Certain individuals are not eligible to file their Income Tax Return-1 (ITR-1) for the Assessment Year 2023-24. Understanding who falls under this category is essential for taxpayers to ensure they file their returns correctly and in compliance with the Income Tax Act. Here are the individuals who are ineligible to file ITR-1, along with the benefits of adhering to these guidelines:
- Resident Not Ordinarily Resident (RNOR) and Non-Resident Indian (NRI): Individuals falling under the RNOR or NRI status cannot use ITR-1. This limitation exists because the ITR-1 form is specifically designed for resident individuals with income from salary, one house property, other sources (excluding lottery, racehorses, legal gambling, etc.), and whose total income does not exceed ₹50 lakh. By understanding their eligibility, RNOR and NRI taxpayers can choose the appropriate form for filing their income tax returns, ensuring accuracy and compliance.
- Total Income Exceeding ₹50 Lakh: Individuals with a total income exceeding ₹50 lakh are not eligible to file ITR-1. For such individuals, other tax forms, like ITR-2 or ITR-3, are available. Filing the correct form based on income levels ensures accurate reporting of financial information and helps avoid penalties for using an incorrect form.
- Agricultural Income Exceeding ₹5000/-: If an individual’s agricultural income exceeds ₹5000/-, they cannot use ITR-1. This provision encourages individuals with significant agricultural income to utilize forms suitable for their specific income sources, such as ITR-2 or ITR-3. Using the appropriate form allows taxpayers to report their agricultural income correctly and take advantage of any applicable exemptions or deductions.
- Income from Lottery, Racehorses, Legal Gambling, etc.: Individuals with income from activities like lottery, racehorses, legal gambling, etc., are ineligible to file ITR-1. The exclusion of such income sources from ITR-1 prevents taxpayers from mistakenly reporting these unique sources of income under the wrong category. By using the appropriate tax form, individuals can accurately report and calculate the tax liability associated with such income, if applicable.
- Taxable Capital Gains (Short-term and Long-term): ITR-1 is not suitable for individuals with taxable capital gains, whether short-term or long-term. To report capital gains correctly and avail the associated tax benefits, taxpayers must use the appropriate form, such as ITR-2 or ITR-3. This ensures accurate computation of capital gains tax and facilitates the utilization of exemptions or deductions related to capital gains.
- Investment in Unlisted Equity Shares: Individuals who have invested in unlisted equity shares are not eligible to use ITR-1. The exclusion of unlisted equity shares from ITR-1 is crucial to ensure proper reporting and taxation of these investments. By utilizing the correct tax form, individuals can accurately disclose their investments and comply with the relevant tax provisions.
- Income from Business or Profession: ITR-1 is not suitable for individuals earning income from a business or profession. For such cases, forms like ITR-3 or ITR-4 are available, depending on the nature and turnover of the business. Utilizing the appropriate form ensures accurate reporting of business income, deductions, and compliance with tax laws.
- Director in a Company: Individuals holding the position of a director in a company are not eligible to file ITR-1. This limitation exists because ITR-1 is designed for salaried individuals with income from a single house property and does not cater to the complexities associated with directorship. By using the correct form, directors can accurately report their income, including director’s remuneration and any other sources related to their role.
- Tax Deduction under Section 194N of the Income Tax Act: Individuals who have availed tax deduction under Section 194N of the Income Tax Act are ineligible to file ITR-1. Section 194N pertains to the deduction of tax at source on cash withdrawals from banking channels. Excluding such individuals from ITR-1 ensures compliance with tax regulations and enables accurate reporting of income and deductions associated with such transactions.
- Deferred Income Tax on ESOP received from Employer being an eligible start-up: Individuals who have deferred income tax on Employee Stock Ownership Plan (ESOP) received from an employer, where the employer is an eligible start-up, cannot use ITR-1. The exclusion of such cases from ITR-1 facilitates proper reporting and taxation of deferred income. By using the appropriate tax form, individuals can ensure accurate disclosure and computation of their tax liability related to ESOPs.
- Ownership and Income from more than one House Property: Individuals who own and earn income from more than one house property are ineligible to file ITR-1. The exclusion of multiple house properties from ITR-1 ensures proper reporting of rental income, deductions, and other aspects related to such properties. By utilizing the correct form, individuals can accurately disclose their multiple properties and comply with tax regulations.
- Not Covered under ITR-1 Eligibility Conditions: Individuals who do not meet the eligibility conditions set for ITR-1 cannot use this form. This provision encourages taxpayers to assess their income sources, investments, and other factors to determine the most suitable form for filing their income tax returns. By selecting the appropriate form, individuals can accurately report their income, claim deductions, and fulfill their tax obligations.
Understanding the ineligibility criteria for filing ITR-1 allows individuals to select the appropriate tax form based on their income sources, investments, and other relevant factors. Utilizing the correct form ensures accurate reporting, compliance with tax laws, and the ability to take advantage of exemptions, deductions, and other benefits available under the Income Tax Act. By adhering to these guidelines, taxpayers can fulfill their obligations effectively and avoid penalties for incorrect filing.