Why is there confusion regarding ITR-1 and ITR-2? Understand from a CA which form you need to file..
ITR-1 vs ITR-2: The process of filing Income Tax Returns (ITR) for the Assessment Year 2026-27 is progressing rapidly. According to official data from the Income Tax Department, over 4 crore taxpayers have already filed their returns.
The Income Tax Department has urged taxpayers via the social media platform X not to wait until the last moment—the July 31, 2026 deadline. Taxpayers are advised to file their ITR well in time to avoid issues caused by heavy traffic on the e-filing portal during the final days. Meanwhile, the first and most crucial question that arises when filing a return is: should one choose ITR-1 or ITR-2? Selecting the wrong form can actually lead to receiving a notice from the Income Tax Department. Let us understand which form is right for you, based on insights from Chartered Accountant (CA) experts.
Who should file the ITR-1 form?
ITR-1 is considered the simplest form and is also known as 'Sahaj'. It is primarily designed for salaried individuals with low income and limited sources of income. So, who is eligible to file this form? Essentially, any Indian citizen whose total annual income is up to ₹50 lakh—derived from the sources listed below—can file this form:
Income from salary or pension.
Income from a single house property (e.g., rental income or interest on a home loan).
Income from other sources, such as interest on bank fixed deposits (FDs), savings account interest, or share dividends.
Agricultural income, provided it is limited to ₹5,000 per year.
ITR-1 is not for those with income exceeding ₹50 lakh.
Taxpayers whose income exceeds ₹50 lakh, or who own more than one house property, serve as a director in a company, hold unlisted shares, or have earned capital gains from the stock market, cannot file ITR-1.
Who is the ITR-2 form for? If your financial activities extend beyond just salary or interest income—such as earnings from investments or property—then ITR-2 is the appropriate form for you. This form applies to individual taxpayers and Hindu Undivided Families (HUFs).
Taxpayers deriving income from the sources listed below are required to file ITR-2:
Those with an income exceeding ₹50 lakh.
Those who have realized capital gains from the sale of shares, mutual funds, virtual digital assets, or property.
Those earning income from more than one house property.
Those holding foreign assets or earning income from abroad.
Those with agricultural income exceeding ₹5,000.
Who should file ITR-3 or ITR-4?
If you earn profits or income from a business or profession—such as a doctor, lawyer, or freelancer—you are not eligible for ITR-2; instead, ITR-3 or ITR-4 applies.
New Rules for Assessment Year 2026-27
The Central Board of Direct Taxes (CBDT) has introduced significant updates and additional disclosure requirements to the ITR forms this year. Consequently, providing precise details regarding losses from share buybacks and rules concerning trading transactions is now mandatory. Additionally, new columns have been added to the form to facilitate the scrutiny of long-term and short-term capital gains claims.
Rapid Growth in Taxpayers
Data from the Income Tax Department’s e-filing portal indicates a steady rise in the number of taxpayers and compliance levels in India. The chart below illustrates the year-on-year growth in the number of taxpayers.
Financial Year Total ITRs Filed
FY 2022-23 7.78 crore
FY 2023-24 8.52 crore
FY 2024-25 9.19 crore
AY 2026-27 (to date) Over 4 crore
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