Which ITR Form Applies to You?

A note on the law: section numbers here are from the Income tax Act, 1961, which still governs your FY 2025-26 (AY 2026-27) return. The Income tax Act, 2025 renumbers everything, but only from Tax Year 2026-27 returns onward, filed in July 2027.

ITR-1 (Sahaj): resident individuals, income up to fifty lakh rupees, salary, up to two house properties (raised this year from one), other simple sources like bank interest, and now a small allowance for long term capital gains, up to 1.25 lakh rupees from listed shares or equity mutual funds under Section 112A (equity long term gains provision). No foreign assets, not a company director, no unlisted shares.

ITR-2: anyone who crosses the ITR-1 boundaries above, capital gains beyond the small allowance, more than two house properties, foreign assets or income, or company directorship, but with no business or professional income.

ITR-3: business or professional income of any kind, including freelancing or trading, on top of anything in ITR-2. This year’s forms introduce a separate reporting section specifically for F&O and intraday trading, kept distinct from other business income.

ITR-4 (Sugam): presumptive taxation opted under Section 44AD (small business presumptive scheme), 44ADA (professional presumptive scheme), or 44AE (goods transport presumptive scheme), income up to fifty lakh rupees, within the same small LTCG allowance as ITR-1.

Three things that quietly rule out ITR-1 and ITR-4

A Hindu Undivided Family cannot use ITR-1, regardless of how simple its income looks. ITR-1 (Sahaj) is for individuals only. Filing for an HUF means ITR-2 if there is no business income, ITR-3 if there is, or ITR-4 if the HUF has opted for presumptive taxation.

Any income from virtual digital assets rules out ITR-1 and ITR-4, no matter how small the amount. Cryptocurrency, NFTs, or similar holdings push you to at least ITR-2, or ITR-3 if you also have business income, reported under Schedule VDA. This income is taxed at a flat 30% under Section 115BBH (virtual digital asset tax provision), separate from your regular slab, and losses from it cannot be set off against any other income or carried forward.

Foreign assets rule out ITR-1 and ITR-4 for residents too, not just NRIs. A resident with a foreign bank account, foreign stocks, or ESOPs and RSUs from a multinational employer is excluded from ITR-1 and ITR-4, even with zero income from those holdings that year. ITR-2 or ITR-3 becomes mandatory, along with Schedule FA (foreign assets schedule), covered in more depth in Foreign RSUs: Taxation, Reporting, and Foreign Tax Credit. This one catches salaried employees at MNCs off guard most often, since they assume simple salary income alone qualifies them for ITR-1.

A high net worth detail worth knowing

If your total income exceeds one crore rupees, you now need to disclose your assets and liabilities in Schedule AL (assets and liabilities schedule), a threshold that has been revised upward this year, meaning some taxpayers who had to disclose this before no longer need to at the current, higher cutoff.

Deadlines differ by form this year

ITR-1 and ITR-2 filers keep the usual 31 July deadline. ITR-3 and ITR-4 filers who do not need a tax audit now get until 31 August, a genuine extension introduced this cycle for smaller professionals and businesses.