An income tax return is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability.

Due date for all income-tax return for FY 2019-20 is extended from July 31 2020 and 31 October 31, 2020 to November 30, 2020 to provide relief to taxpayers in view of the current COVID 19 pandemic.

The Income Tax Law provides for mandatory filing of returns in certain cases.

Who is required to mandatorily file Income Tax Returns (ITR)?

1) Individuals or HUF who is less than 60 years of age and has gross total income more than INR 2.5 lakh i.e. above basic exemption limit has to file income tax returns, according to the Income Tax Act. For senior citizens, the basic exemption limit is INR 3 lakh, and for those who are more than 80 years old, the basic exemption limit INR Rs 5 lakh.

2) Companies have to compulsorily file income tax returns irrespective of profit or loss.

3) A firm, individual or a HUF whose books of account are required to be audited under section 44AB.

4) A resident assessee having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India.

5) Taxpayers claiming relief under section 90, 90A or 91.

6) Assessee wanting to apply for refund.

7) Assessee wanting to carry forward or set off the loss.

8) Those who derive income from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.

9) If one has entered into any transaction under the Annual Information Return.

The Central Board of Direct Taxes (CBDT) has notified and released various ITR forms for different purposes. If you file your return using the wrong form, then it will be considered defective.

If the defect is not rectified, the return will be regarded as invalid, and the department will treat it as if the person did not file his return. Hence it is extremely important to know which ITR is applicable for which kind of assessee and for what income.

Given below are the applicable ITR’s for AY 2020-21

ITR 1 (SAHAJ)

ITR -1 Form is a simplified one-page form for individuals having income up to Rs 50 lakh from the following sources:

1) Income from Salary/Pension

2) Income from One House Property (excluding cases where loss is brought forward from previous years)

3) Income from Other Sources (excluding winning from Lottery and Income from Race Horses)

Who is not required to file ITR-1?

1) Individuals who are non-resident or not ordinarily resident.

2) Resident individuals whose total income exceeds Rs 50 lakh.

3) Individuals who are directors in a company.

4) Individuals who have invested in unlisted equity shares.

5) Individuals who have incurred income from the following means:-

    i) Capital gains – either short-term, long-term or both.

    ii) Income from more than one House Property.

    iii) Winnings from Lottery, Racehorses, Legal Gambling etc.

    iv) Agricultural income exceeding Rs. 5,000.

     v) Profits or Gains from Business or Profession.

6) Individual who is a Resident and has assets (including financial interest in any entity) outside India or signing authority in any account located outside India.

7) Individual claiming relief of foreign tax paid or double taxation relief under section 90/90A/91.

8) Individual taxpayers who made cash deposits exceeding INR 1 crore with a bank.

9) Individual taxpayers who incurred expenses above INR 2 lakh on foreign travel.

10) Individual taxpayers whose expenditure is above INR 1 lakh on electricity bill.

ITR 2

ITR-2 Form is for individuals and HUFs not carrying any profession or business. Thus persons having income from following sources are eligible to file Form ITR 2:

1) Income from Salary/Pension.

2) Income from House Property.

3) Income from Capital Gains/loss on sale of investments/property.

4) Income from Other Sources (including winning from Lottery, bets on Race Horses and other legal means of gambling).

5) Foreign Assets/Foreign Income.

6) Agricultural Income more than Rs 5000.

7) Resident not ordinarily resident and a Non-resident.

8) A Director of any company and an individual who is invested in unlisted equity shares of a company will be required to file their returns in ITR-2.

Who is not required to file ITR-2?

1) Any individual or HUF having income from Business or Profession.

2) Individuals who are eligible to fill out the ITR-1 Form.

ITR 3

The ITR 3 is applicable for individual and HUF who have income from profits and gains from business or profession. The return may include income from House property, Salary/Pension, capital gains and Income from other sources. This includes both tax audit and non tax audit cases and also includes income under Presumptive basis taxation under section 44AD, 44AE, 44ADA. The taxpayer should disclose:-

1) the amount of cash deposits above Rs 1 crore in the current accounts with a bank.

2) expenditure incurred above Rs 2 lakh on foreign travel.

3) expenditure incurred above Rs 1 lakh on electricity.

4) In case an individual is a director in a company or holds unlisted equity investments, the ‘type of company’ should also be disclosed.

5) In case of short-term or long term capital gains from sale of land or building or both, the details of the buyer(s) i.e. name, PAN or Aadhaar, percentage share of ownership and address have to be given.

6) While providing the details of bank accounts, if a taxpayer selects multiple bank accounts for credit of refund, the income tax department may choose any account for processing the refund.

ITR 4 (SUGAM)

ITR 4 is to be filed by the Individuals / HUF / Partnership firm whose total income of AY 2020-21 includes:-

1) Business income under section 44AD or 44AE.

2) Income from profession calculated under section 44ADA.

3) Salary/pension having income up to Rs 50 lakh.

4) Income from One House Property having income up to Rs 50 lakh (excluding the brought forward loss or loss to be carried forward cases under this head).

5) Income from Other Sources having income up to Rs 50 lakh (Excluding winning from lottery and income from horse races).

An individual who is either a director in a company and has invested in unlisted equity shares cannot use this form.

ITR 5

This income tax return is meant for firms, LLPs, AOPs (Association of persons) and BOIs (Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.

However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) shall not use this form.

ITR 6

ITR 6 is an income tax return form that is used by companies to e-file income tax return if they do not claim exemption under Section 11 of the Income Tax Act, 1961. Under existing Income Tax rules, companies that can claim exemption u/s 11 are those who have income from property that is held for charitable or religious purposes.

If the assessee is liable for Audit u/s 44AB and the accounts have been audited by an accountant, the details of such audit report, auditor along with the date of furnishing it to the department electronically has to be provided.

The key changes in the ITR-6 Form in AY 2020-21 are:-

1) A separate schedule 112A for the calculation of the long-term capital gains on the sale of equity shares or units of a business trust which are liable to STT.

2) The details of tax on secondary adjustments to transfer price under section 92 CE(2A).

3) The details of tax deduction claims for investments or payments or expenditure made between 1st April 2020 and 30th June 2020.

ITR 7

ITR 7 is an income tax return form that is to be submitted by tax assessees who are required to file returns under key sub-sections of Section 139 of the Income Tax Act, 1961. The following are the key individuals / businesses who can file income tax return using ITR-7 are:-

1) ITR 7 u/s 139(4A)

Income tax filing under Section 139(4A) is for any person who receives income from property used solely/partially for charitable or religious purposes. Additionally, in order to file income tax return using ITR 7, such property must be held under a legal obligation or as a trust.

2) ITR 7 u/s 139(4B)

Section 139(4B) specifically applies to political parties. While political parties are exempt from taxation u/s Section 13A, this exemption applies only if they file annual returns using ITR 7. Section 13A also prescribes a basic exemption limit for political parties, thus ITR Form 7 needs to be filed only if the political party breaches this exemption limit.

3) ITR 7 u/s 139 (4C)

Under existing income tax rules, returns need to be mandatorily filed using ITR 7 u/s 139 (4C) by the following entities:

1. Scientific research association

2. News agency

3. Association or institution referred to in Section 10(23A)

4. Various types of institutions listed in Section 10(23B)

5. Filing ITR 7 u/s 139 (4D)

Under rules of Section 139 (4D) all institutions, college and university who are not covered under any other section are required to mandatory file their income tax returns using ITR Form 7.

Filing ITR comes with a number of benefits such as claiming deductions, set off and carry forward of losses, avoid interest and penalties on tax liability and so on. It is always considered a prudent action to file one’s income tax return on time.

More than any other benefit, being on the right side of law helps. It is recommended to keep the income tax department informed about one’s income and taxability. This communication is only possible when one files their ITR.

Author
CA Ankit Gupta