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ITR Filing FY2024-25: It’s quintessential to choose the correct ITR form based on one’s income sources and entity type to ensure compliance and avoid penalties.
Income Tax: Seven types of tax payers.
ITR Filing FY2024-25: The new Income Tax filing season kicks in on April 1, 2025. To avoid any violation and penalty, taxpayers must file their income tax return (ITR) before the deadline, which is July 31. The Income Tax Department has notified all forms from ITR-1 to ITR-7 for the financial year 2024-25 (AY 2025-26).
There are seven types of taxpayers under the income tax rules in India, from individual to company. Understanding your category will help you to choose the right ITR form for you based on income sources and entity types, which eventually decreases the risk of being rejected due to an anomaly or discrepancy.
Let’s understand the seven types of taxpayers in the country and which one is appropriate for you.
1. Individual
Who: Single taxpayers, including salaried employees, freelancers, and professionals.
Taxation: Based on income slabs; different rates for general, senior (60–80 years), and super senior citizens (80+ years).
ITR Forms:
ITR-1 (Sahaj): For salaried individuals with income up to ₹50 lakh.
ITR-2: For those with capital gains or multiple properties.
ITR-3: For income from business/profession.
ITR-4 (Sugam): For presumptive income under Sections 44AD, 44ADA, or 44AE.
2. Hindu Undivided Family (HUF)
Who: A family unit with common ancestors, treated as a separate entity.
Taxation: Similar to individuals, with applicable deductions and exemptions.
ITR Forms: ITR-2, ITR-3, or ITR-4, depending on income sources.
3. Company
Who: Private or public limited companies registered under the Companies Act.
Taxation: Flat corporate tax rates; special provisions like Minimum Alternate Tax (MAT) may apply.
ITR Form: ITR-6 (except for companies claiming exemption under Section 11).
4. Firm
Who: Partnership firms, including LLPs (Limited Liability Partnerships).
Taxation: Flat rate of 30% on total income, plus applicable surcharge and cess.
ITR Form: ITR-5.
5. Association of Persons (AOP) / Body of Individuals (BOI)
Who: Groups of individuals or entities coming together for a common purpose.
Taxation: Taxed either at individual rates or maximum marginal rate, based on specific conditions.
ITR Form: ITR-5.
6. Local Authority
Who: Municipalities, Panchayats, and other local governing bodies.
Taxation: Income from commercial activities is taxable; certain incomes may be exempt.
ITR Form: ITR-5
7. Artificial Juridical Person (AJP)
Who: Entities not covered above, like trusts, societies, and other legal entities.
Taxation: Varies based on the nature of the entity and its income.
ITR Forms:
ITR-5: For general AJPs.
ITR-7: For entities claiming exemptions under Sections 11, 12, etc., like charitable trusts.
It’s quintessential to choose the correct ITR form based on one’s income sources and entity type to ensure compliance and avoid penalties.
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