What is Income Tax?

The Constitution of India → Schedule VII → Union List → Entry 82 has given the power to the Central Government to levy a tax on any income other than agricultural income, which is defined in Section 10 of the Income Tax Act, 1961

What is Income Tax Return?

Income Tax Return is the form in which assessee files information about his Income and tax thereon to Income Tax Department. Various forms are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7. When you file a belated return, you are not allowed to carry forward certain losses.

APPLICABILITY OF FORMS

ITR-1

This income tax return form is also called a Sahaj form. The ITR-1 form is to be filed solely by an individual taxpayer. Any other assessee liable to pay tax will not be eligible to avail of this form for the purpose of filing their returns. This form is applicable for the following:

  • Individuals who earn income through salary or through means such as a pension.
  • Individuals who earn income from a single housing property.
  • Individuals who have no income from any other business or who have no income from the sale of any assets ie: capital gains.
  • Individuals who do not own any assets or property in countries other than India.
  •  Individuals who do not earn income from any country outside India.
  • Individuals whose income from agriculture is below Rs 5,000.
  •  Individuals who earn income from various investments or sources such as Fixed Deposits, Investments, Shares etc.
  •  Individuals who have not earned income from any windfall such as lotteries or horse racing.
  • Individuals who wish to club the income of their spouse or underage child with their own income, so long as the income to be clubbed is in accordance with the criteria mentioned above.

 

ITR-2

The ITR-2 Form is generally used by individuals who have accrued income through the sale of assets or property as well as individuals who earn income from countries outside India. Individuals or Hindu Undivided Families (HUF) can avail of this form to file their returns. This form is applicable for the following:

  •  Individuals who earn income through salary or through means such as a pension.
  •  Individuals whose total income exceeds Rs. 50 lakhs.
  • Individuals who earn dividend income exceeding Rs. 10 lakhs taxable under Section 115BBDA.
  • Unexplained credit or unexplained investment taxable at 60% under Sections 68, 69, 69A, etc.
  •  Individuals who earn income through the sale of assets or property in India ie: capital gains.
  •  Individuals who earn income from more than one housing property.
  •  Individuals who do not earn income from any business venture.
  •  Individuals who own assets in countries outside of India.
  •  Individuals who earn income from countries outside of India.
  •  Individuals whose income from agriculture is above Rs 5,000.
  •  Individuals who earned income from any windfall such as lotteries or horse racing.

ITR-3

The ITR-3 Form is to be used by a taxpayer who is either an individual or a Hindu Undivided Family (HUF) who solely operate as a partner in a firm but who do not conduct any business under the firm or who do not earn any income from the business conducted by the firm. This form can be filed by those taxpayers whose taxable income earned from business is only in the form of the following received as a partner:

  •  Salary
  • Total income exceeding Rs. 50 lakhs
  •  Dividend income exceeding Rs. 10 lakhs taxable under Section 115BBDA.
  •  Unexplained credit or unexplained investment taxable at 60% under Sections 68, 69, 69A, etc.
  •  Commission
  •  Bonus
  • Interest
  • Remuneration

ITR-4

The ITR-4 form is to be used by those individuals who conduct a business or who earn income through a profession. This form is applicable to any type of business, undertaking or profession, with no limit on the income earned. Along with the income earned from business, taxpayers can also club any income they receive from windfalls, speculation, salaries, lotteries, housing properties etc with their business income. Any individual ranging from shopkeepers, doctors, designers, agents, retailers, contractors etc is eligible to file their income tax returns using this form.

ITR-5

The ITR-5 form is to be used by only by the following entities for filing income tax returns.

  •  Firms
  • Limited Liability Partnerships (LLPs)
  • The body of Individuals (BOI’s)
  •  Association of Persons (AOPs)
  •  Co-operative Societies
  • Artificial Judicial Persons
  •  Local Authorities

 

ITR-6

The ITR-6 form is to be used only by companies except for those companies or organisations that claim tax exemption as per Section 11. Those organisations that claim tax exemptions as per Section 11 are organisations wherein the income received is accumulated from the property used for the purpose of religion or charity. This particular income tax return form can only be filed online.

ITR-7

 Section 139(4A) – Under this section, returns can be filed by those individuals who receive income from any property that is held for the purpose of charity or religion in the form of a trust or legal obligation.

 Section 139(4B) – Under this section, returns are to be filed by political parties provided their total income earned is above the non-taxable limit.

 Section 139(4C) – Under this section, returns are to filed by the following entities:

  • Any institution or association mentioned under Section 10(23A).
  • Any association involved with scientific research.
  • Any institution mentioned in Section 10(23B).
  • Any news agency.
  • Any fund, medical institution or educational institution.

Section 139(4D) – Under this section, returns are to be filed by entities such as colleges, universities or any other such institution wherein income returns or loss is not required to be provided in accordance with other provisions outlined in this sectio

 Section 139(4E) and Section 139(4F) – Returns are to filed by Business Trusts and Investment Funds.