ITR Filing

Income Tax Return

ITR (Income Tax Return) is a form in which the taxpayers file information about his income earned and tax applicable to the income tax department. The department has notified 7 various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till date. Every taxpayer should file his ITR on or before the specified due date. The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category the taxpayer belongs to like individuals, HUF, company, etc.

Form ITR – 1 SAHAJ Filing

Income Tax Department of India has classified taxpayers into several categories based on their income and sources of income. The department has also assigned a specific form to each category for filing their annual Income Tax Returns (ITR). For salaried class taxpayers having an annual income within INR 50 Lakhs, a short and simple form itr_1 SAHAJ has been allocated.

Individuals receiving income from following sources are required to file their ITR through itr_1 SAHAJ:

Earning through Salary or Pension

Income from one house property (excluding the cases where loss incurred is carried forward) Earning through other sources (excluding lottery, legal gambling, and other such un- lawful activities) Individuals’ earnings through below mentioned sources are not eligible to file their ITR through itr_1 SAHAJ:

ITR – 2 Form Filing

Income Tax Department (ITD) of India has recommended different form for different type of tax-payers on the basis of their source of income and allocated a specific tax filing Form to each category for filing their annual income tax returns (ITR). Individuals or HUFs (Hindu Undivided Families) making income in the form of salary or pension and not eligible to file Form ITR -1 are instructed to comply their annual ITRs by filing Form ITR -2.

The authorities have classified the eligibility criteria and sources of income to be considered for itr_2 as follows:

Individual or HUFs, however, earning any business or profession income under a proprietorship model are not eligible to file their ITR through Form ITR- 2

Form ITR- 3 Filing

Income Tax Department (ITD) of India designed and assigned various Income Tax Return (ITR) filing forms to the tax payers making earnings from different sources of income. All tax payers need to choose the appropriate ITR Forms considering their eligibility criteria for each Form, as specified by the ITD.

Individuals and Hindu Undivided Families (HUF’s) having income and gains from a business or a profession are instructed to file returns on Form ITR- 3.

To assess the total income for this category, following sources of income are taken into consideration:

Also, due date for filing annual returns through Form ITR- 3 is July 31st for individuals, while a business entity can file its annual ITR by 30th September.

Form ITR- 4 SUGAM

As per the Section 44 AD, Section 44 ADA, and Section 44 AE of the Income Tax Act, a tax- payers are eligible to opt for presumptive income scheme as per their business requirement or the form of business. The scheme allows a tax payer to compute annual taxable amount on a presumed income basis instead of an actual earnings. Individuals, Professionals, and Hindu Undivided Families (HUF’s) who have opted for presumptive income scheme are obliged to use Form ITR- 4 SUGAM for filing their annual Income Tax Returns (ITR).

Any individual or HUF can opt for presumptive income scheme based on their respective annual income. In case of a business entity the annual income shall not exceed INR 2 Crores, while professionals can go for presumptive income scheme when their yearly receipts exceed INR 50 Lacs.

Following sources of income are taken into consideration while computing the annual taxable amount:

Important Notes:

Individuals and HUFs exceeding their respective annual turnover limits (as specified by the ITD) are not eligible to use Form ITR- 4 SUGAM
Also, Companies are restrained to use the Form ITR- 4 SUGAM and are advised to file their annual ITRs using Form ITR- 6 or Form ITR- 7 (as per the applicability).

Understanding the Presumptive Taxation Scheme

Presumptive Income Scheme for Small and Medium Size Enterprises (SMEs) The ITD has introduced the presumptive taxation scheme in financial year 2016- 2017. Business entities with an annual turnover of NOT exceeding over INR 2 Crores can get enrolled and claim benefits of the scheme.

The ITD has set an annual tax rate of 8% on the yearly turnover where the presumed income is considered for calculating the ITRs.

For Instance, business entity with total annual turnover of INR 1 Crores need to file annual ITR equalling to INR 8 Lacs, which is computed as per the prescribed 8% tax rate. The rate is, however, applied on a presumed income that is based on the annual turnover.
Moreover, the presumptive taxation scheme has a determined minimum annual tax rate (i.e. 8%) chargeable on the presumed income, but there is no defined maximum tax rate. Any tax payer (professional or business) can willingly declare their respective profit margin, if its exceeding the taxable amount as per the minimum prescribed 8% tax rate.

Presumptive Taxation Scheme for Professionals

The ITD invites professionals (like engineers, doctors, chartered accountants) with gross receipts NOT exceeding INR 50 Lacs in a financial year to get enrolled under the Presumptive Taxation Scheme. ITD has set the tax rate at 50% on the annual gross receipts to compute the presumed income. Further, the taxable amount (i.e. 50% of total gross receipts) will be calculated under income tax head, “Profits and Gains of Business or Profession”.

For Instance, a professional with INR 40 Lacs of annual gross receipts will be charged tax at 50% rate making it INR 20 Lacs, which will be the taxable income.

Likewise SMEs, a professional can also willingly declare more income, if exceeding 50% of the total annual receipts. A professional can claim for deductions under the presumptive taxation scheme such as salary paid to employees and interest paid to partners. As per the Sections 30 to 38, a professional is, however, not eligible to claim deductions for depreciation on assets.

Presumptive Taxation Scheme for Transporters

The ITD has extended presumptive taxation scheme for Transporters involved in activities, including plying, leasing, and / or hiring of goods carriages. A transporter can get enrolled under presumptive taxation scheme for owning NOT more than 10 goods carriages. Under this scheme, the presumed income is computed to be INR 7,500 each month that will be valid on all types of goods carriage vehicles, irrespective of heavy or light.

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