutual funds on regular basis.

You should choose ITR-2 form for e-filing IT return, if...
  1. You have salary or pension or family pension.
  2. You have interest bearing instruments like savings bank accounts, fixed deposits and NSC.
  3. You have made money selling shares or mutual funds in the last financial year.
  4. You have earned from selling or renting out your house or land or any other landed property in the last FY.
  5. You have paid EMI to repay home loans.
  6. You are filing income tax return online on behalf of a Hindu Undivided Family (HUF) not having income from business.

You should not choose ITR-2 form for e-filing IT return, if...
  1. You have a business.
  2. You make money from professions or monetize your skill sets. Freelance writers and bloggers like me cannot choose ITR-2 form for filing IT return.


ITR Form 3: When should you fill in Income Tax Return Form III?


If you are neither a salaried or pensioner employee, nor a professional or businessperson, but are a partner in a firm, this one is for you. Remember you should choose ITR form 3 only if you are a partner in a legal firm or business entity and do not draw salary for it, nor are the sole proprietor.

You should choose ITR-3 form for IT return filing, if...
  1. You are a partner in a legal business firm (or business entity).
  2. You are filing income tax return on behalf of a HUF which is a partner in a firm.

You should not choose ITR-2 form for e-filing IT return, if...
  1. You own a business or proprietorship.
  2. You monetize your skill sets or if you are a freelancer or professional.


ITR Form 4: When should you fill in Income Tax Return Form IV?


With the rising unemployment under the present economic conditions, more and more people are needed to choose ITR form 4 for filing IT return. Yes, that means more and more people are moving towards self employments. This can mean having a proprietorship business, a private shop, having technical skill sets, freelancing and so on. Let us see it in details.

You should choose ITR-4 form for IT return filing, if...
  1. You have a proprietorship business, or you are filing on behalf of a HUF having a proprietorship.
  2. You have technical skills and monetize that. This means you are automobile mechanic, electrical serviceman, freelance journalist or writer, blogger or website owner, run a mall scale industry, practice medicine or law and so on.
  3. You have agricultural incomes.

You should not choose ITR-4 form for e-filing IT return, if...
  1. You do not own a business or proprietorship, or are not filing on behalf of a HUF having proprietorship.
  2. You do not monetize your skill sets or freelance.


ITR Form 4S (Sugam): When should you fill in Sugam ITR form?


This is completely a new addition. Let us see when a person should choose ITR-4S form, or Sugam ITR form.

You should choose ITR-4 form (Sugam), if...
  1. You are a small businessperson who comes under presumptive taxation.

You should not choose ITR-4 form (Sugam), if...
  1. You have any asset. This means if you have anything that generates income over a certain period of time, like a rented out house, or any entity that generates financial interest, you cannot fill in ITR Sugam form.
  2. You have incomes under Capital Gains which is not exempted from tax.
  3. Agricultural income exceeding Rs. 5000.
  4. You earn from speculative business, or are a freelance professional. In that case, choose ITR-4 form.
  5. You have income as commission or brokerage from any agency or other business. Choose ITR form 4 for such incomes.


FAQs about choosing ITR form


I am a salaried employee, but I run a shop too. Which ITR form I should choose?

If you are a salaried employee but run a shop in free time, you are having an income from a proprietorship. Choose ITR-4 form.

I am a salaried employee, and I monetize my websites. I blog and earn from Google AdSense. Which ITR form I should choose?

You can choose ITR-1 / ITR-2 (whichever is applicable as per other terms) and then show your earnings as income from other sources. However if you earn a significant amount of revenue you can think have registering a proprietorship and file ITR-4.

Should the income from offering tuition go into ITR? Which ITR form I should choose for tuition income?

If you earn from offering private tuitions only, you are monetizing your skill sets and you have to choose ITR-4 form. However if you offer tuition alongside a regular job and the amount is not too much you can show it under income from other sources in ITR-1 / ITR-2 (whichever is applicable as per other terms).

I am a salaried person, but sell insurance/loan/real estate policies. Which ITR form should I go for?

Since you earn in form of commission or brokerage, you should go for ITR-4.


Comments

Guest Author: Gopal25 Aug 2012

Another blog from Pankaj batra says, if one holds single house property still he can go for ITR1, from yours I see, for emi payments, we shall use ITR2. Can you help clarify please

Guest Author: Milly16 Oct 2012

Wodnefrul explanation of facts available here.

Guest Author: kchitesh19 Nov 2012

I was a partner till December 2011. Recd salary and share of profit till that date. Ceased to be partner on 31-03-2012, which ITR SHOULD I use?

Guest Author: RP Sati31 Dec 2012

I am a salaried person and I earn income from capital gain of investment in equity market and through offline computer works. Which ITR form should I choose?



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