We have discussed about who can and can’t use the ITR-1 (Sahaj) in my previous article. In addition to ITR-1, other forms ITR-2, ITR-3 and ITR-4 can also be used by an individual, so it’s advisable for us to understand as to who can submit the remaining ITRs.
As far as simplicity and ease of filling up an ITR is concerned, next to ITR-1 comes ITR-2. ITR-1 can’t be used by an HUF, but both ITR-1 and ITR-2 can be used by individual and HUFs. The ITR-2 can be used by all the persons who are not eligible to use ITR-1 and do not have any business or professional income. So, you can use it even if you have more than one property or have agricultural income over Rs5,000 or are a non-resident or are resident and have any asset of income outside India. You can also use ITR-2 for furnishing your income from other sources, against which you wish to claim certain expenses.
All those residents who have an authority to sign in respect of any account situated outside India can also use ITR-2. In case you have any brought forwards losses to be set off against current year’s income or have some losses during the current years and which can’t be set off against current year’s income and therefore have to be carried forward for set off in subsequent years. For all those who are directors and any company or own shares of listed company and who are ineligible to use ITR-1 can use ITR-2.
Briefly stated ITR-2 can’t be used by an Individual or an HUF who have any business or professional income. The income here includes loss also and in case you have incurred any loss in your business howsoever small the amount is, you can’t use ITR-2 and have to invariably use ITR-3 or ITR-4. This form can also be used by the individuals who are partner in a firm, but are not carrying on any business or profession in your own name.
People who do day trading in shares or commodity are under the impression that this income can be offered under the residual head ‘Income from other sources’ as they are not engaged in business as they do not have proper business set up. In my opinion, such transactions amount to business activity and one has to use ITR-3 or ITR-4.
This is the most complicated ITR form for Individuals and HUFs, and is difficult for a layman to fill it up without committing any mistake. As far eligibility to use ITR 3 is concerned, it is simple. You have to use ITR, if you are an individual or an HUF engaged in any business or profession, income where it’s not being offered for taxation under presumptive taxation. However, in case you are offering your business or professional income on presumptive basis, but your total income exceeds Rs50 lakhs, you have to use ITR-3 only.
Form ITR 4
ITR-4 form, known as Sugam, can be used by any individual, HUF or a partnership firm, which wishes to offer their income on presumptive basis, where income is presumed at a minimum rate based on ownership of commercial vehicles or as percentage of your gross receipts.
Please note an LLP is not eligible to use ITR-4. This form can only be used by a person who is resident for income tax purposes and thus a non-resident can’t use it even if his income is below Rs50 lakhs and has income taxable on presumptive basis. In case, you are director in any company or own shares in any unlisted companies you can’t use ITR-4 and have to use ITR in case you have business or professional income taxable eligible for presumptive scheme of taxation.
In case your actual business or professional income is lower than that was is presumed by law, you can’t use this form and have to use ITR-3. Moreover, you have to get your accounts audited and get the report it submitted before submission of the ITR.
I am sure that with the discussion in this article and earlier article it is clear to you as to which ITR form you need to use this year.
The writer is a tax and investment expert and can be reached on email@example.com