ITR Forms FY23: Which ITR Should You File? A Complete Guide

ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7 are the seven different forms that the Income Tax Department has announced so far. The application of the ITR form relies on a number of parameters, including sources of income, residential status, taxpayer opting for the presumptive scheme, etc. It is advised that you evaluate your income profile in order to choose the appropriate form for filing. Any of the ITR forms-ITR 1 (Sahaj), ITR 2, ITR 3, or ITR 4-can be used to report several types of income, including salary, rental income from real estate, capital gains, business or profession income, and more. Here's a guide on ITR Forms for FY23, for taxpayers on which ITR should they file and the guidance made here are of different tax experts.

Suresh Surana, Founder, RSM India

The applicability of ITR form depends upon various factors such as residential status, total income, taxpayer opting for the presumptive scheme, etc. Selection of correct ITR form would be important for taxpayers as return furnished in a wrong ITR would be rendered invalid and such return would be treated as a defective return. Some of the indicative condition for selection of correct ITR form are provided as below:

(i) ITR 1 (Sahaj)

ITR 1 can be filed by a Resident Individual whose:

• Total income does not exceed ₹ 50 lakh during the FY

• Income is from salary, one house property, family pension income, agricultural income (up to ₹5000/-), and other sources, which may include savings/ FD interest, interest on income tax refund, etc.

ITR-1 cannot be filed by any individual who:

• is a Resident Not Ordinarily Resident (RNOR), and Non-Resident Indian (NRI)
• has total income exceeding ₹ 50 lakh
• has agricultural income exceeding ₹ 5000/-
• has income from lottery, racehorses, legal gambling etc.
• has taxable capital gains (short term and long term)
• has invested in unlisted equity shares
• has income from business or profession
• is a Director in a company
• has tax deduction under section 194N of Income Tax Act
• has deferred income tax on ESOP received from employer being an eligible start-up
• ·owns and has income from more than one house property

(ii) ITR 2

ITR-2 can be filed by individuals or HUFs who are not eligible to file ITR-1 (Sahaj)

ITR-2 cannot be filed by any individual or HUF, whose total income for the year includes income from profit and gains from business or profession, and also who has income in the nature of interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from a partnership firm.

(iii) ITR 3

ITR 3 can be filed by individuals and HUFs having income from profits and gains of business or profession. Thus, any person not deriving any income from business or profession would not be eligible to file this ITR.

(iv) ITR 4 (Sugam)

ITR-4 can be filed by a Resident Individual / HUF / Firm (other than LLP) who has:

• Income not exceeding ₹50 Lakh during the FY
• Income from Business and Profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE
• Income from Salary/Pension, one House Property, Agricultural Income (up to ₹ 5000/-)
• Other sources (excluding winning from Lottery and Income from Race Horses) which may include interest income from unsecured loan

ITR-4 cannot be filed by an individual / HUF / Firm (Other than LLP) who:

• is a Resident Not Ordinarily Resident (RNOR), and non-Resident Indian
• has total income exceeding ₹ 50 Lakh
• has agricultural income in excess of ₹5,000/-
• is a Director in a Company
• has income from more than one House Property
• has income is in the nature of winnings from lottery, activity of owning and maintaining race horses, income taxable at special rates u/s115BBDA or Section 115BBE
• has held any unlisted equity shares at any time during the financial year
• has deferred income tax on ESOP received from employer being an eligible start-up

Swati Jain, CA & Strategic Business Advisor, Arihant Capital Markets Ltd

Choosing the right ITR form is crucial for accurate tax filing. Here's a breakdown of the applicable forms based on your income and business status:

ITR 1: For resident Indian individuals and HUFs with no business income.

ITR 2: Suitable for HUFs and individuals without business income, but with capital gains or foreign assets.

ITR 3: Required by partners in a firm, HUFs, or individuals with business income.

ITR 4: Designed for firms, HUFs, or individuals with business income under the presumptive taxation scheme.

By understanding the applicable ITR forms, you can ensure accurate and proper tax filing.

Avinash Shekhar, CEO and Founder, TaxNodes

Understanding the appropriate income tax form that applies to you is essential to ensure accurate and timely filing of your Income Tax Return (ITR) in India. The choice of ITR form depends on the nature and sources of your income. To determine the correct form for filing, it is recommended to assess your income profile. Whether you fall under ITR 1 (Sahaj), ITR 2, ITR 3, or ITR 4, each form caters to different income scenarios, such as salary income, house property income, capital gains, business or profession income, and more.

TR 1 (Sahaj): ITR 1, also known as Sahaj, is designed for individuals with relatively simple income sources. This form is applicable for individuals with income from salary or pension, income from one house property (excluding cases where loss is carried forward), and income from other sources (excluding winnings from lottery and racehorses). This form is not applicable if the individual has agricultural income exceeding ₹5,000 or if they are a director in a company.

ITR 2: ITR 2 is for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession fall under this category. It includes individuals with income from salary, pension, multiple house properties, capital gains, and other sources. If you have income from these sources and do not engage in business or profession, ITR 2 is the appropriate form for you.

ITR 3: This form is applicable for individuals and HUFs who have income from a proprietary business or profession. It is also suitable for individuals who are partners in a partnership firm but are not involved in business as a company. If you have income from a proprietary business or profession or if you are a partner in a partnership firm, ITR 3 should be used to file your income tax return.
ITR 4 (Sugam): ITR 4, also known as Sugam, is for individuals, HUFs, and firms (other than LLP) who have opted for the presumptive income scheme under sections 44AD, 44ADA, or 44AE of the Income Tax Act. If you fall under the presumptive income scheme and have a business with a turnover up to ₹2 crore or if you are a professional with gross receipts up to ₹50 lakh, ITR 4 is the appropriate form for you.

It's important to note that the above categorization is a general guideline and therefore, It is important that you consult a tax professional for accurate and up-to-date information based on your specific situation. To ensure accurate compliance and personalized advice, taxpayers can refer to platforms like TaxNodes, that assist users in filing their income tax returns accurately, adhering to tax regulations in their jurisdictions.

Amit Gupta, MD, Sag Infotech

The deadline to file Income Tax Returns (ITRs) for the financial year 2022-23 (assessment year 2023-24) is July 31, 2023. There are four ITR forms applicable to individuals, and online filing is available for ITRs 1 and 4. Mandatory filing is required if the aggregate income from all sources exceeds the basic exemption limit, which is ₹2.50 lakh for individuals below 60 years, ₹3 lakh for individuals between 60 and 80, and ₹5 lakh for individuals above 80.

The income considered for filing should exclude various deductions under Chapter VIA, such as Sections 80C, 80CCD, 80D, 80G, 80TTA, 80TTB, etc. Many individuals wait for their Form-16, which is typically received from employers by June 15 of the assessment year, before filing their ITR.

Choosing the correct ITR form is crucial to avoid filing errors and rejection. For salaried individuals, ITR Form 1 is appropriate, while individuals with both salaried income and capital gains should use ITR Form 2. Self-employed individuals with business profits should file using ITR Form 3. There are also simpler forms (ITR 4, 5, 6, and 7) available for small and medium taxpayers, LLPs, and businesses.

Instructions for the applicability of different ITR forms for FY 2022-23 have not been issued separately by the income tax department, but the Central Board of Direct Taxes (CBDT) notified the ITR forms for the fiscal year in February.

Aashika Jain, Financial Expert and Editor, Forbes Advisor India

Income tax return filing is an important activity that needs to be completed by July 31. To understand which income tax form applies to you, you need to categorize your salary bracket and accordingly choose the form.

Resident individuals who are salaried professionals with a total income of up to INR 50 lakh are eligible for ITR 1 using Form 16. Individuals, HUFs and NRIs whose income from multiple income sources should file ITR via Form ITR 2. The salaried who have made profits via stocks should also file tax via ITR 2.

The salaried who have made profits futures and options trading should file for tax via Form ITR 3. If you have made returns realty, trade and other ways of income such as capital gains must opt for ITR 3. Individuals, HUFs, and corporates that have recorded a revenue of more than INR 2 cr and individuals who earn a revenue of up to INR 50 lakh need to opt for tax via ITR 4. Freelancers should also opt for ITR 4.

Satyen Kothari, the founder and CEO of Cube Wealth

The appropriate ITR form depends on your income sources, the nature of income, and certain other factors. Generally, ITR-1 is for individuals with income from salary, house property, or other sources, while ITR-2 is for individuals and HUFs with income from capital gains. ITR-3 is for individuals and HUFs with income from business or profession, and ITR-4 is for individuals and HUFs with presumptive income from business or profession. Consulting a tax professional can help determine the correct ITR for your specific situation.

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