Which form to choose for the income tax return?

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After discussing who can use ITR 1 in last week’s article, let’s now see who can use ITR 2, ITR 3, and ITR 4. Discussion is limited to the individual and the person. HUF only.

Read also: Income tax return: who can use the RTI 1, who cannot?

Who can use ITR 2

ITR 2 is therefore next to ITR 1 in terms of simplicity and ease of filling. Since HUF cannot use RTI 1, they can use RTI 2 in all cases where individuals are eligible to use RTI 1. RTI 2 can be used by anyone who is not eligible to use the RTI 1 and their source of income has no business or professional income. So you cannot use ITR 1 if you are a director or have unlisted shares or even if you own more than one house or have farm income above Rs. 5,000 / – as long as you do not have taxable income in respect of profit or loss under the heading “Profits and gains of a business or a profession. You can use ITR 2 if you are a non-resident or if you are a resident and have assets or interests in assets outside of India or even if you have the authority to sign a bank account in outside of India if there is no business income. Anyone who has income from other sources and wishes to deduct expenses under the heading “Income from other sources” can use ITR 2. Those who have dividend income and have borrowed money to make such payments. investments can use RTI 2 if they wish. claim expenses for interest paid on money borrowed to purchase these shares.Please note that you are allowed to claim interest up to 20% of the amount as dividends even though the actual interest charges incurred for the year are greater than 20% of the total dividends received by you.

For all those who have carried forward losses that they wish to charge against the income of the current year or those who have losses in this respect for the current year and who wish to carry them forward to charge them to the following years can also use RTI 1 as they cannot use ITR 1.

So to put it in one line, all individuals and HUF who have no income under “Business or Profession” and who cannot use RTI 1 are eligible to use RTI 2. Since income includes loss also, you cannot use RTI 2 if you have suffered losses in your business, regardless of the amount. Majority of people have the impression that the profits they make from trading stocks and commodities can be offered under “Income from other sources” because they are not engaged in business because they are not. have not set up a suitable business. In my opinion this is not correct and such transactions constitute a commercial activity and one should use either ITR 3 or ITR 4.

Eligibility to use RTI 3

This is the most complicated RTI form for individuals and HUFs. In my opinion, it is difficult for a layman to complete this form on their own without making a mistake. As for ITR 3 eligibility, it’s simple. You must use ITR 3 if you are an individual or HUF engaged in an activity or profession, earning income and not authorized to use ITR 4. In addition, even if you are offering your business income or professional on a presumptive basis and your taxable income exceeds Rs. 50 lakhs or you have income under “Capital Gains”, you should use ITR 3 only.

RIR 4 form

The ITR 4, known as Sugam, can be used by any natural person, HUF or general partnership who wishes to be eligible to offer their income on a presumptive basis. Under the presumptive tax system, a taxpayer is presumed to have earned a minimum income expressed as a percentage of the gross revenue of the business or profession or as a fixed amount based on the number of commercial vehicles owned. Please note that while a partnership can use ITR 4 if it qualifies for flat tax, 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. Thus, a non-resident cannot use it even if his income is less than 50 lakhs and it is taxable on a lump sum basis. If you are a director of a company or own shares in unlisted companies, you cannot use ITR 4.

Likewise, if you have income under the heading “Capital gains” or “Income from other sources” other than interest and family pension or have income from a source outside India, you cannot use ITR 4 and you should use ITR 3 when you have an opportunity to offer your income on a presumptive basis.

In the event that your actual business or professional income is lower than what was presumed by law, you cannot use RTI 4 and you must use RTI 3 and in which case you must have your accounts audited and obtain the report that he submitted to the income tax department before filing the RTI.

I’m sure with these two articles you have a good idea of ​​which RTI form you should use.

Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on Twitter

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