Directors ITR in India

Directors ITR in India (AY 2027-28): ITR-2, ITR-3 and Every Disclosure That Matters

Directors of Indian companies must file either ITR-2 or ITR-3 for Assessment Year 2027-28 — never ITR-1, which is explicitly barred for anyone who holds a directorship or invests in unlisted shares. ITR-2 covers directors whose income comes from salary, capital gains, house property and other sources. ITR-3 is mandatory the moment you also carry on a business or profession. Beyond picking the right form, you must disclose every directorship, every unlisted shareholding, all perquisites and — if you are a Resident and Ordinarily Resident — foreign directorships in Schedule FA. The Income Tax Department cross-validates your return against MCA21 V3, AIS, TIS and FATCA/CRS data before it is even processed.

Why Director ITR Is Categorically Different from a Regular Employee's Return

A salaried employee with no other income can often file a one-page ITR-1. A director cannot. The ITR-1 (Sahaj) instructions explicitly exclude any person who:

• is or was a director in a company during the financial year, or
• holds unlisted equity shares at any point during the year.

This exclusion exists because the disclosure obligations of a director extend far beyond what ITR-1 can accommodate. The Income Tax Department has three independent data feeds to verify a director's return:

1. MCA21 V3 portal — records of directorships, DIN (Director Identification Number), shareholding changes, board resolutions and annual filings
2. AIS / TIS (Annual Information Statement / Taxpayer Information Summary) — a consolidated feed of all financial transactions reported by banks, depositories, registrars, companies and mutual funds
3. FATCA / CRS reporting — foreign financial institution data for Indian residents with offshore accounts, investments or directorships

If your return does not match what these sources show, the Centralised Processing Centre (CPC) in Bengaluru flags the discrepancy automatically. A mismatch can generate a notice under Section 143(1)(a) for an arithmetic or prima facie incorrect return, or a full scrutiny notice under Section 143(2). Reconciling before you file is the only rational strategy.

Which ITR Form Should a Director File?

The entire decision rests on one question: do you earn income from a business or profession in your individual capacity during FY 2026-27?

ITR-6 is the return form filed by the company itself — it is never used by a director in a personal capacity.

ITR-4 (Sugam) covers presumptive taxation under Sections 44AD, 44ADA and 44AE. A director who also runs a small proprietorship and opts for presumptive taxation might technically qualify, but ITR-4 is barred if you have capital gains income or hold unlisted equity shares — both of which are common for directors. In practice, most directors who also have a business will land on ITR-3. When genuinely uncertain, use ITR-3.

What the Income Tax Department Already Knows Before You File

Download your AIS at incometax.gov.in → Services → Annual Information Statement at least two to three weeks before filing. The AIS now consolidates:

• Salary income: TDS data from your employer's Form 24Q quarterly filings
• Sitting fees and professional fees: TDS under Section 194J (10%) from Form 26Q filings
• Dividends: reported by companies under Sections 194 and 194K
• Interest income: reported by banks and NBFCs under Section 194A
• Securities transactions: share sale proceeds from NSDL, CDSL and registrar/transfer agent data
• High-value credit card transactions: aggregate spends above the reporting threshold
• Foreign remittances: LRS (Liberalised Remittance Scheme) transactions above USD 2,50,000 equivalent
• MCA21 directorship data: appointments, resignations and DIN-level company associations

The TIS then shows a "derived" figure — the Department's own estimate for each head of income. Your ITR must either match or explain the difference through feedback. Submit AIS feedback for any incorrect entry before filing, not after — the feedback trail becomes your audit defence.

Mandatory Disclosures You Cannot Skip

Directorship Details

Every ITR-2 and ITR-3 includes a schedule requiring you to disclose for each company where you hold a directorship:

• Name and PAN of the company
• Whether the company is listed or unlisted
• Your DIN
• Date of appointment (and cessation, if you resigned during FY 2026-27)

This includes dormant companies, companies under strike-off proceedings, Section 8 (not-for-profit) companies and wholly owned subsidiaries. "I forgot about that dormant entity" is not a defence — MCA21 maintains a complete and searchable record.

Unlisted Company Shareholding

If you hold shares in unlisted companies, you must disclose the following for each company:

• Opening balance: number of shares and cost of acquisition as on 1 April 2026
• Acquired during the year: number of shares, face value, issue price or cost
• Transferred or sold during the year: number, sale consideration and profit or loss computed
• Closing balance: number of shares and cumulative cost

This data is cross-validated against MCA21 Form PAS-3 (share allotments) and Form SH-4 (share transfers) filed by those companies. Even a nominal holding of 0.01% must be reported.

Perquisites and Benefits-in-Kind

If your total perquisites exceed Rs. 1,50,000 in the year, your employer must issue Form 12BA detailing each perquisite. The aggregate perquisite value is already included in your Form 16 (Part B) as part of gross salary. Common perquisites directors underreport:

• Company accommodation: taxable at 15% of salary (cities with population above 25 lakh) or 10% (other cities), less any rent recovered from you
• Company car: Rs. 2,400 per month if engine capacity exceeds 1.6 litres; Rs. 1,800 per month if 1.6 litres or below; add Rs. 900 per month if a driver is also provided
• Concessional loans: the interest differential between the SBI benchmark prime lending rate as notified on 1 April 2026 and the rate actually charged by the company is taxable under Section 17(2)(vi)

Worked number — loan perquisite: Your company lends you Rs. 25,00,000 at 4% per annum for a house purchase. The SBI benchmark rate as on 1 April 2026 is 10.30% per annum (illustrative). Perquisite value = (10.30% − 4.00%) × Rs. 25,00,000 = Rs. 1,57,500 for the full year. This must appear under "Salaries" in your ITR. If your employer excluded it from Form 16 Part B, you are still liable — add it yourself.

Foreign Directorships and Schedule FA

If you are a Resident and Ordinarily Resident (ROR) for FY 2026-27, Schedule FA (Foreign Assets) is mandatory if you hold or held:

• A directorship in any foreign company
• A foreign bank account
• Foreign equity or debt investments
• A beneficial interest in an overseas trust

For each foreign directorship, Schedule FA requires the country, entity name and address, nature and extent of interest, date of acquisition and income accrued during the year — even if that income was never remitted to India.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes a penalty of Rs. 10 lakh per undisclosed foreign asset and provides for prosecution. The Income Tax Department already receives CRS (Common Reporting Standard) data from over 100 countries identifying Indian-resident directors in foreign entities. A dormant €1 company in any OECD jurisdiction still triggers the disclosure requirement. File Schedule FA.

How Each Income Stream Is Reported on the Return

Salary: Executive Directors (MD / WTD)

A Managing Director or Whole-Time Director receives remuneration that is subject to the limits and approval requirements under Sections 197 and 198 of the Companies Act, 2013 (for public companies). The income is taxable under Head: Salaries. Your company deducts TDS under Section 192. Report salary from Form 16 Part A and Part B. Under the new tax regime for AY 2027-28, the standard deduction applicable to salary income is Rs. 75,000. Under the old regime it remains Rs. 50,000 — confirm which regime you have opted for and apply the correct figure.

Sitting Fees and Commission: Non-Executive Directors

Non-executive directors receive a per-meeting sitting fee and, in some companies, an annual commission linked to net profits. The company deducts TDS at 10% under Section 194J (professional and technical services). If you carry on no other business or profession, declare these receipts under Schedule OS (Income from Other Sources) in ITR-2. If you also run a business or profession, transfer this income to Schedule BP (Business and Profession) in ITR-3. Do not mix sitting fee income reported on Form 16A with salary income reported on Form 16.

Professional and Consultancy Fees

Some directors also render consulting services — particularly to companies in which they have a substantial interest (defined as 20% or more shareholding under Section 40A(2)(b)). This income is taxable under PGBP if carried on systematically, or under IFOS if it is incidental. TDS is deducted at 10% under Section 194J. If you are filing ITR-3, maintain a record of gross receipts, expenses claimed and the basis for each deduction; if total gross receipts from profession exceed Rs. 50 lakh, a tax audit under Section 44AB is required.

Worked Example: Director Arjun Shah, FY 2026-27

Profile: MD of Sunrise Pharma Pvt Ltd (unlisted, 31% stake), Non-Executive Director of Metro Retail Ltd (BSE-listed), sole proprietor of a management consulting firm.

ITR form required: ITR-3 — because proprietorship business income is present.

Capital gains note: LTCG on listed equity is exempt up to Rs. 1,25,000 per year. Taxable LTCG = Rs. 2,40,000 − Rs. 1,25,000 = Rs. 1,15,000. Tax at 12.5% = Rs. 14,375.

Disclosures Arjun must make:

1. Both directorships (Sunrise Pharma + Metro Retail) in the directorship schedule
2. Unlisted shareholding in Sunrise Pharma — 31% stake, opening and closing balance, no transactions this year
3. Perquisite value of concessional loan in Schedule Salary
4. Proprietorship income in Schedule BP — gross receipts, allowable expenses, net income
5. Dividend income in Schedule OS
6. LTCG in Schedule CG with scrip-wise acquisition and sale details

Step-by-Step: Filing Your ITR Before 31 July 2027

The due date for AY 2027-28 is 31 July 2027 for individuals whose accounts are not subject to audit. If your individual business income triggers a tax audit under Section 44AB, the extended deadline is 31 October 2027.

1. Download AIS, TIS and Form 26AS from incometax.gov.in at least three weeks before filing — Services → Annual Information Statement
2. Collect Form 16 (Parts A and B) from every company that has paid you salary, and Form 16A from every company that has deducted TDS on sitting fees or professional fees
3. Pull your DIN-linked directorship list from the MCA21 V3 portal — Business Services → View Signatory Details — and verify it against your own records; include dormant companies
4. Download demat account statement (NSDL / CDSL) for the full period 1 April 2026 to 31 March 2027; identify every ESOP vesting, sale of listed shares and transfer of unlisted shares
5. Value unlisted shareholding using cost-of-acquisition records from share certificates, allotment letters or the company's CAP table
6. Check for foreign assets — any overseas directorship, bank account, investment or trust interest? Compile documentation for Schedule FA
7. Verify advance tax payments — go to e-Pay Tax → Payment History on the income tax portal and confirm all four instalments (15 June, 15 September, 15 December, 15 March) against your actual liability
8. Submit AIS feedback for any entries you dispute — mark them "denied" or "partially accepted" with a brief reason before you file
9. Compute self-assessment tax on any remaining unpaid balance and pay via Challan 280 (online, through the e-filing portal) before submitting the ITR
10. File ITR-2 or ITR-3 online at incometax.gov.in using the JSON offline utility or the online filing mode — do not use any third-party software that has not been authorised by CBDT
11. E-verify within 30 days of filing using Aadhaar OTP, net banking or a Digital Signature Certificate (DSC); an unverified return is treated in law as a return that was never filed

Common Mistakes Directors Make — and What They Cost

Filing ITR-1 by mistake: ITR-1 is barred for directors. Filing it produces a defective return notice under Section 139(9). You get 15 days to correct and refile; missing that window means the return is treated as invalid, and Section 234F late fees run from the original due date.

Not disclosing unlisted shareholding: Even a nominal holding — inherited shares, shares in a family company — must be reported. MCA21 registers every allotment and transfer; the mismatch generates a scrutiny notice.

Omitting perquisites the employer missed: If your company forgot to include the concessional loan perquisite or the car benefit in Form 16, the AO can still re-compute your salary income and raise a demand with interest under Section 234B.

Missing small AIS entries for dividends and interest: The AIS captures every dividend and every rupee of bank interest, regardless of whether TDS was deducted at source. A Rs. 8,000 dividend from a subsidiary that you forgot is still grounds for addition under Section 68 or Section 56.

Treating sitting fees as salary: Sitting fees attract TDS under Section 194J and appear in Form 16A, not Form 16. Putting them under the Salary schedule creates a TDS mismatch that the CPC flags automatically during processing.

Forgetting Schedule AL: Schedule AL (Assets and Liabilities) is mandatory if your gross total income exceeds Rs. 50 lakh. For most company directors, this threshold is easily crossed. Omitting it is a defect that can hold up your refund.

Not e-verifying: A filed but unverified ITR is legally identical to an unfiled return. The Section 234F fee and 234A interest accrue from the original due date.

Penalties and Interest: What a Late or Defective Return Costs

Worked penalty example: Arjun (from the example above) has net tax payable of Rs. 1,80,000 after all TDS credits. He files on 15 October 2027 instead of 31 July 2027.

• Section 234A: 1% × 3 months × Rs. 1,80,000 = Rs. 5,400
• Section 234F: Rs. 5,000 (filed before 31 December 2027; income well above Rs. 5 lakh)
• Total avoidable cost: Rs. 10,400 — paid entirely because the deadline was missed

Had Arjun also under-reported his proprietorship income by Rs. 3,00,000 (tax on that at, say, 30% = Rs. 90,000), the Section 270A penalty alone would add another Rs. 45,000 (50% of Rs. 90,000). The compounding effect of a few careless errors is significant.

Key Takeaways

• ITR-1 is barred for every director without exception — use ITR-2 if you have no business or profession income, or ITR-3 if you do.
• Disclose every directorship — listed, unlisted, dormant or foreign — in the directorship schedule; MCA21 V3 data will surface any omission.
• Report unlisted company shareholding in full (opening, acquired, transferred, closing) for each unlisted entity, however small your stake.
• Reconcile your AIS before filing, not after; raise feedback on incorrect entries through the AIS portal — this trail protects you if a notice arrives later.
• Perquisites are taxable salary: concessional loans, company cars and rent-free accommodation must appear in your return even if your employer omitted them from Form 16.
• Schedule FA is non-negotiable for ROR individuals — a dormant overseas directorship with zero income still triggers the disclosure requirement, and the Black Money Act penalty starts at Rs. 10 lakh per undisclosed asset.
• E-verify within 30 days of submission; an unverified return has no legal standing and late fees continue to accrue as though you never filed.