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Why Income Tax Return Filing is Important / How to choose ITR form

ITR (Income Tax Return) should be filed by individuals and entities who have taxable income during the financial year. This includes:

 

  • Individuals who are residents of India and have an income of more than Rs. 2.5 lakhs per annum.

  • Individuals who are non-residents of India but have earned income in India.

  • Companies, firms, LLPs, and other types of businesses that have earned taxable income during the financial year.

  • Partnerships and sole proprietorships that have earned taxable income during the financial year.

  • It is important to note that even if you are not required to file an ITR, it is advisable to do so as it helps to establish your financial credibility and can be useful in various situations such as obtaining loans, visas, etc.

How to choose ITR form

 

Choosing the correct ITR (Income Tax Return) form is important to ensure that your tax return is filed correctly and efficiently. The following are the steps to choose the correct ITR form:

 

Step 1: Determine your residential status

The first step is to determine your residential status. This is important because different ITR forms are applicable based on your residential status. If you are a resident of India, you can file ITR 1, 2, 3, 4, 5, 6, or 7, depending on the sources of income. If you are a non-resident, you can file ITR 2 or 3.

 

Step 2: Determine your income sources

The second step is to determine your income sources. Based on your income sources, you need to select the appropriate ITR form. For example, ITR 1 is applicable for individuals having income from salary, one house property, and other sources like interest income, etc., whereas ITR 2 is applicable for individuals and HUFs having income from capital gains, foreign assets, and multiple house properties.

 

Step 3: Check for other criteria

There are other criteria that you should consider while choosing the correct ITR form. For example, ITR 1 is not applicable for individuals having agricultural income of more than Rs. 5,000, ITR 4 is applicable only for individuals and HUFs having presumptive income from business and profession, and ITR 5 is applicable for LLPs, firms, AOPs, BOIs, and artificial juridical persons.

 

Once you have determined your residential status, income sources, and other criteria, you can choose the appropriate ITR form. It is advisable to consult a tax professional if you are unsure about which ITR form to file.