Income Tax Return FY 2022-23 (ITR Filing Assessment Year 2023-24): One should carefully read the instructions provided along with each income tax return form and choose the appropriate ITR form based on your income sources, residential status, and other factors. While filing ITR, the question that first comes into many people’s minds is which form they need to use. In order to make filing returns easier, the Income Tax Department has put out several different forms that an individual taxpayer can use, as per their type of income and other criteria.
If you are confused about which form you need to use while filing your ITR, we have got you covered. Read below to understand the different types of tax returns forms and which one you should file. Also, know about the most common mistakes to avoid when filing your ITR.
Archit Gupta, founder and CEO of Clear, shared which ITR form should be filed by the taxpayers.
Gupta said for individuals there are four ITR forms available. All the forms are applicable for various instances applicable on the individuals.
ITR 1 – It is also known as Sahaj form. This ITR can be filed by an ordinary tax resident of India, who has income from salary, other sources (Dividend, Bank interest etc) and owns only one house property and agricultural income not more than Rs 5,000 annually. Further if the taxable income is more than Rs 50 Lakhs, ITR 1 form can not be filed by the individual. Therefore NRIs cannot file ITR-1.
ITR 2 – This form is used for reporting salary income, other sources income, house property income (more than one) and capital gains. This form can be used by both tax residents (both ordinary and not ordinary) and NRIs. In case the income taxable income is more than Rs 50 Lakhs ITR 2 needs to be filed instead of ITR 1 even if the condition of filing the ITR 1 is met.
Further, holders of unlisted shares or directors of a company need to file ITR 2 even if all the conditions of filing ITR 1 are fulfilled.
If any person is holding any foreign assets, then also ITR 2 needs to be filed instead of ITR 1.
ITR 3 – ITR 3 is the master ITR form, as all the types of income can be reported in ITR 3. Further it can be used to report all the types of tax situations applicable on an individual. In addition to covering all the incomes reportable under ITR 2, business income can also be reported using ITR 3.
This includes business income where books of accounts are kept, the individual opting for presumptive taxation u/s 44AD/ 44ADA/ 44AE, remuneration received from firms etc.
ITR 4 – It is also known as Sugam form. This ITR can be filed by an ordinary tax resident of India, who has income from salary, other sources (Dividend, Bank interest etc), owns only one house property and agricultural income not more than Rs 5,000 annually and reports business income under presumptive taxation scheme. Further if the taxable income is more than Rs 50 Lakhs, ITR 4 form can not be filed by the individual, instead ITR 3 shall be filed.
There shall be multiple combinations based on which the required ITR form shall change, therefore the filers have to be very careful while considering which ITR form should be filed.
When you file your ITR online with any e-filing portal, you don’t need to worry about choosing the right form, as this is done automatically based on the types of income reported by you, Gupta concluded.
Here are some of the most common mistakes to avoid when filing your ITR:
Using the wrong ITR form: As discussed above, there are different ITR forms for different types of taxpayers. Make sure you use the correct form for your situation.
Not reporting all of your income: You are required to report all of your income, regardless of where it comes from. If you fail to report all of your income, you could be subject to penalties.
Making errors in your calculations: Double-check your calculations before you file your ITR. Even a small mistake could have a big impact on your tax liability.
Not verifying your return: Once you have filed your ITR, make sure to verify it carefully. This will help to ensure that there are no errors in your return.
Filing your return late: The deadline for filing your ITR varies depending on your circumstances. Make sure you file your return on time to avoid penalties.
Moreover, the Income Tax department has enabled online filing of income tax returns (ITRs), filed by individuals, professionals and small businesses, for the financial year 2022-23 (or assessment year 2023-24).
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