Filing your Income Tax Return (ITR) correctly is more than just an annual task, it’s a vital part of ensuring financial compliance and avoiding unnecessary scrutiny from the tax department. For individual taxpayers in India, ITR-1 (Sahaj) and ITR-2 are two of the most commonly used forms. While both cater to individuals without business income, their applicability depends on the nature and complexity of your income. Choosing the wrong form can lead to return rejection, delayed refunds, or even legal consequences.
This blog is a comprehensive comparison of ITR-1 and ITR-2 for the Assessment Year 2025–26, helping you decide which form applies to your income profile. We’ll break down eligibility rules, explore real-life examples, and clarify recent updates from the Budget 2024 and CBDT notifications to help you file with confidence.
Why should you choose the right ITR form?
Selecting the appropriate ITR form is not optional, it’s a legal requirement under the Income Tax Act. If you file your return using the wrong form, your return could be marked as defective under Section 139(9). You may then be asked to revise your return within a given timeframe. Failure to do so could lead to your return being considered invalid, possibly attracting penalties under Section 234F for late filing or even scrutiny from the Income Tax Department.
Moreover, the accuracy of the form used directly affects your refund timeline. Filing with the wrong ITR form might delay the refund process or raise compliance red flags. Therefore, it’s essential to understand your income sources and determine your eligibility before proceeding.
Who should file ITR-1 (Sahaj)?
ITR-1 (Sahaj) is a simplified Income Tax Return form meant for resident individuals with straightforward income sources. It is primarily designed for salaried employees, pensioners, and individuals earning interest from savings or fixed deposits. This form is ideal for those whose total income does not exceed ₹50 lakh and who have income only from salary or pension, one house property, and other sources such as bank interest. Its ease of filing and minimal disclosure requirements make it a popular choice among first-time filers, senior citizens, and individuals with single-source income.
However, ITR-1 is not applicable in certain cases. Individuals who are Non-Resident (NRI) or Resident but Not Ordinarily Resident (RNOR), those with total income exceeding ₹50 lakh, or those having agricultural income above ₹5,000 are not eligible. Likewise, anyone with taxable capital gains (including long-term gains under Section 112A above ₹1.25 lakh), income from gambling or lottery, income from business or profession, or investments in unlisted equity shares cannot file ITR-1.
Who should file ITR-2?
ITR-2 is an Income Tax Return form meant for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession, but deal with more complex or high-value income sources. Unlike ITR-1, which is limited to basic salary and interest income, ITR-2 caters to those with capital gains, multiple house properties, foreign income or assets, high-income levels, and more. It is commonly used by salaried individuals who invest in equity markets, NRIs with Indian income, or taxpayers who must report specific financial disclosures like unlisted shares or directorship in companies.
Despite being more comprehensive than ITR-1, the ITR-2 form allows for full and accurate disclosure of all income heads (except business income), deductions, exemptions, and foreign holdings.
