Before understanding which form you have to use, let’s understand the common terminology used in the forms, and make an informed decision:
- Income from Salary: This happens only when there is an employee / employer relationship, and you benefit from this in monetary terms on the exchange of your services to the employer or company. The aggregate income after considering exemptions is called your Gross Salary. Pension income is also taxed under the head of income from salaries.
- Income from House Property: Every residential and commercial property held under your name will be taxed, regardless of whether you earn a rental income from it or not. You will be taxed on the value of the earning potential of the property. There are some exemptions on the total amount of this tax (ex. Home Loan).
- Profits and Gains of Business or Profession: This is for when you earn an income through a selling products or rendering services through a business concern, or by rendering professional services to customers. The income is charged on the amount that is arrived at after subtracting all incurred expenses (and depreciation of assets) from the income received. Tax is charged on profits.
- Income from Capital Gains: Any profits arising from the transfer (sale) of capital assets (like gold, land, property, equity, etc.) which have been held as investments are taxable under this heading. The capital gains (profit) are charged differently based on whether they’re short-term or long-term – based on how long they were held before being sold.
- Income from Other Sources: This heading holds all the income earned from sources other than the 4 mentioned above. Incomes such as those from interest from deposits, lottery and game show winnings, gifts (from persons other than relatives), etc. are charged to tax under this heading.
The different forms one has to fill depends on things like:
- Who has Earned Income: You can earn an income as an individual, a HUF, a company or Firm, etc.
- Residential Status: NRIs and resident Indians have different tax implications.
- Type of Income: The head of income under which you’ve earned money, refer the 5 mentioned above.
- Carry Forward of Losses: Losses being carried forward (like a loss on the sale of a capital asset, etc.) offers some rebate in future tax liabilities.
So now that we have a clear idea of what the terminology refers to, let’s take a look at the right income tax form for you between ITR-1, ITR-2A and ITR-2:
ITR-1
You need to fill the ITR-1 form if:
- You are an Individual.
- You have an income from Salary / Pension.
- You have income from 1 House Property.
- You earn any Exempt Income (like agricultural income) Up to Rs.5,000.
- You have income from Other Sources (excluding income from lotteries, racehorses, gambling, etc.)
You do not need to fill the ITR-1 form if:
- You are anything but an Individual for taxation purposes.
- You earn an income from more than 1 Property.
- You earn an income from Other Sources through horse races, lotteries, gambling, etc.
- You earn an income through short or long-term Capital Gains that are non-tax-exempted.
- You earn an Exempt Income over Rs.5,000.
- You earn an income through Business or Profession.
- You have reported losses under Income from Other Sources.
ITR-2A:
You need to fill the ITR-2A form if:
- You are an Individual or a HUF.
- You have an income from Salary / Pension.
- You earn income from more than one Property.
- You earn an income from Other Sources (including income from lotteries, racehorses, gambling, etc.)
You do not need to fill the ITR-2A form if:
- You have earned an income through Capital Gains.
- You have earned an income from Business or Profession.
- You have claimed a tax-relief or deduction for taxes paid overseas.
- You have any foreign income.
- You have any assets or financial interests outside India.
If you are still unclear about which form to use between ITR-1 and ITR-2A, refer this table of differences:
| Form | Income from Property | Income from Other Sources | Exempt Income (Agricultural Income) | Losses from Property |
|---|---|---|---|---|
| ITR-1 | Only from 1 Property | Cannot use in case of income from lotteries, racehorses, etc. | Up to Rs.5,000. | Cannot be used in case a loss is being brought forward under this heading. |
| ITR-2A | From multiple properties | Must use in case of income from lotteries, racehorses, etc. | Above Rs.5,000. | Must be used in case a loss is being brought forward under this heading. |
ITR-2:
You need to fill the ITR-2 form if:
- You are an Individual or a HUF.
- You have an income from Salary / Pension.
- You earn income from more than one Property.
- You have any brought forward losses.
- You earn an income from Other Sources (including income from lotteries, racehorses, gambling, etc.)
- You’ve earned an income through Capital Gains.
You do not need to fill the ITR-2 form if:
- You have earned an income through business or profession.
ITR-2A and ITR-2:
The ITR-2 form is a much more comprehensive form compared to the ITR-2A form. Basically, anyone who can use the ITR-2A form can alternatively use the ITR-2 form. The only difference between these two is that the ITR-2A form cannot be used in cases where there has been an income from Capital Gains.
In addition to the ITR-1 or ITR-2A or ITR-2 forms, you’ll need to have the following documents with you:
- A copy of the previous year’s tax return.
- A bank statement.
- Your TDS certificates.
- Your Savings Certificates / Deductions.
- An Interest statement that shows the interest paid to you.
- Balance sheets, Profit & Loss account statements, and other requisite Audit Reports, wherever applicable.
Basically, different sources of income depending on their complexity require different ITR forms to be filled.