Which ITR Should I File? Here Are Types Of ITR Forms For FY 2023-24 (AY 2024-25)

Income Tax Return Filing: Navigating the complexities of income tax filings can be daunting, particularly for individuals juggling multiple income sources such as salary and trading activities. As the popularity of trading in shares, futures, and options grows, selecting the appropriate Income Tax Return form becomes crucial for accurate and compliant tax reporting.

ITR filing last date for Financial Year 2023-24 (AY 2024-25) is July 31, 2024. However, if you miss filing within the due date, you can still file a belated income tax return before December 31, 2024.

Here are the types of ITR Forms:

ITR 1, also known as Sahaj, is tailored for residents with income from salaries, one house property, and other sources such as interest income, among others. This form is for individuals with a total income of up to Rs 50 lakh and is mandated for online filing. However, it excludes individuals with income from business or profession, making it unsuitable for traders engaged in active trading activities.

ITR 2 is designed for individuals and Hindu Undivided Families (HUFs) with income from salaries, multiple house properties, capital gains, and other sources except for business income. This form is ideal for salaried individuals who also derive income from investments in shares, mutual funds, or property transactions. It requires detailed reporting of capital gains, making it more appropriate for taxpayers with substantial investment activities.

ITR 3 is pivotal for individuals involved in business or profession, encompassing income from house property, salary, pension, capital gains, and partnership income. It is particularly relevant for traders engaged in futures and options (F&O) trading, as it treats such trading activities as business income or loss. This form allows comprehensive reporting of financial transactions and is essential for those actively participating in the stock market.

Roshan Agarwal, managing partner at Agarwal Roshan & Associates, Chartered Accountants, underscores the importance of selecting the correct ITR form based on one's income sources. "Many individuals inadvertently file under ITR 1, assuming it covers all income scenarios, only to face issues later, especially when they have capital gains from trading," he explains.

Agarwal advises that investors and traders should opt for ITR 3, depending on their income sources and the nature of their financial activities. Incorrectly filing under ITR 1 could lead to receiving notices from the Income Tax Department, highlighting the necessity for informed decision-making during tax filings.

Agarwal further highlights strategic tax implications, such as tax loss harvesting and the carry-forward of losses to offset future gains. Traders can strategically reinvest long-term capital gains to avail of tax exemptions up to Rs 1 lakh annually and carry forward losses for up to seven years, providing a significant advantage in managing tax liabilities.

With seven ITR forms available, selecting the appropriate form ensures accurate tax reporting and compliance with regulatory requirements. The deadline for filing income tax returns for individuals and entities is July 31st, applicable to taxpayers not subject to tax audit under the Income Tax Act. Delays in filing beyond this date may attract penalties and interest, underscoring the importance of timely and informed tax filings.

ITR-4 is for individuals, HUFs, and partnership firms (excluding LLPs) whose total income includes business income under the presumptive income scheme (Section 44AD or 44AE), professional income under Section 44ADA, salary or pension up to Rs 50 lakh, income from one house property, and income from other sources. Under the presumptive income scheme, income is assessed at a minimum rate based on gross receipts or turnover percentages. However, if business turnover exceeds Rs 2 crore, taxpayers must file ITR-3 instead.

For firms, LLPs, AOPs, BOIs, and other entities, different ITR forms such as ITR-5, ITR-6, and ITR-7 are applicable based on their specific legal status and filing requirements.