ITR-1 for Salaried Employees: New Rules, New Risks, and New Opportunities
Every year when ITR filing season begins, millions of salaried employees across India ask the same questions — “Which ITR form should I fill? Has anything changed this year? Am I missing any benefit?”
If you are a salaried person, chances are your form is ITR-1 (also called Sahaj). But AY 2025–26 brings some important changes — new rules that can save you money, new risks that can cost you if ignored, and new opportunities you should not miss.
At My Finance Gyan, we believe filing your ITR should not feel like solving a puzzle. So let us walk you through everything, in simple language.
What is ITR-1 (Sahaj)? Who is it For?
ITR-1, also known as ITR Sahaj, is the simplest income tax return form. It is designed specifically for individuals with straightforward income — mainly salary and a few other basic sources.
ITR-1 is for you if you have:
- Income from salary or pension
- Income from one house property
- Interest income from savings accounts, FDs, or RDs
- Agricultural income up to ₹5,000
- Total income up to ₹50 lakhs
You CANNOT file ITR-1 if you have:
- Capital gains (from stocks, mutual funds, or property)
- More than one house property
- Business or professional income
- Foreign income or foreign assets
- Income above ₹50 lakhs
- You are a director in any company
- You hold unlisted shares
If any of the above applies, you need to file ITR-2 or ITR-3 instead. Using the wrong form can result in a defective return notice — so always verify before filing.
Who is Eligible to File ITR-1 in AY 2025–26?
The basic eligibility remains the same, but here is a quick checklist for this year:
- You are a salaried employee or pensioner
- Your total income is below ₹50 lakhs
- You have income from only one house property (self-occupied or let out)
- You have interest income from bank accounts or FDs
- Your agricultural income is ₹5,000 or less
- You do not have capital gains or foreign assets
If you tick all these boxes, ITR-1 is your form. Simple.
New Rules for ITR-1 Filing in AY 2025–26:
This is where things get interesting. Budget 2025 brought several important changes for salaried taxpayers. Here is what is new:
- Zero Tax Up to ₹12 Lakh — Section 87A Rebate: This is the biggest change. Under the new tax regime, if your total income is up to ₹12 lakh, your tax liability becomes zero — thanks to the enhanced rebate under Section 87A. For salaried employees, with the ₹75,000 standard deduction, this effectively means zero tax up to ₹12.75 lakh. This is a massive relief for middle-income salaried individuals.
- Revised Standard Deduction — ₹75,000: Under the new regime, the standard deduction has been increased to ₹75,000 (up from ₹50,000). This is automatically applied — no proof or documents needed. Under the old regime, the standard deduction remains ₹50,000.
- Updated Tax Slabs Under New Regime:
- Better Pre-Filled ITR Data: The Income Tax portal now auto-fills more information in your ITR — including salary details from Form 16, TDS data, interest income, and even some investment details. This makes filing faster and reduces manual errors. However — always verify the pre-filled data before submitting. Do not just click confirm without checking.
New Risks Salaried Employees Face in AY 2025–26:
1. Wrong Regime Selection:
The new tax regime is now the default. If you do not actively choose the old regime, you will automatically be placed in the new one.
This is fine for many people — but if you have significant deductions like home loan interest, HRA, or heavy 80C investments, the old regime might still save you more tax.
Always calculate your tax under both regimes before deciding. Do not just go with the default.
2. Mismatch Between Form 16 and AIS:
The Annual Information Statement (AIS) is a document on the Income Tax portal that shows all your financial transactions — salary, interest, dividends, property purchases, and more. The department collects this data from banks, employers, and other sources. If the income shown in your AIS does not match what you report in your ITR, you will get a notice.
Before filing, always:
- Download your Form 16 from your employer
- Download your AIS and 26AS from the Income Tax portal
- Match all figures carefully
- Report every income the AIS shows — even small FD interest
3. Not Reporting All Income Sources:
Many salaried employees think only their salary needs to be reported. That is not correct.
You must also report:
- FD interest — even if TDS was deducted
- Savings account interest — above ₹10,000 is taxable
- Rental income — if you have a let-out property
Forgetting these is one of the most common reasons salaried employees receive income tax notices. Also — if you have capital gains from stocks or mutual funds, you cannot use ITR-1 at all. Switch to ITR-2.
4. TDS Not Reflecting Correctly in 26AS:
Sometimes, your employer deducts TDS from your salary but there is a delay in depositing or reflecting it in your Form 26AS. If you claim TDS credit that is not in 26AS, your ITR will be processed with a mismatch.
What to do?
- Check 26AS before filing
- If TDS is missing, contact your employer’s accounts/HR team
- Wait for it to reflect before filing — or file and then revise if needed
5. Late Filing Penalty:
The last date for filing ITR for salaried employees is typically 31st July of the assessment year. Missing this deadline means:
- ₹1,000 penalty if income is below ₹5 lakh
- ₹5,000 penalty if income is above ₹5 lakh (under Section 234F)
- Interest under Sections 234A, 234B, and 234C on unpaid tax
- Loss of carry-forward of any losses (like house property loss)
File on time. It is that simple.
6. Filing the Wrong ITR Form:
Using ITR-1 when you should be filing ITR-2 or ITR-3 results in a defective return notice from the department. You will then have to refile correctly — causing delays, stress, and possible penalties.
Common situations where you must NOT use ITR-1:
- You sold shares or mutual funds during the year (even at a loss)
- You have two house properties
- You earned any foreign income
- You are a partner in a firm or director in a company
When in doubt — ask a professional before filing.
New Opportunities for Salaried Employees in AY 2025–26:
Now the good part — here is how you can actually benefit this year.
- Zero Tax Up to ₹12.75 Lakh: With the 87A rebate covering tax up to ₹12 lakh and the ₹75,000 standard deduction on top — salaried employees earning up to ₹12.75 lakh have zero tax liability under the new regime. If you fall in this range, the new regime is clearly the better choice.
- NPS Employer Contribution (Section 80CCD(2): Even under the new regime, your employer’s contribution to your NPS account is deductible under Section 80CCD(2). This can be up to 10% of your basic salary — and it reduces your taxable income. If your employer offers NPS, ask HR to maximise this contribution. It is one of the best tax-saving tools available even in the new regime.
- Simplified Filing for First-Time Filers: The new regime means no need to collect investment proofs, rent receipts, or medical bills. You just file with your salary income and standard deduction. This is great for young professionals and first-time ITR filers who have not yet built up investments.
- Updated Return (Section 139(8A)): Made a mistake in a previous year’s ITR? Under Section 139(8A), you can file an Updated Return up to 2 years after the end of the assessment year. This allows you to correct past errors and report missed income — before the department finds it and sends a notice.
- Faster Refunds with Pre-Filled Data: The improved pre-filled ITR experience means fewer errors, faster processing, and quicker refunds. If you are expecting a TDS refund, filing early with accurate data means the refund hits your account faster.
How to File ITR-1 for AY 2025–26? Step by Step
Here is a simple guide to filing your ITR-1:
Documents you need:
- Form 16 (from your employer)
- AIS and Form 26AS (from Income Tax portal)
- Bank statements (for interest income)
- Home loan certificate (if applicable under old regime)
Steps:
- Go to www.incometax.gov.in and log in
- Click on “File Income Tax Return”
- Select AY 2025–26 and filing mode as Online
- Choose ITR-1 as your form
- Review and verify all pre-filled data — salary, TDS, interest
- Choose your tax regime (new or old)
- Enter any remaining income or deductions
- Click “Calculate Tax” — pay any balance tax due
- Submit and e-Verify using Aadhaar OTP, net banking, or DSC
Done! Your ITR is filed. You will get an acknowledgement on your registered email.
ITR-1 vs ITR-2 — When Should You Switch?
When in doubt, always go with the more detailed form. Filing ITR-2 when ITR-1 was enough is not a problem. But filing ITR-1 when you needed ITR-2 can result in a defective return.
Common Mistakes to Avoid:
- Not downloading and checking AIS before filing
- Forgetting to report FD interest or savings account interest
- Selecting the wrong Assessment Year (should be AY 2025–26 for FY 2024–25 income)
- Filing and forgetting to e-verify — unverified ITR is treated as not filed
- Ignoring notices for defective return after filing
Conclusion — File Smart, File on Time:
ITR-1 may be the simplest income tax return form — but simple does not mean casual. AY 2025–26 is a year full of changes. Zero tax up to ₹12.75 lakh, revised slabs, higher standard deduction, better pre-filled data — there is a lot working in your favour. But at the same time, the risks are real. Wrong regime selection, AIS mismatches, missing income sources, or filing the wrong form can quickly turn a smooth filing into a stressful notice.
As a salaried employee, here is what you need to remember:
- Know your form — ITR-1 (Sahaj) is for you if your income is simple and within ₹50 lakh
- Compare both regimes — do not just go with the default; calculate and then decide
- Check your AIS — before you file, match every figure with Form 16 and 26AS
- Report everything — salary, FD interest, rent, and any other income
- File before 31st July — avoid penalties, interest, and the last-minute rush
The new rules are genuinely good news for most salaried employees. But only those who file correctly and on time will actually benefit from them. Do not leave your hard-earned money on the table — and do not risk a notice by filing in a hurry. Let Startup Portal Business Services handle it for you. You can be confident that every rupee of your tax benefit is claimed and every detail is correctly reported.
FAQs:
ITR-1 (Sahaj) is a simplified income tax return form for individuals with salary, pension, one house property, and interest income — with total income up to ₹50 lakh.
Yes. FD interest is allowed in ITR-1. Just make sure to report it correctly — even if TDS was already deducted.
For salaried employees without audit requirements, the due date is typically 31st July 2025. Always check the Income Tax portal for any extensions.
Yes — as long as you combine the income from both employers and your total income is within ₹50 lakh. However, ensure Form 16 from both employers is considered.
Yes. Salaried employees can choose their tax regime at the time of filing every year. Just select the old regime option in the ITR form.
The department will issue a defective return notice. You will need to refile using the correct form within the time given — otherwise the return may be treated as invalid.
