ITR Series: Day 3:  Types of ITR Forms- Which one is right for you?

Overview

Filing your Income Tax Return (ITR) is more than just ticking a legal checkbox—it’s a reflection of your financial awareness. 

But here’s the catch: choosing the wrong ITR form can lead to delays, rejections, or penalties.

👉 Think of it like sending a wedding RSVP to the wrong address—your intent was right, but the outcome can go terribly wrong.

So, how do you know which ITR form is for you?

Let’s break it down in the cleanest, simplest way. 

 

 What’s New for FY 2024-25?

• Individuals earning LTCG from equity/mutual funds up to INR 1.25 lakh (within the exemption limit) can now file ITR-1.
• Digital asset income must be reported under capital gains in applicable forms.
• Tighter scrutiny for foreign income/assets, and presumptive taxation reporting rules.
• Reporting of Assets and Liabilities if Gross total income exceeds INR 1 Crore.

 ITR Form Snapshot: Who Should File What?

Breakdown of Each ITR Form

 

✅ ITR-1 (Sahaj) – “Simple & Straightforward”

 

Use if you:

• Are a Resident (Ordinary) individual
• Earn up to INR 50 lakh
• Have income from:
  • Salary or pension
  • One house property
  • Interest or other income (excluding lottery/horse race)

New: Can be used even with LTCG < INR 1.25 lakh from equity/mutual funds

 

Don’t use if you:

• Have capital gains exceeding the limit
• Own more than one house
• Have foreign assets or directorships

Best for: Salaried employees, pensioners with simple income

 

✅ ITR-2 – “For the Investor & Global Earner”

 

Use if you:

• Have capital gains (stocks, mutual funds, property)
• Own multiple properties
• Have foreign assets or income
• Hold directorships/unlisted shares

Don’t use if you:

• Earn from business or profession

Best for: Stock traders, NRIs, high net-worth individuals

 

✅ ITR-3 – “The Business Mind”

 

Use if you:

• Are a proprietor, professional, or consultant
• Have business/profession income
• Also have salary, capital gains, or interest income
• Earn through multiple income streams

Best for: Freelancers, self-employed professionals, shop owners

 

✅ ITR-4 (Sugam) – “Presumptive & Proud”

 

Use if you:

• Are under presumptive taxation:
  • Sec 44AD – Small businesses (≤ INR 2 crore)
  • Sec 44ADA – Professionals (≤ INR 50 lakh)
  • Sec 44AE – Vehicle owners

Don’t use if you:

• Have foreign income/assets
• Want to claim capital gains

Best for: Micro businesses, small traders, independent professionals

 

✅ ITR-5 – “The Entity Return”

 

Use if you’re a:

• Partnership firm, LLP, AOP, BOI, Society or Trust (non-Sec 11)

Best for: Firms other than companies

 

✅ ITR-6 – “Corporate Compliant”

Use if you are a:

• Company not claiming exemption under Section 11

Best for: Private/public companies

 

✅ ITR-7 – “For the Givers”

 

Use if you’re filing under:

• Section 139(4A): Charitable trusts
• Section 139(4B): Political parties
• Section 139(4C/4D): Research institutions, educational boards, etc.

Best for: NGOs, trusts, institutions

 
Common Mistakes to Avoid:

• Filing ITR-1 despite holding foreign assets or earning taxable capital gains.
• Using ITR-4 when not eligible under presumptive taxation.
• Filing ITR-2 if you have business income (should be ITR-3)

How to Choose the Right Form – Ask Yourself:

1. What’s your primary source of income?
2. Are you an individual, firm, or company?
3. Do you hold any foreign assets, unlisted shares, or directorships?
4. Are you eligible for presumptive taxation?

These four questions are your shortcut to clarity. Answer them, and your ITR form will pick itself.

 

🔍 Real-Life Examples

• Ravi, a salaried employee with INR 40 lakh income and no other assets – ITR-1
• Megha, who sold mutual funds (INR 1.8 lakh LTCG) and owns two flats – ITR-2
• Arjun, a freelancer earning INR 38 lakh and trading stocks- ITR-3
• Shruti, a designer with INR 18 lakh under presumptive tax (Sec 44ADA)- ITR-4

 Conclusion

Choosing the right ITR form isn’t just about staying compliant—it’s about being financially smart. The right form helps avoid notices, get refunds faster, and ensures peace of mind.

Don’t guess—file right.

 

What’s Next? Day 4: Know Your Deadlines – All About ITR Filing Due Dates ⏳

 

Still unsure which form applies to you? Drop your income type in the comments—we’ll help you decide!