HomeBlogUncategorizedDifferent Types of ITRs – Which ITR Should You File?

Different Types of ITRs – Which ITR Should You File?

Taxpayers submit information about their earned income and the relevant tax in income tax returns to the Income Tax Department. Taxpayers can quickly determine their tax liability, request refunds for overpaid taxes, and schedule tax payments with the aid of an income tax form.

Depending on the taxpayer’s category and source of income, there are various sorts of income tax return forms. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7 are such forms. However, before selecting a tax return form to file, one should exercise caution. 

Types of Income Tax Returns Forms

An ITR form for a salaried worker and that of a company are different. The forms that can be used by both individuals and companies to file tax returns are listed below.

ITR forms for individuals, salaried individuals, and HUFs

Hindu Undivided Families (HUF) and residents of India can file ITR forms 1 and 2 for their income tax returns. To choose these options, people must be salaried with a house property, and other sources of income. 

ITR forms for companies, trusts, and partnership firms

Limited Liability Partnerships (LLPs), trusts, and companies must file ITR forms 5, 6, and 7. Firms and companies with income from real estate, business, and other income sources may choose these forms Income from capital gains won’t fall under these categories.

Let’s now dive deeper into each ITR form’s specifics!

ITR-1 Form

The Sahaj form is another name for this one. Individual taxpayers ought to file an ITR 1. This form is not available for use by any other taxpayer.

Who should go with this form?

The following people are eligible to use this form:

  • A person who receives income from pension or salary.
  • A person whose income depends entirely on single housing property.
  • A person with no source of income from businesses or capital gains.
  • A person who does not have any overseas assets and does not receive any foreign income.
  • An individual who earns up to INR 5000 through agriculture.
  • A person who earns money through additional sources, such as fixed deposits and other investments.
  • Any person who does not receive any revenue from winning the lottery, horse racing, or other windfalls.
  • Those who wish to combine their income with their spouses or minor children.

ITR-2 Form

Those who earn income from selling assets or properties are eligible for ITR 2 income tax. People with incomes from countries other than India may also utilize this form. Additionally, HUFs can file income tax returns by requesting an ITR 2 form.

Eligibility requirements for submitting tax returns using the ITR 2 form

The following kinds of people can apply for ITR 2 forms:

  • People who earn money through salary or pension.
  • One whose source of income is from capital gains, from the sale of a property or an asset.
  • If a person’s income possibly originates from more than one residential property.
  • Those who own overseas assets and those who derive their income from sources outside of India.
  • A person who earns more than INR 5000 per year through agriculture.
  • People who have money coming in from winning lotteries.
  • If a person serves as a director for a company.
  • RNOR and non-residents.

ITR-3 Form

ITR 3 applications can be made by individual taxpayers or HUFs who are partners in a company but do not conduct business under the company. However, the eligibility requirements of the said form should be thoroughly reviewed by taxpayers looking for the meaning of ITR 3.

Who is qualified to submit this form?

Applicants with the following sources of income can file ITR 3

  • Earnings from equity shares that are not publicly traded.
  • People who are continuing their profession or business are qualified.
  • Company director.
  • Earnings from house property, salary, pension, or other sources.
  • An individual receiving income because he is a partner in a company.

ITR-4S Form

ITR 4, sometimes referred to as Sugam, allows those who operate a business and receive revenue from it or from other professions to submit their IT returns using this form. They can combine this money with any windfall earnings and apply for this form. Additionally, this form can be used to file an ITR by taxpayers who work as doctors, store owners, designers, retailers, agents, and contractors.

Taxpayers who are eligible for this form

  • Those who receive income from enterprises.
  • One who receives money from single house property.
  • Taxpayers who do not receive income from selling assets or capital gains.
  • A person may file ITR 4 if their agricultural income is less than Rs. 5000.
  • People who do not own assets or properties outside of India.
  • A candidate earns within India.
  • This form also applies to companies whose revenue is based on a presumptive scheme under  Section 44AD, 44ADA, and 44AE of the Income Tax Act.

ITR-5 Form

Firms and business trusts must choose this form to file ITR. ITR 5 refers to forms that are acceptable for LLPs or partnership firms. One must have a deep knowledge of the taxpayers who are and are not eligible to use ITR 5 to comprehend its implications fully.

Taxpayers who are qualified to file Form ITR 5:

The following bodies can file ITR 5

  • Co-operative societies.
  • Local authorities.
  • LLPs (Limited Liability Partnerships).
  • BOIs (Body of Individuals).
  • Artificial judicial persons.
  • Firms.
  • AOPs (Association of Persons).
  • Estate of the deceased and insolvent.
  • Investment funds.
  • Business trusts.

ITR-6 Form

An income tax return form designated for use by businesses is known as an ITR 6. Companies can only electronically file income tax using this form.

Who can submit ITR 6?

The organizations and income sources that qualify for this form are listed below:

  • All companies, excluding those that claim an exemption under Section 11.
  • Income derived from housing property.
  • Business earnings.
  • Income derived from several sources.

ITR-7 Form

The ITR 7 form must be used to file income tax returns by people or businesses who are required to do so by Sections 139(4A), 139(4C), 139(4D), and 139(4E), or 139(4F).

Individuals or Companies who can submit ITR 7

The companies filing returns under the abovementioned sections can submit ITR 7. An explanation of each section and the requirements is provided below.

  • People who receive income from assets held under trusts or other types of total legal obligations for charitable or religious purposes are required to file IT returns under Section 139(4A) using this form.
  • Political parties must file returns under Section 139(4B) if their total earned income exceeds the non-taxable threshold.
  • The following entities should file returns under Section 139(4C) by using the ITR 7 form:
  • Institutions covered under Section 10 (23A)
  • Science research associations
  • News agency
  • Associations or institutions covered by Section 10(23B)
  • Universities, medical institutions, educational institutions, funds, etc.
  • Returns by universities, colleges, and other institutions are required to be filed under Section 139(4D). However, under other Section 139 (4D) provisions, they do not have to present the return of income and losses.
  • Business trusts can file returns under Section 139(4E) without including revenue or loss disclosures.
  • Investment funds under Section 115UB need to file returns under this section. 

Tax on Earnings Through P2P Lending

In P2P lending, investors earn income in the form of interest on the amount they lend. The fixed maturity peer-to-peer investment plan from LenDenClub offers up to 10–12%* annual returns on your investment. Similar to the interest earned on any other instrument, such as a fixed deposit, the interest income in P2P lending is also taxable. But, the investment opportunity allows you to earn significantly higher rates of returns, when compared to its peers. Lenders’ interest income from peer-to-peer lending is classified as “income from other sources” and added to their taxable income. 

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** Average value mentioned is the weighted average of returns received by investors

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