Income Tax Return (ITR) is the process through which the assessee pass on to the information about his income and tax thereon to the Income Tax Department. Filing of income tax return is mandatory for every taxpayer, where the gross total income from salary, rent, business, capital gain or any other gains exceeds the specified exemption limit.
Different assessee having income from different sources files different ITRs. Form ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 are filed with Income Tax department on or before specified due date by the assessee as per their source of income. Belated ITR is also allowed after paying certain fees but there are some restrictions like the assessee is not allowed to carry forward of certain losses.
According to the Income Tax Act, the income is classified into five heads, which are as below:-
Income from Salary
Income from House Property
Income from Business and Profession
Income from Capital Gain
Income from Other Sources
According to the Income Tax Act, 1961 obligates citizens to give details of their income in a form called Income Tax Return at the end of every financial year to the Income Tax Department. The ITR will be processed by the Income-tax department, once filed by the assessee. Only those Forms which are correct and filed by the eligible Assessees are processed by the Income Tax Department of India. It is therefore important to know which particular form is appropriate for the assessee.
Following are the Income Tax Return Forms released by the Income Tax department:-
ITR-1 is to be used by an individual whose total income for any assessment year includes:-
i. Income from Salary/ Pension; or
ii. Income from One House Property (Cases, where loss from House Property is brought forward from previous years, are excluded); or
iii. Income from Other Sources (excluding Winning from Lottery and Income from Horse Race)
ITR 2 is to be used by an individual or a Hindu Undivided Family whose total income for the Assessment Year includes:-
i. Income from Salary/Pension; or
ii. Income from House Property; or
iii. Income from Other Sources
iv. Income from Capital Gains; or
v. Share of profit fom the Partnership firm
vi. Foreign Assets/Foreign income
vii. Agricultural income more than Rs 5,000
Further, in a case where the income of another person like spouse of assessee, child, etc. is to be clubbed with the income of the assessee, ITR-2 form needs to be submitted.
The Current ITR-3 Form is filed by an individual or a Hindu Undivided Family who has income from proprietorship business or income from profession. The persons having income from following sources are eligible to file ITR-3:
i. Carrying on a business or profession
ii. Income from House property, Salary/Pension and Income from other sources may also be included.
Individuals and Hindu Undivided Families (HUFs) having income from a business or profession and who have opted for the presumptive income scheme as per Section 44AD, Sec 44ADA and Section 44AE of the Income Tax Act 1961 are liable to file thier return in ITR-4. However, if the turnover of the business exceeds Rs 2 crores, the taxpayer needs to file ITR-3.
ITR 5 is being filed by firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons) and BOIs (Body of Individuals).
ITR-6 is being filed by the companies other than companies claiming exemption under section 11 of Income Tax Act, 1961. ITR-6 has to be filed electronically only. This retrun is filed by the trust or society where the income is recieved from the property held for charitable or religious purposes.
ITR-7 needs to be filed by the persons including companies which are required to furnish return under section 139 (4A) or section 139(4B) or section 139(4C) or section 139(4D) of Income Tax Act, 1961.
Easy access of Bank Finance
Income tax returns are mandatory to get various financial facilities / loan from the Banks / Financial Institutions.
For availing Home Loan, Education Loan, Personal Loan, Car Loan, Business Loan, Income Tax return is mandatory.