Income Tax Return: When can you not use Form ITR1 to file income tax return for FY 2020-21?

Clipped from: https://economictimes.indiatimes.com/wealth/tax/when-can-you-not-use-form-itr1-to-file-income-tax-return-for-fy-2020-21/articleshow/88524293.cmsSynopsis

Form ITR-1 is used by most individual salaried taxpayers to file their income tax returns. However, there are certain situations where an individual cannot use ITR-1 or Sahaj to file their tax returns. Here is a look at those circumstances.

Nearly half of all the income tax returns (ITRs) filed for FY2021-22 has been filed using Form ITR-1. This is the ITR form used by most salaried taxpayers and is also known as Sahaj. ITR-1 can be filed if:

  • Taxpayer is a resident Individual
  • Total income does not exceed Rs 50 lakh
  • Sources of income include salary, one house property, agricultural income up to Rs 5,000 and other sources such as interest from savings account, deposits, income tax refund, family pension etc.
  • Clubbing of income with spouse or minor

Do keep in mind that ITR-1 can be used to file ITR even if you own one single property jointly with your spouse.
However, there are situations where an individual taxpayer cannot use ITR-1 to file tax returns for FY 2020-21 despite having the above-mentioned sources of income.

When can you not use ITR-1?
According to tax laws, an individual cannot file ITR-1 if any of the following criterion are met:

  • Invested in unlisted equity shares
  • Director if a company
  • Hindu Undivided Family (HUF)
  • Holding foreign assets such as stocks of a foreign company etc.
  • Deferred income tax on ESOP (Employees’ Stock Ownership Plan) received from employer being an eligible start-up
  • Owns and has more than one house property (either owned as single or jointly)
  • Agriculture income in a financial year exceeds Rs 5,000
  • Is a Resident Not Ordinarily Resident (RNOR) and Non-resident Indian (NRI)
  • Have taxable capital gains (short term and long term)
  • Total income from all sources exceeds Rs 50 lakh
  • Income from lottery, racehorses, legal gambling etc.
  • Losses that have brought froward or to be carried forward for subsequent years under the head ‘Income from house property’.
  • Income from business or profession
  • Tax has been deducted under section 194N of the Income-tax Act. TDS is deducted under section 194N on the cash withdrawals exceeding certain limit provided certain conditions are specified.

What to do if you cannot file ITR-1
Individuals who do not satisfy the eligibility conditions of ITR-1 should worry not. These individuals can use different ITR forms to file their tax returns. For instance, individuals having capital gains (either short-term and/or long-term), holding unlisted equity shares or is a director of a company can use ITR-2 to file their income tax return.
Similarly, individuals/HUF having business income or income from profession can use ITR-3 to file their income tax return.

ITR filing: The last-minute checklist for taxpayers

ITR filing season comes to an end soon, i.e. on December 31, 2021. In its last leg, unless there is yet another deadline extension, Preeti Khurana, Director- Advocacy & Regulation at Clear, runs us through all the information you need to file your taxes for FY 2020-21.
Also Read: Which income tax return form is applicable to you for FY 2020-21?

Also Read: How to file ITR-2 with salary, capital gains and other incomes

Also Read: How to file ITR-1 with salary, home loan and other incomes

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