When it comes to income tax return filing, choosing the correct ITR form is one of the most critical steps. Each Income Tax Return (ITR) form is designed for a specific category of taxpayers and types of income. Filing the wrong form can lead to rejections, notices from the Income Tax Department, or delayed processing of refunds.
Let’s break down the differences between the most commonly used ITR forms: ITR-1, ITR-2, ITR-3, and ITR-4.
ITR-1 (Sahaj)
Who can use it: Resident individuals with income up to ₹50 lakh from salary, one house property, and other sources like interest.
Who cannot use it: Individuals with capital gains, income from business or profession, or more than one house property.
Best suited for: Salaried employees with straightforward income.
ITR-2
Who can use it: Individuals and HUFs not having income from business or profession.
Includes: Income from salary, multiple house properties, capital gains, foreign income/assets.
Best suited for: Investors, NRIs, or individuals with capital gains or foreign income.
ITR-3
Who can use it: Individuals and HUFs having income from business or profession.
Includes: All incomes under ITR-2 plus income from business/profession, partnership firms (not LLPs).
Best suited for: Professionals like doctors, lawyers, consultants, or those with business income.
ITR-4 (Sugam)
Who can use it: Individuals, HUFs, and firms (other than LLPs) opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE.
Includes: Business income where books are not required to be maintained.
Best suited for: Small business owners and freelancers with income up to ₹50 lakh.
Conclusion
Selecting the right ITR form is essential for accurate and hassle-free income tax return filing. Understanding your sources of income and how they are classified under the tax laws will help you file the correct form and stay compliant. When in doubt, consulting a tax professional can save you from costly mistakes and ensure smooth processing of your return.
