ITR filing: What happens when you file wrong ITR form. Check important points 

ITR Filing AY 2024-25: The Income Tax Department issues different tax return forms for different section of taxpayers. Income Tax Return (ITR) is a crucial document where taxpayers provide details regarding their income and applicable taxes to the income tax department. As of now, the I-T department has introduced a total of 7 forms, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7 for the taxpayers' convenience. ITR forms are chosen based on the taxpayer's income sources, earnings, and taxpayer category (individuals, HUF, company).

For AY 2024-25, the Income Tax department has once again updated the ITR forms for FY2023-24, requesting more information from taxpayers. The Central Board of Direct Taxes (CBDT) has implemented new reporting rules and changes following the Finance Act 2023 updates, similar to previous years.

It is to be noted that the deadline to file ITR is July 31, 2024 for most. Taxpayers under income tax audits and with business income can file using ITR-3 until October 31.

What happens when you file wrong ITR form

If a taxpayer mistakenly files an incorrect tax return form or ITR, the Income Tax (I-T) Department allows for the submission of a revised return without any set limitations on how many times this can be done within a fiscal year. However, if it is determined by the tax authorities that the taxpayer willfully underreported or concealed income in an attempt to evade taxes, penalties ranging from 100% to 300% of the outstanding tax amount may be imposed. 

Given these provisions and recent revisions to ITR forms by the tax department, it is essential for taxpayers to accurately identify the appropriate ITR form applicable to their individual circumstances.

ITR Forms

ITR-1 OR SAHAJ

It is for a resident individual whose total income for the AY 2024-25 includes:

> Income from Salary/ Pension; or
> Income from One House Property (excluding cases where loss is brought forward from previous years); or
> Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
> Agricultural income up to Rs 5000.

ITR-2

It is for an individual or a Hindu Undivided Family (HUF) whose total income for the AY 2024-25 includes:

> Income from Salary/Pension
> Income from House Property
> Income from Other Sources (including Winnings from Lottery and Income from Race Horses)
> If you are an Individual Director in a company
> If you have had investments in unlisted equity shares at any time during the financial year
> Being a resident not ordinarily resident (RNOR) and non-resident
> Income from Capital Gains
> Having any foreign income
> Agricultural income more than Rs 5,000
> Owning assets (including financial interest in any entity) outside India, including signing authority in any account located outside India
> If tax has been deducted under Section 194N
> If in case payment or deduction of tax has been deferred on ESOP
> If you have any brought forward loss or loss needs to be carried forward under any income head
> In a case where the income of another person like one’s spouse, child etc. is to be clubbed with the income of the assessee.

ITR-3

The ITR-3 Form is to be used by an individual or a Hindu Undivided Family who have income from 

> A proprietary business or is carrying on a profession. 
> If you are an Individual Director in a company
> If you have had investments in unlisted equity shares at any time during the financial year
> The return may include income from House property, Salary/Pension and Income from other sources
> Income of a person as a partner in the firm

ITR 4 or Sugam

It applies to individuals and HUFs, Partnership firms (other than LLPs), which are residents and whose total income includes:

> Business income according to the presumptive income scheme under Section 44AD or 44AE
> Professional income according to presumptive income scheme under section 44ADA
> Income from salary or pension up to Rs 50 lakh
> Income from one house property, not more than Rs 50 lakh (excluding the amount of brought forward loss or loss to be carried forward)
> Income from other sources having income not more than Rs 50 Lakh (excluding income from lottery and race-horses)
> Please note that any individual earning income from the above-mentioned sources as a freelancer can also opt for a presumptive scheme if their gross receipts are not more than Rs 50 lakhs.

An income scheme based on presumptive calculations, as outlined in sections 44AD, 44AE, and 44ADA of the Income Tax Act, allows individuals or entities to determine their income using a predetermined minimum rate. This rate is calculated based on a percentage of gross receipts or turnover, or the ownership of commercial vehicles. If the business turnover exceeds Rs 2 crore, the taxpayer must file ITR-3.

ITR-5

It is for firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.

ITR-6

It is for companies other than companies claiming exemption under section 11 (Income from property held for charitable or religious purposes), this return has to be filed electronically only.

ITR-7

It is for persons including companies required to furnish returns under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F).

> Return under section 139(4A) is required to be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes.
> Return under section 139(4B) is required to be filed by a political party if the total income without giving effect to the provisions of section 139A exceeds the maximum amount, not chargeable to income-tax.
> Return under section 139(4C) is required to be filed by every –

• Scientific research association;
• News agency;
• Association or institution referred to in section 10(23A);
• Institution referred to in section 10(23B);
• Fund or institution or university or other educational institution or any hospital or other medical institution.

> Return under section 139(4D) is required to be filed by every university, college or other institution, which is not required to furnish a return of income or loss under any other provision of this section.
> Return under section 139(4E) must be filed by every business trust which is not required to furnish a return of income or loss under any other provisions of this section.
> Return under section 139(4F) must be filed by any investment fund referred to in section 115UB. It is not required to furnish a return of income or loss under any other provisions of this section.

Why should you file ITR?

> If you have generated earnings from or made investments in foreign assets during the financial year, it is necessary to disclose these details in your ITR.
> If you are seeking to obtain a refund on your income taxes, you may do so by submitting a claim to the appropriate governmental department.
> If you are contemplating submitting an application for a visa or a loan, please ensure that your tax obligations are met and any necessary documentation is readily available.
> For companies or firms, regardless of making a profit or incurring a loss, it is imperative that tax returns are filed in a timely manner.
> In instances where there is a loss from business or profession, or under the capital gains category, carrying forward these losses to subsequent years is contingent upon filing the tax return prior to the deadline.