Filing your tax returns may appear to be a difficult task. If filed correctly and on time, it can provide numerous benefits. In this article, we shall explain the details of various ITR forms to help you file the right one.
For the assessment year 2021-22, the Central Board of Direct Taxation (CBDT) has announced a new update to the ITR Forms (ITR-1 to ITR-7). The CBDT added that only the simple minimum changes required due to amendments in the Income Tax Act, 1961 have been made.
What is ITR Form?
Income Tax Return (ITR) is a form in which a taxpayer submits information about their income earned and tax applicable to the income tax department. The department has notified 7 various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till date.
Every taxpayer is required to file his ITR on or before the deadline. The applicability of ITR forms varies based on the taxpayer’s sources of income, the amount of income generated, and the type to which the taxpayer belongs, such as individuals, HUFs, corporations, and so on.
Why should you file ITR?
If any of the following circumstances apply to you, filing an income tax return (ITR) in India is necessary:
- If your gross annual income exceeds the basic exemption limit, see the table below:
Particulars Amount Individuals under the age of 60 Rs 2.5 Lakh Individuals between the ages of 60 and 80 Rs 3.0 Lakh Individuals over the age of 80 Rs 5.0 Lakh
- If you have multiple sources of income, such as a home, a rental property, or capital gains, etc.
- If you want to claim an ITR from the department.
- If you earned or invested in foreign assets during the financial year.
- If you wish to acquire a visa or a loan.
- If the taxpayer is a corporation or a company, regardless of profit or loss.
Related Read: How To Save More Taxes Using An Income Tax Calculator?
What are the different forms and who is eligible to file them?
- Who is eligible to file ITR-1?
- The ITR-1 (Sahaj) is for people with a total salary income of up to Rs. 50 lakh. It could be single ownership, interest income, family pension income, and so on.
- Who is not eligible to file ITR-1 Sahaj?
- This form cannot be filed by taxpayers with salaries exceeding 50 lakhs. ITR-1 is not applicable to non-residents or RNORs (Residents Not Ordinarily Resident).
- People who own two or more residential properties are ineligible for the programme. Taxpayers who earn money as a professional or a business are likewise not qualified to file an ITR-1.
- Who is eligible to file ITR-2 and ITR-3?
- ITR-2 can be filed by HUFs (Hindu Undivided Families) and individuals who do not earn money from a trade, profession, or business (and hence are not eligible to file Sahaj ITR-1).
- ITR Form 3 can be filed by people who earn money from their profession or business.
- Who is eligible to file ITR-4 Sugam?
- HUFs, individuals, and firms (except limited liability partnerships) with a total income of up to 50 lakh, having income from a business, one residential property (single ownership), and a profession with a measure under sections 44AD, 44ADA, or 44AE, or income from interest, family allowance, and agricultural or farm income up to 5,000 are qualified for the ITR-4 Sugam.
- Who is not eligible to file ITR-4 Sugam?
- This form cannot be utilized to file an ITR if the individual owns a residential property, income from salary, or from any other source that exceeds 50 lakhs.
- Furthermore, this form cannot be used by a person who is a director of a corporation and has invested in unlisted equity shares.
- Who is eligible to file ITR-5, ITR-6 and ITR-7?
- ITR Form 5 can be filed by people other than a self-individual, HUF and firms i.e. partnership firm, Limited Liability Partnerships (LLP) etc.
- ITR Form 6 can also be filed by corporations or firms. Political parties, trusts, charitable organisations, and other entities that require exempt revenue under the Act can file Form ITR-7, according to the report.
On the official website, you may find the notified ITR Forms. According to the tax body, there is no difference in the way ITR Forms are filed this year compared to the previous year.
- There are no significant differences in this year’s ITR forms. Few possible improvements are needed to make it easier for taxpayers to comply with and report data regularly.
- Besides the decision between the two regimes, taxpayers must report dividend income received in FY 2020-21 on a regular basis in order to observe advance tax provisions on how to advance tax is calculated and returned on capital gains.
Worried about paying less or more tax?
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What are the advantages of submitting tax returns on time?
Here are the benefits of filing your income tax returns on time:
- TDS refund
- If you are due a refund from the Income Tax Department, you must file an income tax return to claim it.
- Avoid penalties
- If you failed to file your tax returns when you were supposed to, the tax officer has the ability to charge you a penalty of up to Rs.5,000.
- Losses can be carried forward
- If you file your IT return by the deadline, you will be eligible to carry forward all types of losses to the future year. These losses can be set off against your income earned in future years.
- Extra interest rates are avoided
- It will be easier to obtain housing and car loans at lower rates with top banks in India in the future if you keep a consistent record of filing tax returns.
- Processing of Visas
- Most embassies and consulates require you to submit copies of your tax returns for the previous two years when applying for a visa.
As a result, as the ITR filing deadlines approach, it is essential that everyone follow the laws implemented by the government and comply with them. If you wait too long to file your ITR, you could end up incurring a significant fine.
Furthermore, for all single taxpayers, this year (2021-2022) will be crucial. This is the first time that taxpayers will have the option of selecting an additional tax regime. The CBDT also announced that taxpayers will now be able to explain their investments on each of the ITR forms: Sahaj (ITR-1), ITR-2, ITR-3, ITR-4 (Sugam), ITR-5, ITR-6, ITR-7, and Form ITR-V.
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