Which ITR form to file Tax Returns for AY 2015-16?

The Right Form for filing your Income Tax Returns

The Right Form for filing your Income Tax Returns

While filing your income tax return (ITR), the most confusing part for anyone is to decide which ITR forms to fill. There are 6 ITR forms (ITR 1, ITR 2A, ITR 2, ITR 3, ITR 4S, ITR4) for individuals to choose from. How do you decide which one to fill?

The post gives you the details of how to choose the right ITR form?

Which ITR form to choose mainly depends on the source of income.

Types of Income as per I-T Laws:

As per income tax laws there can be following types of income:

1. Income from Salary/ Pension:

This is income that an employee receives from his employer. Pension is also treated as salary for Income tax

2. Income from Home/Real Estate:

This is the income from any property – residential or commercial by renting/leasing it out

3. Income from Capital Gains:

The profits on selling of an asset like equity, mutual funds, gold, NCDs, Bonds or real estate. The capital gains are further classified as Short Term or Long Term depending on the time frame of transactions and asset under consideration.

4. Income from Business/ Profession:

This is income for professional such as lawyers, doctors etc which they generate through freelancing or private practice. Income from running a business is profits that the business generates after deduction of expenses such as rent, salary to staff, etc.

5. Income from Other Sources:

All other income other than the above falls under this category. This might cover interest received on fixed deposits, gifts, winning of prize or lottery, etc

Types of Income as per Income Tax Rules

Types of Income as per Income Tax Rules

Exempted Income:

There are some categories of income which are exempted from income tax. Below is the list of exempted Income:

  1. Interest on PPF
  2. Interest on Tax Free Bonds
  3. Dividend from Stocks and Equity Mutual Funds
  4. Payment on Maturity of Life Insurance/ULIPs
  5. Gratuity
  6. Gift from Relatives
  7. Income up to Rs 1,500 of a minor child (up to 2 Children allowed)
  8. Compensation for Retrenchment or VRS up to Rs 5 lakhs
  9. Compensation received on death or injury
  10. Income from Agriculture

 Which ITR forms to fill?

We list down the eligibility for all the ITR forms and also who should not fill a particular form.

Which ITR Form for filing Tax Return for AY 2015-16?

Which ITR Form for filing Tax Return for AY 2015-16?

ITR 1 (Sahaj):

You should choose this form when:

  • You have income from Salary/Pension
  • Income from only One house property (except where losses are brought forward from previous years)
  • Income from other sources like interest on FD etc (except winning lottery and income from race horses)

You should not choose this form when:

  • HUFs cannot fill ITR 1
  • Income from Business or Profession
  • Have income from more than 1 property
  • Income from winning lottery or from race horses
  • Capital gains by sale of assets
  • Agriculture Income of more than Rs 5,000
  • Carry forward losses from previous years
  • Foreign Income, Assets and financial interest outside India, etc

Change from last year:

Earlier, individuals having exempt income exceeding INR 5,000 were not permitted to use Form ITR-1 but this time only people with agriculture Income of more than Rs 5,000 cannot use ITR 1.

ITR 2A:

An individual or HUF (Hindu Undivided Family) can use ITR2 when:

  • Have income from salary/Pension
  • Income from one or multiple house properties
  • Tax Free Capital Gains (Long term capital gains on Equity and Equity Mutual Funds)
  • Income from other sources (including winning lottery and income from race horses)

You should not choose this form when:

  • Income from Business or Profession
  • Taxable Capital gains by sale of assets
  • Foreign Income, Assets and financial interest outside India, etc

Change from last year:

This is entirely new form.

ITR 2:

  • When you cannot fill ITR 1 and ITR 2A and have no income from Business or Profession

You should not choose this form when:

  • Income from Business or Profession

ITR 3:

An individual or HUF can use ITR3 when:

  • The income is through partnership in a firm
  • Income from one or multiple house properties
  • Capital Gains
  • Income from other sources (including winning lottery and income from race horses)

Should not use ITR3 when:

  • The income is through Income from Business or Profession under sole proprietorship
  • You need to consider ITR 4 and ITR 4S when you have income from Business or Profession.

ITR 4S (Sugam):

An individual or HUF can use ITR 4S when:

  • Income from Small Business which is covered under presumptive tax rules u/s 44AD and 44AE. In case of presumptive tax rules, the income is considered as 8% of the business turnover.
  • The turnover of the business is less than Rs 1 crore
  • You have income from Salary/Pension
  • Income from only One house property (except where losses are brought forward from previous years)
  • Income from other sources (except winning lottery and income from race horses)

You should not choose this form when:

  • Your business/profession does not fall under presumptive tax rules or have turnover of more than Rs 1 crore
  • Income from commission or brokerage
  • Income from Agency business
  • Income from Profession such as lawyer, doctor, engineering, architectural, etc
  • Have income from more than 1 property
  • Income from winning lottery or from race horses
  • Capital gains by sale of assets
  • Agriculture Income or exempt income of more than Rs 5,000
  • Carry forward losses from previous years
  • Foreign Income, Assets and financial interest outside India, etc

ITR 4:

An individual or HUF who has do not qualify to fill any of the above forms (ITR 1, ITR 2, ITR 2A, ITR 3 or ITR 4S) can fill up ITR 4.

This form is most complex of all and if you have several income sources or a good business income, you might want to take assistance of professionals.

I hope the above guidelines would help you to select the right ITR Form.

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