The time to file Income Tax Returns (ITR) is upon us. The process can be daunting, especially when it comes to selecting the correct ITR form. This article aims to demystify the process and shed light on who should file ITR-3.
The income tax department has classified ITR forms into seven types — ITR-1 to ITR-7. The form you need to fill depends on your sources of income, the amount of income, and the category of taxpayer you are.
ITR-1, also known as SAHAJ, is for individuals with income up to Rs 50 lakh from salary, one house property, other sources (interest, etc.), and agricultural income up to Rs 5,000. ITR-2 is for individuals and Hindu Undivided Families (HUFs) not having income from profits and gains of business or profession.
ITR-3, on the other hand, is for individuals and HUFs with income from profits and gains of business or profession. However, it is also possible for individuals and HUFs to file ITR-3 if they have income from other sources, such as salary, pension, or capital gains.
Also read | Know the nuts and bolts of income tax return-filing process for FY22-23
This brings us to the question: who should file ITR-3?
Below are the categories of income that can be filed under ITR-3:
Profits and gains from business or profession: If you are a business owner or professional, your income falls under this head. This includes income from a profession such as law, medicine, engineering, architectural services, accountancy, technical consultancy, interior decoration, or any other profession notified in the official gazette of India.
Income from house property: This includes income from a rented house or from a property deemed to be let out.
Also read | Income tax filing: Who should file ITR 1 and who should not?
Salary / pension: If you are a salaried individual or a pensioner, your income falls under this head.
Income from other sources: This includes income from sources like lottery winnings, dividends, interest income, etc.
Income from capital gains: If you have sold a capital asset such as property or shares during the financial year, any profit from the sale is considered as income from capital gains.
Income from foreign assets: If you have foreign assets or financial interest in any entity outside India, you need to file ITR-3.
Agricultural income of more than Rs 5,000: If you have agricultural income of more than Rs 5,000, you need to file ITR-3.
It is important to note that if you have opted for the presumptive income scheme under Section 44AD, 44ADA, or 44AE, you should not file ITR-3 even though you can. Because you will need to provide additional information.
To choose the right ITR form, you need to understand your sources of income and the category of taxpayer you are. If you have multiple sources of income, you may need to file more than one type of ITR form.
Also read | ITR filing: How to file income from capital gains or set off capital losses
It is always a good idea to consult a tax professional or chartered accountant to ensure you're filing the correct form and not missing out on any deductions or exemptions. It is especially important if you have different sources of income, or if you are not sure which ITR form to file.
Remember, filing the wrong ITR form is considered an invalid return. It's equivalent to not filing the return, and you may be liable for penalties. So take the time to understand the different ITR forms and choose the one that's relevant for you.
Remember, filing your ITR is not just a statutory obligation but also a responsibility as a citizen.
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