Business Today

The Right Choice: Which income tax form should you fill to declare returns?

By Renu Yadav   New Delhi     Print Edition: June 4, 2017
The Right Choice

Choosing the right income tax form is important. Using the wrong one means the return will be rejected. For assessment year 2017-18, the Central Board of Direct Taxes has notified new simplified income tax return forms. It has also made several changes in older forms that you should be aware about, especially if you file returns on your own.

Declare cash deposited in banks during demonetisation

Those who deposited Rs 2 lakh or more in an account during the demonetisation period will have to mention the amount deposited and details such as bank name, branch, IFS code, and account number in a new column. "At the time of demonetisation, the authority concerned had said that the probability of receiving a notice for depositing cash will be less in cases where the deposit amount is less than Rs 2.5 lakh. Now, with the addition of column 'cash deposit in case amount is Rs 2 lakh or more,' it seems that the chances of getting a notice have increased," says Sudhir Kaushik, CFO, TaxSpanner.com.


Aadhaar mandatory

Now, mentioning the Aadhaar number is mandatory for filing income tax returns. The rule will come into effect from July 1. You will have to mention the 12-digit Aadhaar number or the 28-digit Aadhaar enrolment number while filing the return. Till last year, this was optional. Also, it is now mandatory to give information about all the bank accounts held during 2016-17. You don't have to give details of dormant accounts though. We tell you how to select the right form.

THE NEW ITR- 1 (SAHAJ)

It is a one-page form for individuals with income of up to Rs 50 lakh a year. This includes salaried income, interest income and income from one house property. "Those who have income of more than Rs 50 lakh or own more than one house property will not have to file this form," says Archit Gupta, Founder and CEO, Cleartax.com. The asset and liability column has been removed from the ITR- 1 (Sahaj) form. Earlier, a person with income of more than Rs 50 lakh in a year had to declare assets and liabilities while filing the return. This has been done away with as a person with income over Rs 50 lakh can't file ITR-1. All other forms still have the asset and liability column.


Who all can't opt for this form

  • Those who have income of more than Rs 50 lakh
  • Those with more than one house property.
  • People with agriculture income in excess of Rs 5,000
  • Those having income from business and profession
  • Those having income from capital gains
  • Those with income or asset outside India during the year

ITR-2

The number of income tax forms has been reduced from nine to seven. "Old ITR-2, ITR-2A and ITR-3 have been done away with and merged with new ITR-2," says Gupta of Cleartax.com. ITR -2A was for those having more than one house property while ITR-3 was for those having income from business or profession from a partnership firm. ITR-2 was for those having more than one house property plus taxable capital gains. Now, if you have salary income or more than one house property or taxable capital gains or income from business and profession from a partnership firm, you will have to file the new ITR-2 Form. It has the asset and liability column under which the taxpayer will have to give details of movable properties and immovable such as description, address and cost. "There is a major change in the assets and liabilities column. The tax department is seeking reports of assets in a detailed format. The taxpayer will have to give the description of the property, the address as well as the cost. Till last year, it used to ask only for cost," says Gupta of Cleartax.

Also, one has to disclose the various financial assets, including, bank deposits, mutual funds, shares, and insurance policies. Earlier, the tax department used to ask only for details of banks deposits.


Who can't file this form

  • This form can't be used by a person who is eligible to file ITR- 1.
  • Those who have income under business and profession through a proprietorship firm.

ITR-3

As ITR-2A and ITR-3 no longer exist, ITR-4 and ITR-4S (Sugam) have been renumbered as ITR-3 and ITR-4 (Sugam), respectively. This form is to be filled by those who have income from business and profession. Income from salary, house property, lottery, interest or any other income not from business and profession can be included in this form.

ITR-4 (Sugam)

This form is for those who opt for the presumptive income scheme. This scheme is for businesses that do not have the resources to maintain proper books of accounts. So, they pay income tax based on estimated income. But if gross turnover/receipts from the business exceeds Rs 2 crore in a financial year, they will have to file ITR-3.

ITR-5

This income tax return is filed by firms, limited liability partnerships, association of persons and body of individuals.

ITR-6

It is for companies other than those claiming exemption under Section 11. Companies claiming exemption under Section 11 are those whose income from property is held for charitable or religious purposes. This has to be filed electronically.

ITR-7

For persons and companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F), which includes sciectific research agencies, charitable or religious purposes, etc.

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