The Income Tax Department releases different Income Tax Return (ITR) forms each year for a specific Assessment Year. Taxpayers select the appropriate ITR form based on their residential status and sources of income. The income tax return serves as a comprehensive document for declaring various types of income earned in India and settling any applicable tax liabilities.
While the Income Tax Department prescribes seven different ITR form numbers, taxpayers must carefully choose the one that is applicable to their individual circumstances. These forms cater to different types of taxpayers and income sources, ensuring accuracy and compliance in the tax filing process.
What are the different ITR Forms?
Although the Income Tax Department (ITD) has prescribed 7 different ITR form numbers, taxpayers have to choose the one that applies to them.
The following ITR Forms are prescribed for Individuals (Non-corporate assesses):
ITR FORM
Description
ITR 1
The most basic ITR form for individuals having income up to INR 50,00,000 from or income from salary/pension, one house property, and interest.
ITR 2
For individuals/HUF having income from salary/pension, multiple house property, capital gains, interest, and partner’s income from the partnership firm.
ITR 3
Individuals/HUF having income from salary/pension, multiple house property, capital gains, interest, and income from proprietary business or profession.
ITR 4
For individuals/HUF/Partnership firms having income from presumptive business or profession, salary/pension, one house property, and interest up to INR 50,00,000.
Corporate assessees are required to use the prescribed ITR forms listed below:
ITR 5
For firms, an association of persons (AOP), Body of Individuals (BOI), co-operative societies, and local authorities.
ITR 6
For companies claim that do not claim an exemption under section 11 (such as a charitable or religious trust).
ITR 7
For trusts, political parties, scientific research organizations, colleges, and universities.
Know Which ITR Form You Are Required to File
Determining the appropriate Income Tax Return (ITR) form is crucial for individuals to meet their tax obligations accurately. It ensures compliance with tax regulations by aligning with one’s financial circumstances and income sources.
Important Keyword: Assessment Year, ITR Form, ITR-1, ITR-2, ITR-3, ITR-4.
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Income Tax Return (ITR) Form for AY 2016-17 (FY 2015-16)
Filing income tax returns is a fundamental obligation for every taxpayer, and selecting the appropriate Income Tax Return (ITR) form is the first step in this process. For the Assessment Year 2016-17, the Income Tax Department has designated various ITR forms tailored to different types of incomes and taxpayers. Thus, it’s imperative for each taxpayer to ascertain which ITR form is applicable to their specific circumstances before commencing the filing process.
What are the different ITR Forms?
Although the Income Tax Department has prescribed 9 different ITR forms for AY 2016-17, taxpayers have to choose the one which is applicable to them.
Following ITR Forms are prescribed for Individuals (Non corporate assessees):
ITR-1 (SAHAJ)
The most basic ITR form for individuals having income from salary/pension, one house property and interest
ITR-2A
For individuals/HUF having income from salary/pension, multiple house property and interest
ITR-2
For individuals/HUF having income from salary/pension, multiple house property, capital gains and interest
ITR-3
Form individuals/HUF who are partner in a firm and not carrying any business or profession under proprietorship
ITR-4S (SUGAM)
For individuals/HUF/Partnership firms having income from presumptive business or profession
ITR-4
For individuals/HUF having income from proprietary business or profession
Following ITR Forms are prescribed for corporate assessees:
ITR-5
For firms, association of persons (AOP), Body of Individuals (BOI), co-operative societies and local authorities
ITR-6
For companies other than companies claiming exemption under section 11 (such as charitable or religious trust)
ITR-7
For trusts, political parties, scientific research organisations, colleges and universities
Important Keyword: Capital Gains, HUF, Income Heads, ITR Form, ITR-2.
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What is ITR-2 Form?
ITR-2 Form serves as the Income Tax Return form for individuals and HUFs who lack any business or professional income. This means individuals with salary, house property, capital gains, and other sources of income can file ITR-2.
Important Income Tax Documents:
Form 16: For salary income
Form 26AS: Tax Credit Statement
Form 12BB: Statement showing particulars of perquisites, other fringe benefits or amenities, and profits in lieu of salary with value thereof
Form 10BA: Declaration to claim deduction under section 80GG
Form 15G/15H: Declaration to avoid tax deduction at source on interest income
Mandatory ITR Filing:
Until FY 2018-19 (AY 2019-20), filing Income Tax Return wasn’t compulsory if the total income was below the basic exemption limit. However, Budget 2019 introduced a new provision under Section 139(1), mandating ITR filing if a taxpayer engages in high-value transactions. These transactions include:
The ITR-2 Form comprises 25 sections, including Part A General, Schedule Salary, Schedule House Property, Schedule Capital Gains, and others. These sections must be filled before reviewing, paying tax, and submitting the return.
Who Can File ITR-2?
ITR-2 can be filed by individuals or HUFs whose total income includes:
Salary/pension income
Income from multiple house properties
Capital gains income
Income from other sources (including lottery winnings and income from racehorses)
Agriculture income exceeding INR 5,000
Foreign assets/foreign income
Additionally, it can be used when another person’s income is clubbed with the taxpayer’s income falling under any of the above categories.
Who Cannot File ITR-2?
Individuals with total income including business or professional income cannot file ITR-2. Likewise, taxpayers earning income from a partnership firm must file ITR-3 or ITR-4 to declare such income.
File ITR-2 Online using Income Tax Website
General Information Fill in the general information which consists of your contact, personal information, filing status & bank details.
Schedule Salary, House Property & Other Sources In Schedule Salary, you need to review, enter, edit details of your income from salary or pension, exempt allowances and deductions u/s 16. Under schedule house property, you need to review, enter & edit details relating to house property (self-occupied, let out, or deemed let out). The details include co-owner details, tenant details, rent, interest, pass through income etc. and, under schedule other sources, you need to review, enter and edit details of all your income from other sources, including (but not limited to) income charged at special rates, deductions u/s 57 and income involving race horses.
Schedule Capital Gains Capital Gains arising from sale or transfer of different types of capital assets have been segregated. In a case where capital gains arises from sale or transfer of more than one capital asset, which are of same type, please make a consolidated computation of capital gains in respect of all such capital assets of same type. But in case of transfer of land / building, it is mandatory to enter the computation towards each land / building. In Schedule Capital Gains, you need to enter details of your short term and long term capital gains or Losses for all types of capital assets owned.
Schedule 112A & Schedule 115AD(i)(iii) Proviso Under Schedule 112A, you need to review, enter and edit details about sale of equity shares of a company, an equity-oriented fund, or a unit of a business trust on which STT is paid. Schedule 115AD (1)(iii) proviso involves entering the same details as for Schedule 112A but is applicable to non-residents
Schedule Current Year’s Loss Adjustment (CYLA) In Schedule Current Year’s Loss Adjustment (CYLA), you will be able to view details of income after set-off of current year losses. The unabsorbed losses allowed to be carried forward out of this are taken to Schedule CFL for carry forward to future years.
Schedule Brought Forward Loss Adjustment (BFLA) You can view the details of income after set-off of brought forward losses of earlier years.
Schedule Carry Forward Loss You can view the details of losses to be carried forward to future years.
Schedule VI-A you need to add and verify any deductions you need to claim under Section 80 – Parts B, C, CA, and D of the Income Tax Act
Schedule AMT You need to confirm the computation of Alternate Minimum Tax payable u/s 115JC.
Schedule AMTC You need to add details of tax credits u/s 115JD.
Schedule SPI You need to add the income of specified persons (e.g. spouse, minor child) that is includable or required to be clubbed with your income as per Section 64.
Schedule EI You need to provide your details of exempt income i.e., income not to be included in total income or not chargeable to tax. The income types included in this schedule include interest, dividend, agricultural income, any other exempt income, income not chargeable to tax through DTAA and pass through income which is not chargeable to tax.
Schedule SI You will be able to view the income that is chargeable to tax at special rates. The amount under various income types are taken from the amounts provided in the relevant Schedules i.e., Schedule OS, Schedule BFLA.
Schedule PTI You need to provide details of pass through income received from business trust or investment fund as referred to in section 115UA or 115UB.
Schedule Foreign Source Income (FSI) You need to report the details of income, which is accruing or arising from any source outside India. This schedule is available for residents only.
Schedule TR You need to provide a summary of tax relief which is being claimed in India for taxes paid outside India in respect of each country. This schedule captures a summary of detailed information furnished in Schedule FSI.
Schedule FA You need to provide details of foreign asset or income from any source outside India. This schedule need not be filled up if you are Not Ordinarily Resident or a Non-Resident.
Schedule 5A & Schedule AL In Schedule 5A, you need to provide the information necessary for apportionment of income between husband and wife if you are governed by the system of community of property under the Portuguese Civil Code 1860. If your total income exceeds ₹50 lakh, it is mandatory to disclose the details of movable and immovable assets in Schedule AL along with liabilities incurred in relation to such assets. If you are a non-resident or resident but not ordinarily resident, only the details of assets located in India are to be mentioned.
Tax Paid Under Part B, verify all the auto populated rows from the details that you had entered in the schedules. Verify the tax paid details from the previous financial year.
File Income Tax Return Click on eFile > Income Tax Returns > File Income Tax Return
Assessment Year and Mode Select the appropriate assessment year and select the online mode and click on proceed.
ITR Form Select the appropriate ITR Form, in this case, ITR 2.
Select the checkboxes Next, select the checkboxes applicable to your situation.
Review and File ITR Finally, review all the details that you had entered previously and pay the tax dues (if any) and submit the return. Once you submit the return, proceed to everify it to complete the process.
Structure of ITR-2
Part/ Schedule
Heading
Fields
PART A- GENERAL
Personal Information
Name, Address, Date of Birth, PAN, contact details.
Filing Status
Employer Category, Tax status, Residential status, Return filed under the section.
PART B-TI
Computation of total income
Total Income from all income sources, Losses of the current year set off, Gross Total Income, Deductions under Chapter VI-A.
PART B-TTI
Computation of tax liability on total income
The Bank Account details, Verification, and TRP details (if any) are to be provided.
Schedule IT
Details of Advance Tax and Self Assessment Tax Payments
BSR code, Date of Deposit, Chalan number, Tax Paid
Schedule TDS
TDS1: Details of Tax Deducted at Source from SALARY
TAN of Employer, Employer Name, Tax Deducted, etc.
Schedule TDS
TDS2: Details of Tax Deducted at sources from Income other than Salary (As per FORM 16A) & Details of tax deducted at source on sale of immovable property u/s 194IA (Form 26QB)
TAN, Name of Deductor, Year of Deduction, Tax deducted, etc.
Schedule TCS
Details of tax collected at source
TAN of the collector, Name of Collector, Tax Collected, etc.
Schedule S
Details of Income from Salary
Name and PAN of the Employer, Address of the Employer, Salary, Perquisites, Allowance, etc.
Schedule HP
Details of Income from House Property
Details of House Property, Name and PAN of the Co-owners and Tenants, Details of Rent Income, Interest payable on Borrowed Capital, etc.
Schedule CG
Capital Gains
Details about the Short term and Long term Capital gains, Sales consideration, Cost of Acquisition, Deductions under Section 54,54B,54EC,54F,54GB.
Schedule OS
Income from Other Sources
A dividend, Interest, Rental income from machinery, Winnings from lotteries, Crossword puzzles, Races, Games.
Schedule CYLA
Details of income after setoff of current year losses
Details of current year losses and its Inter Headset off
Schedule BFLA
Details of income after Set off of Brought Forward Losses of earlier years
Details of brought forward losses set off against current year’s income, total brought forward losses set off.
Schedule CFL
Details of Losses to be carried forward to the future years
Total of earlier year losses, current year losses, Total of carried forward to future years.
Name of Donee, Address, City or District, State Code, PAN of Donee, Amount.
Schedule SPI
The income of specified persons (spouse, minor child, etc.) included in the income of the assessee (income of the minor child, in excess of Rs. 1500 per child, to be included)
Name and PAN of Person, Relationship, Nature of Income, Amount.
Schedule SI
Income chargeable to income tax at special rates
Description of Special Rate Income, Special Rate, Income, Taxable Income after adjusting min. chargeable to tax, Tax thereon.
Schedule EI
Details of Exempt Income (Income not to be included in Total Income)
Interest income, Dividend, Agricultural Income.
Schedule PTI
Details of Income from Business Trust or Investment Fund
Details of Income earned from Business Trust or Investment Fund as per section 115UA, 115UB.
Schedule FSI
Details of Income from outside India and tax relief
A country, Head of income, Income from outside India, Tax paid outside India, Tax payable in India, Relevant article of DTAA if relief is claimed u/s 90 or 90A
Schedule TR
Summary of tax relief claimed for taxes paid outside India
Details of tax relief claimed
Schedule 5A
Information regarding the appointment of income between spouses governed by Portuguese Civil Code
Name and PAN of a spouse, Income received under different heads, Amount appointed in the hands of the spouse, TDS details.
Schedule FA
Details of Foreign Assets and Income from any source outside India
Details of foreign bank accounts, financial interest in any entities, Immovable Properties, Other Capital Assets.
Schedule AL
Details of Assets and Liabilities
Details of an immovable asset, Details of a movable asset, Interest held in the asset of a firm or AOP.
Here’s a detailed checklist of documents you’ll need for a smooth income tax filing process:
Essential Documents:
PAN (Permanent Account Number)
Aadhaar Card
Bank Account Details
TDS Certificates
Challan of Taxes Paid
Details of Original Return (if filing a revised return)
Details of Notice (if filing in response to a notice)
Documents Based on Type of Income:
For Salary Income:
Form 16/Salary Slips received from your employer
Pension Statement/Passbook
For House/Property Income:
Co-owner details (if applicable)
Address of the property
Interest certificates/Repayment certificate from a bank (for property loan)
Here are the major changes in ITR 2 for Assessment Years 2021-22 and 2020-21:
For AY 2021-22:
Option to Choose Tax Regime: Taxpayers can opt between the old and new tax regimes based on their preference.
Quarterly Breakdown for Dividend Income: Dividend income must be reported with quarterly breakdowns for accurate calculation of interest under Section 234C.
For AY 2020-21:
Mandatory Filing for RNORs and Non-Resident Individuals: RNORs and non-resident individuals must file ITR 2 even if their income is below INR 50 lakh.
Disclosure of High-Value Transactions: Taxpayers must disclose cash deposits exceeding INR 1 crore in current accounts, expenditure above INR 2 lakh on foreign travel, or expenditure above INR 1 lakh on electricity.
Resident Individuals Owning Multiple Properties: Residents with more than one house property must file ITR 2.
Ineligibility for Business and Profession Income: Taxpayers earning income from business and profession cannot file ITR 2.
Disclosure of Company Details: Directors in a company or those holding unlisted equity investments must disclose the type of company.
Separate Section for LTCG Calculation: A dedicated section, Section 112A, is introduced for calculating long-term capital gains on the sale of equity shares or units of a business trust liable to STT.
Important Keyword: HUF, Income from Business & Profession, ITR-2, Section 80C, Section 80D, Section 80TTA.
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Hindu Undivided Family (HUF) and its tax benefits
Hindu Undivided Family, or HUF, stands as a distinct entity for Income Tax assessment purposes, offering tax advantages to its members.
Under Hindu Law, an HUF comprises all individuals descended in lineage from a shared forebear, along with their spouses and unmarried daughters. This familial structure is not established by any specific legislation but by inherent status.
Who can form HUF?
Hindu Undivided Family (HUF) formation is distinct from individual or coparcener initiation. Typically, a married male establishes an HUF, encompassing various family members such as his spouse, children, daughters-in-law, and grandchildren. In case of the demise of the father, the daughters can continue the HUF, with the elder daughter assuming the role of Karta.
The Karta, typically the eldest male, oversees HUF affairs and necessitates a separate PAN. With consensus, a junior male member can also become Karta. Other members, apart from the Karta, constitute the HUF. Notably, income contributed to the common pool or generated from HUF assets is taxed separately as HUF income, distinct from members’ earnings.
Differentiating between a Member and a Coparcener: While a coparcener holds partition rights in HUF property, a member is entitled to maintenance. Until partition, the Karta manages family property jointly for all coparceners.
Tax Implications on HUF Income:
Once acquiring a separate PAN, Hindu Undivided Family must file annual Income Tax returns, akin to individuals, with tax levied at applicable slab rates. HUF enjoys the basic exemption limit of Rs. 2,50,000, akin to individuals.
If HUF invests in a partnership firm, resulting profits and interest constitute HUF income. However, if the Karta receives salary from the same firm, it’s considered individual income.
Leveraging HUF for Tax Planning:
Transferring income taxed at higher slab rates to Hindu Undivided Family can potentially reduce tax liabilities, with HUF benefiting from deductions under Chapter VI-A, thus lightening the individual member’s tax burden.
Tax Deductions available to HUF
HUF (Hindu Undivided Family) is indeed entitled to various tax deductions under Section 80 of the Income Tax Act, 1961. Here’s a glimpse of some notable deductions applicable to HUF:
Section
Deduction for
Allowable if
80C
Life Insurance Premium
Paid for the Policy of any of the members of HUF
Payment under a contract for a deferred annuity
Paid for the Policy of any of the members of HUF
Public Provident Fund (PPF)
Any contribution made towards PPF account of a member of HUF
Unit Linked Insurance Plan of UTI & LIC Mutual Fund
The contribution made in the name of any of the members of HUF
Tuition fees
Paid for children of any of the members of HUF
Certain payments for purchase/ construction of residential House Property, Repayment of Housing Loan
Paid for the House Property purchased or constructed by HUF and the expenses are wholly and exclusively for the purchase of the property
Subscription to Equity Linked Saving Scheme
Paid for the scheme which is either in the name of the HUF or any of the members of the HUF
Term deposit for a fixed period of not less than 5 years, with a scheduled bank or with Post Office
Paid for the deposit in the name of HUF or any of its members
80D
Health Insurance Premium / preventive health check-up
Paid for any of the members of the HUF
80DD
Expenditure on medical treatment of a person with a disability
Paid for any of the members (with a disability) of the HUF
80DDB
Expenses paid for medical treatment of specified diseases and ailments
Paid for the treatment of any of the members of the HUF who are completely dependent on the family
80TTA
Interest on deposits in Savings Bank Account
The interest is earned on the Savings Bank Account in the name of HUF
when an Hindu Undivided Family is engaged in business activities, it can claim various expenses related to the business while computing its taxable income. This includes salaries or remuneration paid to the Karta and other members who contribute to the HUF’s business operations.
Tax Planning with HUF
Certainly! Let’s delve into the tax situation of Dhruv and Khushboo, considering their income sources and the advantages of a Hindu Undivided Family (HUF).
Dhruv and Khushboo, a married couple with a son named Tanay, navigate their tax responsibilities amidst their varied income streams. Khushboo earns a robust salary of Rs. 10 lakh annually, while Dhruv thrives in his business, fetching him Rs. 18 lakh. Additionally, Dhruv receives rental income amounting to Rs. 5 lakh from his ancestral property. Their current tax liabilities are in focus:
Particulars
Dhruv
Khushboo
Salary Income / Business Income
18,00,000
10,00,000
Rental Income from ancestral property
5,00,000
–
Total deductions under section 80
1,50,000
1,50,000
Total Taxable Income
21,50,000
8,50,000
Tax Liability as per Slab Rate
4,84,100
97,850
Combined Tax Liability
5,81,950
Establishing an Hindu Undivided Family offers Dhruv and Khushboo strategic avenues to optimize their tax liabilities and enhance their financial planning. Here’s how they can leverage the benefits of HUF formation:
Rental Income Diversion: By channeling the rental proceeds from Dhruv’s ancestral property into the HUF corpus, they segregate this income from their individual tax brackets. This maneuver effectively reduces their collective tax burden, as the HUF entity enjoys its own basic exemption limit and deductions.
Business Incorporation under Hindu Undivided Family: Dhruv can initiate a business venture registered under the HUF’s name, further diversifying their income sources. By allocating a portion of Dhruv’s business earnings to the HUF, such as Rs. 6,00,000, they bolster the HUF’s financial portfolio while mitigating tax liabilities associated with Dhruv’s individual income.
Strategic Investments and Deductions: With HUF status, they can strategically invest and make payments to avail deductions permissible under the Income Tax Act. For instance, the Hindu Undivided Family can pay life insurance premiums for Dhruv, Khushboo, and Tanay, thereby securing their family’s financial well-being while simultaneously claiming deductions from HUF income.
So now the Tax Liability will be as follows:
Particulars
Dhruv
Khushboo
HUF
Salary Income / Business Income
12,00,000
10,00,000
6,00,000
Rental Income from ancestral property
–
–
5,00,000
Total deductions under Section 80
1,50,000
1,50,000
1,50,000
Salary Income / Business Income
12,00,000
10,00,000
6,00,000
Total Taxable Income
10,50,000
8,50,000
9,50,000
Tax Liability as per Slab Rate
1,44,200
97,850
1,18,450
Combined Tax Liability
3,60,500
In conclusion, the establishment of an Hindu Undivided Family facilitated significant tax savings amounting to Rs. 2,21,450 (5,81,950 – 3,60,500) by redistributing income streams. However, it’s crucial to approach HUF transactions with careful planning and adherence to tax regulations. Seeking guidance from a Chartered Accountant or tax expert can ensure compliance and prevent any inadvertent violations of tax laws.
Can HUF own any asset?
Hindu Undivided Family can acquire assets through various channels, including:
Assets received upon partition of a larger HUF, where the coparcener was a member. For instance, assets received by a coparcener upon partition form part of their own HUF.
Gifts from relatives and friends received by the HUF.
Inherited assets through a will.
Individual members can transfer their assets to the HUF asset pool. However, while this consolidates ownership, it doesn’t shift tax liability on income generated from these assets, which continues to be taxed in the hands of individual members.
Partitions of HUF
Partitioning an HUF is a common strategy to mitigate tax implications:
Total Partition involves the cessation of all members’ status in the HUF, with property distributed among them. Subsequently, members are taxed individually.
Partial Partition, although recognized in Hindu law, doesn’t have a corresponding provision in the Income Tax Act. Hence, it’s either Total Partition or none, as per tax regulations.
Important Keyword: Direct Tax, Income Tax, ITR-1, ITR-2, ITR-3, ITR-4, Taxpayer Categories, TDS.
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ITR:What is Income Tax?
Income Tax serves as a primary source of revenue for the government, aiding in various developmental initiatives such as infrastructure projects and public service salaries. It falls under the category of direct taxes, along with capital gains tax and securities transaction tax. Tax Deducted at Source (TDS) is a mechanism employed by the government to ensure a consistent inflow of revenue by levying taxes directly at the source, such as salaries or other payments.
Every individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), firms, and companies are liable to pay Income Tax based on their income earned during the financial year. This tax is calculated as per the applicable tax rates and slabs determined by the government. Through the efficient collection of Income Tax and TDS, the government can effectively manage public finances and fund various developmental endeavors essential for societal progress.
Income Tax in India
In India, the realm of direct taxation operates under the provisions of the Income Tax Act of 1961, complemented by the Income Tax Rules of 1962, as well as notifications and circulars issued by the Central Board of Direct Taxes (CBDT). Income Tax is imposed according to various income categories and taxpayer classifications, delineated within the Income Tax Act.
Taxpayers in India fall under several categories:
Individual residents aged below 60 years.
Senior citizens aged between 60 to 80 years.
Super senior citizens aged above 80 years.
Non-residents (NRI).
Hindu Undivided Family (HUF).
Firms / AOP (Association of Persons) / BOI (Body of Individuals) / Local Authorities / Co-operative Societies.
Companies.
Income Tax for Resident Individuals
For resident individuals, income is parsed into different categories such as salary, house property, capital gains, business or profession, and other sources. Taxes are applied at slab rates, although there are exceptions for certain types of income.
Most individuals primarily derive income from salary, house property, and interest, rendering them eligible to file ITR-1 (SAHAJ).
If income emanates from multiple house properties, ITR-2 is applicable.
Individuals with capital gains, such as from casual stock trading or property sales, can file ITR-3.
Those with income from proprietary business or profession may choose between ITR-4 (SUGAM) or ITR-3.
Individuals who are partners in a firm and receive income via salary, remuneration, interest, or profit-sharing file ITR-3.
Individuals with proprietary business turnovers exceeding Rs. 2 crores or professionals with gross professional receipts surpassing Rs. 50 lakhs are required to have their books of account audited and file ITR-3.
Income Tax for NRI
For Non-Resident Indians (NRIs), the obligation to file an income tax return in India arises only if they have earned income within the country. Their foreign income from their country of residence does not need to be disclosed while filing the Indian tax return.
The types of return forms applicable to NRIs are the same as those for resident Indians. When filing their return, NRIs can claim credit if the income earned in India is also taxed in their country of residence. The fundamental principle is to prevent double taxation on the same income. Therefore, if income earned in India is also taxed in a foreign country with which India has a double taxation avoidance agreement, NRIs can claim credit for the tax paid in the foreign country while filing their Indian return.
Income Tax for HUF (Hindu Undivided Family)
The Income Tax Act recognizes Hindu Undivided Family (HUF) as a distinct legal entity apart from its members, with its own unique PAN. HUFs enjoy a basic exemption limit similar to that of individuals, set at Rs. 2,50,000.
Key points regarding HUF taxation:
HUFs are required to file their Income Tax Return separately.
All incomes derived from assets in the common pool of the HUF or from business activities conducted in the name of the HUF must be included in the tax return.
HUFs can earn income from various sources, excluding salary.
Income is taxed at slab rates applicable to individuals.
HUFs can file returns using ITR-2, ITR-3, and ITR-4 forms.
Similar to individuals, if an HUF is engaged in business and its turnover exceeds Rs. 2 crores, the books of account must be audited, and ITR-4 is to be filed.
Income Tax for Partnership Firms
Partnership firms and Limited Liability Partnerships (LLPs) are distinct legal entities with their own PAN.
These entities file income tax returns using ITR-5.
Income from business or profession, house property, capital gains, and other sources can be reported in ITR-5.
A flat rate of 30% tax applies to the firm’s income.
Profits distributed among partners, after tax payment, are tax-free in the hands of the partners.
However, any salary, remuneration, or interest paid to partners is taxable in the hands of the partners, while the firm can claim it as an expense.
Income Tax for Companies
Companies have separate legal identities and PANs, categorized as Domestic Companies and Foreign Companies.
Domestic companies file income tax returns using ITR-6.
It is mandatory for companies to file returns and provide details of statutory audits.
If the turnover from business exceeds Rs. 2 crores, a Tax Audit is required, with details to be provided in the Income Tax Return.
Companies can earn income from business, house property, capital gains, and other sources.
Companies claiming exemptions under section 11 file returns using ITR-7.
Domestic companies are taxed at a flat rate of 30%, while foreign companies are taxed at a flat rate of 40%
