Filing income tax returns? You are not eligible for ITR-1 if…

Choosing the wrong ITR form can render your returns 'defective'

The July 31 due date for filing income tax returns (ITRs) for the financial year 2023-24 (assessment year 2024-25) is drawing closer, and it’s time for individual taxpayers to get down to it.

You ought to gather the relevant documents—bank and capital gains tax statements, Form 16, Form-26 AS, annual information statement (AIS), salary slips, last year’s ITR and so on—to ensure that the process goes through smoothly and quickly.

Also read: Tax filing: Filing an income tax return? Access and review your Annual Information Statement first

ITR-1 not for everyone

For salaried individuals or pensioners without any income from business or profession, the two relevant forms are ITR-1 and ITR-2.

However, ITR-1 can be used only by resident (and ordinarily resident) individuals with income of not more than Rs 50 lakh, including income from salary, pension, one house property, agriculture (up to Rs 5,000), and income from savings or fixed deposits, dividends and family pension.

Also read: Salaried taxpayer? Know how to pick the right ITR form, avoid common errors

Ensure that you choose the ITR form applicable to you as filing returns using the wrong form can render your return ‘defective’.

Check your ITR-1 eligibility

You will not eligible to file your returns using ITR-1 if:

-          You are a resident but not ordinarily resident (RNOR) or non-resident individual

-          Your income is more than Rs 50 lakh

-          You have income from business or profession

-          You own more than one house property

-          Your agricultural income is more than Rs 5,000

-          You are a director in a company

-          You own unlisted shares or have ESOPs (employee stock options)

-          You have foreign income or hold assets outside India including pension and bank accounts, even if there are no deposits

-          You have made any capital gains on sale of stocks, mutual fund units and other securities or brought forward any losses

-          Tax has been deducted under Section 194N of the Income-tax Act. As per I-T rules, tax has to be deducted at source if you withdraw cash of over Rs 20 lakh in the financial year (if no return was filed for the previous three years) and Rs 1 crore (if a return was filed for all or any one of the three previous assessment years).

Also read: Income tax calculator for FY 2023-24 (AY 2024-25)

In such cases, salaried individuals or pensioners should use ITR-2, which can be more tedious as it seeks many details around income, financial transactions, assets and liabilities. For example, you will have to make detailed disclosures on your financial transactions in the capital gains (CG), foreign assets (FA) asset-liability (AL) and virtual digital assets (VDA) schedules.

If you have income from business and profession, you will not be able to use ITR-2 form either. In such cases, you will have to ascertain whether the relevant form for you is ITR-3 or ITR-4 (Sugam).