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Confused about which ITR form to use? Here's the help

Choosing the right ITR form is important to avoid unnecessary delays in the process of returns and then to avoid conflicts.

Income Tax Return (ITR) forms vary depending on the assessor's type of income, nature of income (domestic or foreign), etc. For example, there is a separate ITR form for salaried employees and a separate form for businesses and professionals.

Which ITR form is applicable to you?

ITR-1: If you are a salaried person and your total income for the financial year 2020-21 is up to Rs 50 lakh, then ITR-1 is for you. Remember, salary also includes pension income.

If you earn income from other sources like interest on bank deposits and a home property, you can file a return in ITR1. Also, if your agricultural income is up to Rs. 5,000, you can use ITR 1 to file your return.

ITR-2: If your salary income is more than Rs 50 lakh, use ITR-2.

ITR-2 can be used if you have income in the form of capital gains from more than one home property or if you have earned foreign income or own foreign property. If you hold a directorship in a company or you only have unlisted equity shares, you must use ITR-2 to file a return.

ITR-3: This form is for traders and professionals who do not earn salaried income. All income heads eligible for ITR-2 are also valid for this form. If you are a partner of a firm, you should use ITR-3.

ITR-4: ITR-4 can be used by both residents and HUFs who have earned income from a business or occupation in the previous financial year, but want to adopt a Presumptive income Scheme (PIS) to calculate their income tax liability. Pursuant to Sections 44AD, 44AE and 44ADA of the Income-tax Act, 1961, PIS can be used by businesses with a total turnover of less than Rs. 2 crores. It can be used by eligible professionals who received less than Rs 50 lakh in the previous financial year. The main advantage of choosing PIS is that you do not need to keep books of accounts.

Under the PIS scheme, businesses can estimate their net income at a rate of 6 per cent of their total revenue if the total receipts are made digitally. In the case of cash receipts, it will be at 8 per cent. On the other hand, doctors, lawyers, architects and interior designers who choose PIS have to declare 50 per cent of the total receipts as profit in the financial year and tax it accordingly. However, both business owners and professionals can voluntarily declare their income at a higher rate than required under the plan.

Remember, if a person's business turnover is more than Rs 2 crore, he cannot opt ​​for PIS. So, ITR-4 will apply instead of ITR-3. In addition, the total income for filing returns using ITR-4 should not exceed Rs 50 lakh.

Also, people who want to reduce expenses with the income earned cannot opt ​​for PIS and thus ITR-4 will not be applicable.

What happens if I fill in the return in the wrong ITR form?

Director Santosh P, Director, Alliance Tax Experts warned that if you use the wrong form, the Income Tax authorities may consider it as defective as per the provisions of Section 139 (9) of the Income Tax (IT) Act.

However, the tax department, while processing the returns, notifies the assessors that they have filed the return in the wrong ITR form and give them the opportunity to correct it or file it using the correct ITR form.

 “Where the taxpayer selects the incorrect ITR form and files the return, there is an option to rectify the error by filing a revised return within the prescribed time,” Santosh P.

Upon receipt of the notice, you will have 15 days to file a revised return. “If the defect is not removed in time, the ITR can be considered invalid and the taxpayer will have to face punitive consequences such as not filing a return,” Santosh P.

Then it is important to choose the right ITR form to avoid unnecessary delays and conflicts.

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