One size doesn’t fit all they say. The case with tax forms is no different. There are seven different Income Tax Return (ITR) forms for assessees to file their return for the assessment year 2020-21. Out of these seven forms, five can be used by individual taxpayers, depending on their income level, sources of income and other rules. Selecting the correct ITR form is very important, as filing a return with the wrong ITR form is considered as null and void by the income tax department. Read on to know the right form that you need to use.
Salary and other income upto Rs 50 lakh? Use ITR-1
ITR-1 is the most used form among the seven. Just to give you an idea of its use, during assessment year (AY) 2019-20, about 3.3 crore people used ITR-1 to file their returns, out of about 6.78 crore total returns filed – almost 50 per cent. ITR-1 can be used by a resident individual assessee and a Hindu Undivided Family (HUF) with a total income of up to Rs 50 lakh during the financial year 2019-20. This total income includes income from salaries or pension, one house property, other sources (interest on bank deposit and so on), and agricultural income of up to Rs 5,000.
However, this form cannot be used by an individual who is either a director in a company or has invested in unlisted equity shares. Besides these, a person who is a non-resident or not ordinarily resident, or a person who has income from business or profession or owns more than one house property cannot use ITR-1 to file the tax return. There are a few more cases in which this ITR form cannot be used by an individual.
Income from foreign assets or unlisted shares? Use ITR-2
ITR-2 in most cases is an extension of ITR-1. Those who cannot use ITR-1 typically fit into ITR-2. The ITR-2 can be used by those individuals and HUFs who have income from salary or pension (even if it exceeds Rs 50 lakh), and/or income from house property (one or more) in the previous financial year. One can also use ITR-2 to file returns if income includes winning a lottery or there is income from owning and maintaining a race horse or income taxable at special rates…Read more>>