Though the website provides guidance to some extent, mistakes in filing can occur. Submitting the wrong form may result in the Income Tax Department considering it invalid and rejecting it. In such a case, you can always submit a revised return with the correct details by December 31 to avoid income tax notice or penalty.
However, missing the July 31 deadline could have serious consequences.
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Non-submission of ITR form on or before the deadline may attract a late payment penalty Chartered accountant Prakash Hegde said the fine could be Rs 5,000. 1,000 if total income is less than Rs 5 lakh
If any tax liability is pending, interest at the rate of 1% per month will be charged for late filing, in addition to interest at the rate of 1% per month for delayed payment till the time it is paid. Additionally, losses other than those arising from house property will not be allowed to be carried forward.
Moreover, taxpayers will not be allowed to opt for the old tax regime. If ITR is not filed even by December 31, the filer may face a very high tax liability When he files the updated ITR.
Choosing the right ITR form is an important step in tax filing. Here is a guide, using fictional characters as examples, on which ITR form to file. Note that this should not be considered as a substitute for hiring a chartered accountant to handle your ITR filing needs.
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A software engineer who earns 7 lakhs per annum
Suppose an engineer who started work last year has to file his ITR. Assuming this is his first job, suppose he spent all his income on buying gadgets and investing in some mutual funds. Which ITR form should he file, given that he has not sold the mutual fund units?
He should ideally file ITR-1 as he is an Indian resident and his annual income is less than that. ITR-1 can be filed only if the income is less than Rs 50 lakh. Does not have assets worth more than Rs 50 lakh and does not own more than one house.
“He may have income from other sources like interest, dividends, etc. (but not income payable at special rates like online games, lotteries and racehorses or losses),” said Hegde. Non-residents cannot file ITR-1.
There are some exceptions to this. Nitesh Budhdev, CA and founder of Nimit Consultancy, said, “Even if the taxpayer's income is less than Rs 50 lakh, if they have made any profit from virtual digital assets like cryptocurrency, they cannot file ITR-1 as it will be reported as capital gains.” He added, “If they have unlisted shares or any assets/income abroad, they cannot file ITR 1 either.”
A salaried teacher who made capital gains from mutual funds
Suppose a teacher whose income is 10 lakhs per annum. She sold some of her mutual funds as she wanted to decorate her house and she filed capital gains He has earned Rs 3 lakh from his mutual fund investments. Which ITR form should he fill?
Given that he does not have any business income and/or side gig, he should file ITR-2. In ITR-1, one cannot report capital gains income, and hence, this teacher is not eligible for it. In contrast, trading in F&O can be considered business income and falls under ITR-3.
Even when long term capital gains from equity MFs are below the taxable limit Even if the capital gain is less than Rs 1 lakh, they still have to report it in ITR-2. So, in the above case, if the salaried teacher has earned capital gains less than Rs 1 lakh. If a person's annual income is more than Rs 1 lakh and he has no other income, he still has to file ITR-2.
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F&O trader running in loss
The IT Act classifies F&O Income under Business Activities Therefore, a person working in this sector will have to file the more complex ITR-3 or ITR-4, which deals with business and professional income.
ITR-4 is to be filed by persons having income from business or profession and who declare tax under the presumptive income scheme.
In FY22, the market regulator said nine out of 10 traders lost money in options trading. Does this mean your friend who is also making losses in F&O trades does not need to report it in his ITR? The answer is 'no'.
A housewife who receives rental income
If the total rent received by the housewife in FY 2024 is more than 20%, then she will have to pay more than 20% rent. If one has an income of more than Rs 2.5 lakh, which is the exemption limit for filing income tax, one has to file ITR-1. This is if he has rental income from only one property, while if the rent is earned from two or more properties, he has to file ITR-2.
Please note that the exemption limit for filing taxes under the new tax regime is: Rs 3 lakh
A lawyer who earns from clients
Now let us consider the case of a lawyer or other professional person, such as a CA, doctor or architect, who wants to file ITR. Since they do not earn a fixed salary, they cannot file ITR-1 or ITR-2.
If their income is less than Firms with total income less than 50 lakhs can file ITR-3 or ITR-4. Their income falls under the 'income from business or profession' category. If they choose presumptive taxation for their income, they must file ITR-4. Firms with total income less than 50 lakhs Those with turnover up to Rs 50 lakh can also file ITR 4.
An NRI who has assets in India
Many NRIs are buying homes in India because they want to return to their motherland. What happens to the rental income when they are not at home? Do they have to file returns for it?
If the annual rental income is more than this then the answer is 'yes'. More than Rs 3 lakh under new tax regime In the old system this limit was Rs 2.5 lakh.
NRIs can file ITR-2 and report it under income from house property. In many cases, the Income Tax Department had sent notices to NRIs for not declaring interest earned in NRE accounts even though it was tax-exempt.
Hegde said the authorities probably don't have enough data to prove that it is exempted income. So it is always better to file ITR.
An independent content creator
If you are a salaried employee during the day and a content creator at night, you must choose ITR-3 as you earn freelance income, which qualifies as business income.
Experts say that income from content creation falls under income from business or profession. If you opt for presumptive taxation, you should file ITR-4.
conclusion
While filing ITR within the due date is important, it is equally important to file it in the correct form. AL Schedule for Taxpayers in excess of income Reporting this is also a very important aspect for taxpayers holding foreign assets worth more than Rs 50 lakh.
Non-disclosure of even a small holding in foreign shares can lead to investigation under the Black Money Act. Professional assistance can ensure compliance and help avoid penalties. Don't wait until the last day to file your returns – act now to secure your financial peace.
