Which ITR Form Should You File? Complete Guide to ITR-1 to ITR-7

The Income Tax Department has prescribed seven different ITR forms, each meant for a different category of taxpayer based on the nature and level of income. Filing the wrong form can result in your return being treated as defective, so it is important to choose the correct one.

This guide explains, in simple terms, who should use each ITR form.

ITR-1 (Sahaj)

ITR-1, also known as Sahaj, is the simplest form and is meant for resident individuals (other than not ordinarily resident) having:

• Income from salary or pension
• Income from one house property (in recent years extended, subject to the applicable notification for the year, to cover up to two house properties in some cases)
• Income from other sources, such as interest income (excluding winnings from lottery and income from race horses)
• Agricultural income up to a specified small limit
• Total income generally up to Rs. 50 lakh

ITR-1 cannot be used by an individual who is a director in a company, holds unlisted equity shares, has capital gains, has foreign income or foreign assets, or has income from business or profession.

ITR-2

ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession, but who have any of the following:

• Capital gains from sale of shares, mutual funds, property, etc.
• Income from more than one house property, beyond the scope allowed under ITR-1
• Foreign income or foreign assets
• Being a director in a company
• Holding unlisted equity shares
• Total income exceeding the limit prescribed for ITR-1

ITR-3

ITR-3 is meant for individuals and HUFs having income from business or profession under the normal (non-presumptive) provisions, including income as a partner in a firm (other than share of profit, which is exempt, but including remuneration and interest received from the firm). It can also be used by individuals and HUFs who have all the types of income covered under ITR-2 in addition to business or professional income.

ITR-4 (Sugam)

ITR-4, also known as Sugam, is meant for resident individuals, HUFs and firms (other than LLPs) who have opted for the presumptive taxation scheme under Sections 44AD, 44ADA or 44AE, and whose total income is generally up to Rs. 50 lakh, along with income from salary/pension, one house property and other sources. A taxpayer having capital gains, foreign income/assets, or being a company director cannot use ITR-4.

ITR-5

ITR-5 is meant for entities such as firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and certain other artificial juridical persons, other than individuals, HUFs and companies (which file ITR-6), and trusts required to file ITR-7.

ITR-6

ITR-6 is meant for companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes). This form must generally be filed electronically with a digital signature.

ITR-7

ITR-7 is meant for persons, including companies, required to file a return under specific provisions applicable to charitable or religious trusts, political parties, research associations, news agencies, certain educational or medical institutions, and similar entities.

Quick Comparison Table (Conceptual)

• Salaried individual, simple income: ITR-1
• Salaried individual with capital gains or foreign assets: ITR-2
• Business/professional income (regular books of account): ITR-3
• Small business/professional opting for presumptive taxation: ITR-4
• Partnership firm/LLP/AOP/BOI: ITR-5
• Company (other than Section 11 entities): ITR-6
• Charitable trust/political party/specified institutions: ITR-7

What Happens If You File the Wrong Form?

If a return is filed using an ITR form that does not correspond to the taxpayer's actual sources of income, the Income Tax Department may treat it as a defective return under Section 139(9) and issue a notice requiring the defect to be rectified within the time allowed. If not corrected in time, the return may be treated as invalid.

Frequently Asked Questions

Can a salaried person with a small side business use ITR-1?

No. If there is any income from business or profession, ITR-1 cannot be used, even if the primary source of income is salary. Depending on whether presumptive taxation is opted for, ITR-3 or ITR-4 would generally apply.

I sold some mutual fund units this year - can I still file ITR-1?

No, capital gains income (including from mutual funds) generally takes you out of the scope of ITR-1, and ITR-2 (or ITR-3, if you also have business income) would need to be used instead.

Is ITR-4 compulsory for small businesses?

No, presumptive taxation and the use of ITR-4 is optional. A small business can choose to maintain regular books of account and file ITR-3 instead, if that is more suitable for its circumstances.

Conclusion

Choosing the correct ITR form depends primarily on your residential status, the nature of your income (salary, business, capital gains, etc.), and the level of your total income. When in doubt, especially where business income, capital gains or foreign assets are involved, it is advisable to consult a tax professional before filing.