Which ITR Form Should You File? (ITR-1 to ITR-4)

Which ITR Form Should You File?

Filing your income tax return starts with one key decision: which ITR form to use. Pick the wrong one and the Income Tax Department can treat your return as defective, forcing you to file all over again. For most individuals filing for FY 2025-26 (AY 2026-27), the choice comes down to four forms — ITR-1, ITR-2, ITR-3 and ITR-4. This guide explains who should file which, in plain language, with a quick comparison table. (First, if you're still deciding between the old and new tax regime, settle that separately — it changes your tax, not your form.)

ITR Forms at a Glance

Form	Best for	Income limit	Key condition
ITR-1 (Sahaj)	Salaried / pensioners with simple income	Up to ₹50 lakh	Resident; salary, up to 2 house properties, interest, small LTCG — no business income
ITR-2	Capital gains, multiple properties, foreign assets (no business)	No limit	Individuals / HUF without business or professional income
ITR-3	Business owners, professionals, freelancers	No limit	Individuals / HUF with business or professional income
ITR-4 (Sugam)	Small business / freelancers on the presumptive scheme	Up to ₹50 lakh	Resident; presumptive income under 44AD / 44ADA / 44AE

ITR-1 (Sahaj): For Simple Salaried Incomes

ITR-1, called Sahaj ("easy"), is the simplest form. You can file it if you are a resident individual with total income up to ₹50 lakh from:

• Salary or pension
• Up to two house properties (newly expanded this year — earlier only one was allowed)
• Other sources like interest from savings accounts, fixed deposits and bonds
• Long-term capital gains under Section 112A up to ₹1.25 lakh, provided you have no losses to carry forward
• Agricultural income up to ₹5,000

You cannot use ITR-1 if you have business income, capital gains above the ₹1.25 lakh limit, foreign assets or income, are a company director, hold unlisted shares, or earn from crypto. In those cases, step up to ITR-2 or ITR-3.

ITR-2: For Capital Gains and Complex Incomes (No Business)

File ITR-2 if you are an individual or HUF without business or professional income, but you don't qualify for ITR-1. This covers people who have:

• Capital gains from selling shares, mutual funds or property (beyond the small 112A limit)
• More than two house properties
• Total income above ₹50 lakh
• Foreign income, foreign assets, or signing authority in foreign accounts
• Income as a company director or from unlisted shares
• Losses to carry forward to future years

ITR-3: For Business Owners and Professionals

ITR-3 is for individuals and HUFs who earn income from a business or profession — shop owners, traders, consultants, doctors, and freelancers who report actual income and expenses. If you have business income plus salary, capital gains or multiple house properties, ITR-3 covers all of it in one return.

ITR-4 (Sugam): For the Presumptive Scheme

ITR-4, called Sugam, is for resident individuals, HUFs and firms (other than LLPs) with total income up to ₹50 lakh who opt for the presumptive taxation scheme under Sections 44AD, 44ADA or 44AE. It's popular with small businesses and freelancers who want to declare a fixed percentage of turnover as profit instead of maintaining detailed books.

• 44AD (small businesses): turnover up to ₹2 crore (₹3 crore if cash receipts are 5% or less of turnover)
• 44ADA (professionals): gross receipts up to ₹50 lakh (₹75 lakh if cash receipts are 5% or less)

Like ITR-1, ITR-4 now also allows income from up to two house properties and small LTCG under Section 112A up to ₹1.25 lakh.

What's New for FY 2025-26

• Two house properties are now allowed in ITR-1 and ITR-4 — earlier only one was permitted.
• Small long-term capital gains up to ₹1.25 lakh under Section 112A can now be reported in the simple ITR-1 and ITR-4 forms, so you don't always need ITR-2 just for a little equity gain.

How to Choose in 30 Seconds

1. Have business or professional income? → ITR-3 (or ITR-4 if you use the presumptive scheme and earn under ₹50 lakh).
2. No business income, but you have capital gains, foreign assets or income above ₹50 lakh? → ITR-2.
3. Resident with salary/pension, up to two house properties and income under ₹50 lakh? → ITR-1.

Not sure how much tax you owe in the first place? Use our free Income Tax Calculator to estimate your liability, then file your return online.

Common Mistakes to Avoid

• Using ITR-1 when you sold shares or mutual funds with gains above ₹1.25 lakh — that needs ITR-2.
• Forgetting that freelance or consulting income makes you a business filer (ITR-3 or ITR-4), not ITR-1.
• Filing the wrong form, which can make your return defective under Section 139(9).
• Not reconciling your income with Form 16 and Form 26AS before you file.

Frequently Asked Questions

Which ITR form should a salaried person file?

Most salaried people with income up to ₹50 lakh, one or two house properties and only interest income file ITR-1 (Sahaj). If you also have capital gains above ₹1.25 lakh, foreign assets, or are a company director, file ITR-2 instead.

Can I file ITR-1 if I have capital gains?

Only if your long-term capital gains under Section 112A (on listed shares and equity mutual funds) are up to ₹1.25 lakh and you have no losses to carry forward. Any other capital gains require ITR-2.

What happens if I file the wrong ITR form?

The Income Tax Department can mark your return defective under Section 139(9) and ask you to refile with the correct form within a set period. Filing the right form the first time avoids notices and delays in your refund.

Do freelancers file ITR-3 or ITR-4?

Freelancers and consultants earn professional income. File ITR-4 if you use the presumptive scheme under Section 44ADA (receipts up to ₹50 lakh) and want simpler filing; otherwise file ITR-3 with your actual income and expenses.

Can I file ITR-1 with two house properties now?

Yes. For FY 2025-26 (AY 2026-27), ITR-1 and ITR-4 allow income from up to two house properties — earlier only one was permitted. The other ITR-1 conditions (resident, income up to ₹50 lakh, no business income) still apply.

Disclaimer: This article is for educational purposes only and reflects ITR rules for FY 2025-26 (AY 2026-27). Tax rules and form eligibility change, and individual situations vary. Always verify the current form on the official Income Tax Department website or consult a qualified tax advisor before filing.