🧾 Module 4: Choosing the Right ITR Form

📌 Table of Contents:

1. Introduction

2. Why Choosing the Right ITR Form Matters

3. Overview of All ITR Forms

4. ITR-1 (Sahaj)

5. ITR-2

6. ITR-3

7. ITR-4 (Sugam)

8. ITR-5, ITR-6 & ITR-7 (Overview)

9. Common Mistakes to Avoid

10. Conclusion

11. FAQs

---

✅ Introduction

Filing your Income Tax Return (ITR) is not just a formality—it’s a responsibility. But for many beginners, the biggest confusion is:
“Which ITR form should I choose?”

The Income Tax Department has seven ITR forms (ITR-1 to ITR-7), each designed for a different type of taxpayer. Filing the wrong form can lead to notices, penalties, or your return being marked as defective.

In this blog, we break down each form in simple terms, so you can confidently file your return for AY 2024–25.

---

📍 Why Choosing the Right ITR Form Matters

✅ Ensures compliance with tax laws
✅ Reduces the risk of errors or scrutiny
✅ Helps claim the correct deductions and exemptions
✅ Enables faster processing of refunds

Let’s now understand the available forms and who should file them.

---

📋 Overview of All ITR Forms

Form	Applicable To	Key Use
ITR-1	Salaried individuals with simple income	Most common
ITR-2	Individuals with capital gains or multiple properties	Advanced income
ITR-3	Individuals with business/professional income	Business/freelancers
ITR-4	Presumptive taxpayers (under Sec 44AD, 44ADA)	Small businesses
ITR-5	Partnerships/LLPs/Trusts	Non-individuals
ITR-6	Companies (other than those claiming exemption under Sec 11)	Corporate tax
ITR-7	Trusts, Political parties, Charitable institutions	Exempt institutions

Let’s now look at each one in detail.

---

🧾 ITR-1 (Sahaj)

Who Can File:

• Resident individuals (not HUF)
• Total income up to ₹50 lakhs
• Income from:

1. Salary/pension
2. One house property
3. Other sources (FD interest, savings interest, etc.)

Who Cannot File:

• Income from capital gains
• Owning more than one house property
• Agricultural income > ₹5,000
• Director in a company
• Holding unlisted equity shares

👉 Best for: Salaried employees with a single home and no business/capital gain income.

---

📑 ITR-2

Who Can File:

• Individuals and HUFs with:

1. Capital gains
2. More than one house property
3. Foreign income/assets
4. Agricultural income > ₹5,000
5. Director/unlisted shares

Who Cannot File:

• Income from business/profession

👉 Best for: Individuals with capital gains or foreign assets but no business income.

---

📘 ITR-3

Who Can File:

• Individuals and HUFs having:

1. Business or professional income
2. Freelancing or consulting income
3. Income from partnerships (excluding LLPs filing ITR-5)

👉 Best for: Freelancers, consultants, and business owners not under presumptive taxation.

---

📙 ITR-4 (Sugam)

Who Can File:

• Individuals, HUFs, Firms (other than LLPs) opting for:

1. Presumptive taxation under Sec 44AD (business)
2. Sec 44ADA (professionals)
3. Sec 44AE (transporters)

• Total income up to ₹50 lakh

Who Cannot File:

• Non-residents
• Income from more than one house property
• Capital gains
• Foreign assets
• Director in a company

👉 Best for: Small businesses or professionals using presumptive income scheme.

---

🏢 ITR-5, ITR-6, and ITR-7 – Quick Overview

Form	Applicable To	Notes
ITR-5	Partnerships, LLPs, AOPs, BOIs	Not for individuals or companies
ITR-6	Companies (excluding those claiming exemption under Sec 11)	Mandatory e-filing
ITR-7	Entities under Sec 139(4A to 4D) like trusts, political parties	For exempt institutions

👉 If you run a registered LLP, NGO, or company—consult your tax advisor for the right form.

---

⚠️ Common Mistakes to Avoid

❌ Choosing ITR-1 when you have capital gains
❌ Using ITR-4 for regular business (not presumptive)
❌ Not disclosing foreign income/assets in ITR-2
❌ Using the wrong form due to lack of knowledge of exemptions

---

🧾 Conclusion

Choosing the right ITR form is the first and most important step in tax filing. Once you understand your sources of income, it becomes easy to identify the appropriate form. Filing the correct form not only ensures faster refund processing but also helps avoid legal issues later.

In our next module, we’ll guide you on how to file your return online step-by-step, along with important tips to avoid errors.

---

❓ FAQs

1. Can I file ITR-1 if I have capital gains of ₹10,000?
👉 No, you must file ITR-2 or ITR-3 depending on other sources of income.

2. What if I choose the wrong ITR form?
👉 Your return may be treated as defective under Sec 139(9), and you’ll be asked to file a revised return.

3. I am a freelancer earning ₹12 lakh. Which form should I use?
👉 If you're opting for presumptive taxation (Sec 44ADA), use ITR-4; otherwise, ITR-3.