As per Section 139(1) of the Income Tax Act, 1961, every person whose income exceeds the maximum exemption limit is legally bound to file the income tax return and to pay off his tax liability(if any) within the prescribed due date.
The IT department has notified total 7 ITR forms and each form is applicable on different persons depending upon the various factors that are the sources of taxpayer’s income, category of taxpayer (such as Individual, HUF, Company etc.) or the total amount of income etc.
The most frequently asked question related to ITR forms’ applicability is which ITR form should a salaried person file? So the answer is ITR Form 1.
Since the Salaried person’s source of income is salary and the person is an Individual thus the person fulfills the criteria of ITR Form 1. Hence, the salaried person has to file ITR Form-1. However, the salary must not exceed Rs. 50 Lakh in the relevant Financial Year otherwise the person shall not be eligible to file ITR Form 1.
In this Blog, we will discuss the applicability of ITR Form-1 on Salaried Employees and other persons eligible to file it.
What Is ITR1 Form?
ITR 1 means Income Tax Return Form 1 that is required to be filed by Resident Individuals having the prescribed incomes. It is basically an ITR for salaried person.
Who can use Income Tax Return form 1 (ITR-1)?
A Resident Individual having the following incomes:
(i) Income from Salary/Pension or Income from family pension; or
(ii) “Income from house property”, where assessee does not own more than one house property and does not have any brought forward loss or loss to be carried forward under this head; or
(iii) “Income from other sources”, except winnings from lottery or income from race horses and does not have any loss under the head.
Who cannot use Income Tax Return form 1 (ITR-1)?
One must also learn who cannot use Income Tax Return 1 (ITR-1) while understanding what is ITR1.
Proviso to Rule 12(1)(a) provides that if an Individual is otherwise eligible for filing his return of Income, he cannot file ITR-1 (Sahaj), if he:
- has foreign assets (including financial interest in any entity);
- has signing authority in any account located outside India;
- has income from any source outside India;
- has income to be apportioned in accordance with provisions of section 5A;
- has claimed deduction under section 57, other than deduction claimed under clause (iia);
- is a director in any company;
- has held any unlisted equity share at any time during the previous year;
- is assessable for the whole or any part of the income on which tax has been deducted at source in the hands of a person other than the assessee;
- has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91;
- has agricultural income, exceeding Rs. 5,000;
- has total income, exceeding Rs. 50 Lakh;
- has income taxable under section 115BBDA (dividend income from a domestic company above Rs. 10 lakh); or
- has income of the nature referred to in section 115BBE (tax on undisclosed income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69).
Key points to remember while filing Income Tax Return form 1 (ITR-1)
Many ITR filers make common mistakes while filing ITR for salaried persons or others persons eligible for Form ITR 1. This is why they always seek for how to file ITR 1. Thus, we have listed certain points that ITR filers must remember while filing ITR Form 1.
- ITR-1 can be filed only by a resident individual therefore-
- A Non-resident Individual cannot file ITR-1.
- A HUF cannot file ITR-1.
- Income from ONE House Property (single or joint ownership) without any carry forward or brought forward of loss. This means the house property must be a self-occupied house property. If the house property is let-out, the interest paid on home loan shall not exceed Rs. 2,00,000 during the FY 2019-20.
- Income from Other Sources like bank interest, interest on income tax refund, etc. The income from other sources shall not include income from winning from lottery or racehorses.
- Though the Interim Budget, 2019 (Finance Act, 2019) allowed an Individual to own self – occupied house properties without any notional tax liability on second house, but if he owns two house property, he cannot use ITR-1.
Changes in Income Tax Return form 1 (ITR-1) for F.Y 2020-21/ A.Y 2021-22
The Income Tax Department has rolled out a new portal for ITR Filing and thus corresponding changes have been introduced various changes in ITR Forms in order to make tax compliances easier for both taxpayers and ITR filers.
The CBDT has notified are the key changes in all ITR Forms including ITR Form-1 in Income Tax (7th Amendment) Rules 2021 through Notification No. 21/2021.
Following are the substantial changes in ITR Form-1.
Roll-out of JSON Utility
The I-T Department has rolled out a JSON Utility for filing ITR offline. It is expected that the number of filing ITR via offline mode will increase after this Utility as it will make the process more convenient. Moreover, the CBDT has also notified that from now on immediate processing of ITR and new tax payment system will be operative.
The JSON Utility is currently enabled for ITR1 & ITR4 only.
Non-applicability of ITR1 in case if TDS deduction under Section 194N
Section 194N of the IT Act, 1961 states that TDS shall be deducted by the payer while making any payment to any individual in cash from the taxpayer’s bank account on the amount exceeding Rs. 1 Crore.
However, if the person claiming TDS Credits under Section 194N then such person cannot file ITR1. Moreover, the TDS deducted under Section 194N then such amount can only be claimed in the form of refund in the same year of deduction.
Furthermore, when the TDS is deducted as per Section 194N then the TDS deducted can’t be carry forward in subsequent assessment years.
Abolition of DDT Regime
Earlier on, the Companies had to pay Dividend Distribution Tax (i.e. DDT) on the Dividends and thereafter shareholders were required to pay tax on the Dividends when exceeding the threshold limit of Rs. 10 Lakh.
Thereafter, the Finance Act, 2020 has abolished the DDT Regime. It means that the dividend shall be taxable and the taxpayer is required to provide details of dividend income on quarterly basis in ITR Forms. Moreover, Section 234C shall also be applicable on dividend income and it will enable the interest liability on such income accordingly.
Consequently, Schedule Other Sources has also been revised and it shall include the dividend income. Likewise, Schedule Exempt Income which was providing tax exemption on dividend income up-to Rs.10Lakh has been revised.
Implementation of Section 115BAC
Section 115BAC of the IT Act is applicable on only Individuals and HUF’s from Assessment Year 2021-22. This section gives an option to both Individuals and HUF to pay income tax as per either existing Income Tax Regime or to pay tax under New Tax Regime. The New Tax Regime provides fixed concessional tax rates without any deductions and/or exemptions.
In case the taxpayer chooses new tax regime then he/she is required to file Form10IE before filing ITR within the provisions of Section 139(1).
Form 16D in ITR Form 1 – Section 194M
According to Section 194M, when any Individual/HUF who are not subjected to TDS provisions provided under Sections 194C, 194H, and 194J makes payment to any broker, contractor, professional or commission agent then TDS at the rate of 5% shall be deducted on such payment. Thereafter, the details of TDS deducted pertinent to Section 194M then the Certificate in the Form 16D shall also be issued under Rule 31 of IT Rules.
Correspondingly, ITR Forms including ITR Form1 have been changed/amended to provide reference of such Form 16D when applicable.
We hope all of your doubts related to what is ITR1, how to file ITR 1, and other topics related to the ITR 1 Form are answered. In case of any query, contact your Trustworthy Advisors Manthan Experts.