Different Types of Income Tax Returns (ITR) Forms

Individuals and businesses must file Income Tax Returns (ITR) in India for either regulatory or financial purposes. It ensures compliance with tax laws and serves as a crucial financial document when applying for loans. Lenders assess ITR filings to gauge an applicant’s financial health, income stability, and repayment ability. For you to have better terms on your loan agreements, ensure that your income tax return file is kept well.

With various types of ITR forms available, choosing the correct one is important to avoid penalties and ensure smooth processing. This guide explains the different types of ITR forms in India, their applicability, and how they impact loan applications.

What are Income Tax Return (ITR) Forms?

Income Tax Return (ITR) forms are official documents that taxpayers in India use to report their income, expenses, deductions, and taxes to the Income Tax Department. Every individual, business, or entity earning income in India must file the appropriate ITR form to ensure accurate tax compliance.

Since income sources and taxpayer categories vary, there are different types of ITR forms, each designed to suit a specific group of taxpayers. For example, salaried individuals, self-employed professionals, companies, and firms have separate ITR forms based on their income type, amount, and other factors.

Understanding ITR types and applicability is important because filing the correct form ensures smooth processing of your return, eligibility for refunds, and avoids legal or financial penalties.

Why is it important to select the correct ITR form?

The Income Tax Department of India has prescribed different Income Tax Return (ITR) forms for taxpayers based on their income source, category, and financial complexity. Since each form is designed for a specific type of taxpayer - such as salaried individuals, self-employed professionals, or businesses - it is crucial to choose the right one while filing your returns.

Filing the incorrect ITR form can result in rejection of your return, penalties, or even legal consequences. On the other hand, selecting the correct form ensures compliance, smooth processing, and faster refunds.

Here’s why choosing the right filing type in ITR is important:

• Avoid penalties and legal issues
• Ensure accurate income reporting
• Claim eligible deductions and exemptions
• Prevent refund delays
• Reduce the risk of scrutiny

By understanding the ITR types and applicability, you can ensure error-free filing and stay compliant with tax regulations.

Additionally, when applying for a home loan, personal loan, or business loan, institutions carefully review your ITR filings to determine your repayment capacity and creditworthiness. A well-documented ITR history increases loan approval chances, while inconsistent filings can raise red flags.

Now, let’s break down the types of ITR forms and their applicability.

Different Types of ITR Forms and Their Applicability

In India, the Income Tax Department has introduced several types of ITR forms to suit different categories of taxpayers. Each form is designed with specific eligibility criteria and serves a unique purpose, whether you are a salaried individual, self-employed professional, business owner, or charitable trust. By understanding the breakdown of each ITR form - its applicability, income limits, and filing purpose—you can select the right one and ensure accurate tax compliance.

ITR-1 (Sahaj) – For salaried individuals

This form is meant for resident individuals with a total income of up to INR 50 lakh. It applies to those with:

• Income from salary or pension
• Income from one house property (excluding brought-forward losses)
• Income from other sources (except winnings from lottery or horse racing)
• Agricultural income up to INR 5,000

Not applicable for individuals with capital gains, business income, or foreign assets.

• Relevance to loans: Salaried individuals applying for loans must file ITR-1 to provide proof of steady income.

ITR-2 – For individuals and HUFs (without business income)

This form is suitable for:

• Individuals and Hindu Undivided Families (HUFs)
• Income from multiple house properties
• Capital gains from investments
• Foreign assets or foreign income
• Agricultural income above INR 5,000

Not applicable for individuals with business or professional income.

• Relevance to loans: Those applying for home loans or education loans need ITR-2 if they have multiple income sources or capital gains.

ITR-3 – For individuals and HUFs with business/professional income

This is for individuals and HUFs engaged in business or professional activities. It applies to those with:

• Business income (including freelancers and consultants)
• Income from partnerships in firms
• Income from trading (stocks, futures, options, or crypto assets)

Essential for self-employed individuals, traders, and professionals like doctors, lawyers, and consultants.

• Relevance to loans: Business owners applying for business loans or working capital loans must file ITR-3 to demonstrate business earnings and stability.

ITR-4 (Sugam) – For presumptive income taxpayers

ITR-4 is for:

• Individuals, HUFs, and firms (excluding LLPs)
• Total income up to INR 50 lakh
• Income from business/profession calculated under presumptive taxation scheme (PTS) – Sections 44AD, 44ADA, and 44AE

Not applicable for those with capital gains, foreign assets, or speculative income.

• Relevance to loans: Self-employed professionals and small business owners filing under PTS must submit ITR-4 for loan applications.

ITR-5, ITR

ITR-5, ITR-6, and ITR-7 are also essential forms for different entities in India. Since they primarily apply to businesses, companies, and trusts rather than individuals, they are often overlooked in personal finance discussions. However, they still play a crucial role in taxation and financial credibility, especially for organisations seeking loans.

ITR-6

ITR-6 is specifically designed for companies registered under the Companies Act, excluding those claiming exemption under Section 11 (income from property held for charitable or religious purposes). Companies use this form to report income from business, profession, capital gains, or other sources.

ITR-6 is for:

• Private and public companies
• Companies not claiming exemption under Section 11
• Businesses that need to declare income, deductions, and pay corporate tax

ITR-7

ITR-7 is applicable to entities such as trusts, political parties, charitable institutions, and research associations that are required to file returns under sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act. This form is primarily used by organizations claiming exemptions on income for charitable or religious purposes.

ITR-7 is for:

• Charitable and religious trusts
• Political parties
• Research and educational institutions
• NGOs and similar entities covered under Section 139

Latest Updates on ITR Filing Rules (2025)

To ensure your tax return is up to date, take note of these changes:

Increased standard deduction:

• Raised to INR 75,000 for salaried individuals (previously INR 50,000)
• Raised to INR 25,000 for family pensioners (previously INR 15,000)

New tax regime as default:

• Taxpayers must actively opt-out if they prefer the old tax regime.

ITR filing deadline:

• The last date for non-audit taxpayers (salaried individuals) is September 15, 2025. (Source: Income Tax Department of India)

Also Read: Role of Financial Planning: ITR for a Business Loan

How ITR filing affects your loan applications

Your ITR history is a key factor in loan approvals. Lenders consider:

• Income proof: A steady ITR record for the last 2-3 years strengthens loan eligibility.
• Financial credibility: Higher declared income in ITR increases the chance of higher loan amounts.
• Repayment capacity: Consistent ITR filings indicate financial discipline.
• Tax compliance: A history of timely ITR filings assures lenders of financial responsibility.

Mistakes to Avoid While Selecting ITR Forms

Choosing the correct ITR form is crucial for smooth tax filing and compliance. Many taxpayers often make errors that can lead to rejection of their return, penalties, or unnecessary scrutiny. Here are some common mistakes to avoid while selecting ITR forms:

1. Choosing the Wrong ITR Form
   Filing an incorrect form is the most common mistake. For example, salaried individuals eligible for ITR-1 sometimes mistakenly use ITR-2 or vice versa. Each form has its own applicability, so always check which one fits your income sources.
2. Ignoring Additional Income Sources
   Taxpayers often miss declaring income from interest, capital gains, or freelance work. Selecting the wrong ITR form without considering these incomes can lead to under-reporting.
3. Missing Mandatory Disclosures
   Many taxpayers overlook reporting foreign assets, directorships, or investments. Some ITR forms specifically require these disclosures, and skipping them may trigger notices.
4. Overlooking Presumptive Taxation Rules
   Small businesses and professionals eligible for presumptive taxation under Sections 44AD, 44ADA, or 44AE must file the correct ITR form (like ITR-4). Ignoring this and using a regular form may result in compliance issues.
5. Not Updating to the Latest ITR Form
   The Income Tax Department updates forms annually. Using outdated forms or old applicability rules can cause technical rejection during filing.
6. Relying on Assumptions Instead of Guidance
   Many taxpayers assume all salaried individuals or all businesses file the same form. In reality, ITR types differ based on income, deductions, and exemptions. Always verify applicability before filing.

Pro tip

If you’re planning to take a home loan, business loan, or personal loan, ensure your ITR filings are complete and error-free.

The Bottom Line

Filing the correct ITR form is not just a tax obligation—it impacts your financial credibility. Whether you’re salaried, self-employed, or a business owner, choosing the right ITR form ensures smooth tax compliance and enhances your chances of securing loans.

So, when you apply for a loan now, keep your ITR filings updated to improve your financial opportunities.

Moreover, if you’re struggling to calculate your loan costs instantly, use an APR calculator. This will help you make informed decisions for your secured business loan today.

FAQs

Q.1. What are the different types of ITR forms?

A. There are seven ITR forms for individuals, namely, ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7.

Q.2. How many types of income are there in ITR?

A. The department prescribes seven types of ITR forms based on the taxpayer category and income sources. ITR-1 is for resident individuals with a total income of up to INR 50 lakh. It applies to those earning from salary, one house property, and other sources. NRIs (Non-Resident Indians) are not eligible to file ITR-1.

Q.3. Who is eligible to file ITR 7?

A. ITR-7 is filed by entities such as firms, companies, local authorities, associations of persons (AOPs), and artificial juridical persons. It is used when these entities claim exemptions under specific sections of the Income Tax Act.

Q.4. How much income is tax free?

A. Income up to Rs.12.75 lakh qualifies for zero tax due to rebate. However, income above INR 12.75 lakh is fully taxable from INR 4 lakh onwards. This applies only under the new tax regime.

Q.5. What is TDS in income tax?

A. TDS stands for Tax Deducted at Source. It is the tax amount deducted by the employer from the taxpayer which is deposited to the IT Department on behalf of the taxpayer.

Q.6. Which ITR form should a salaried person file?

A. A salaried individual can file ITR-1 (Sahaj) if their total income is up to ₹50 lakh and includes salary, one house property, and other income like interest. If income exceeds ₹50 lakh, includes capital gains, or foreign income, then ITR-2 should be used instead.

Q.7. Can I use ITR-1 if I have income from capital gains?

A. No. ITR-1 cannot be used if you have income from short-term or long-term capital gains. In such cases, you should file ITR-2 (for individuals not having business/professional income) or ITR-3 (if you also have business income).

Q.8. What happens if I choose the wrong ITR form?

A. Filing the wrong ITR form may lead to your return being treated as defective under Section 139(9). This can result in rejection of the return, loss of refunds, or even penalties. You may be required to re-file using the correct form within the given time frame.

Q.9. Which ITR form is applicable for freelancers in India?

A. Freelancers earning income from professional services can use:

• ITR-3 – if reporting actual income and expenses.
• ITR-4 (Sugam) – if opting for presumptive taxation under Section 44ADA (with gross receipts up to ₹75 lakh).

Q.10. Which ITR form is mandatory for companies?

• ITR-6 – Mandatory for companies registered under the Companies Act, except those claiming exemption under Section 11 (charitable/religious purposes).
• ITR-7 – Applicable to companies and entities like trusts or political parties required to file under sections 139(4A) to 139(4D).

Disclaimer:

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