ITR-1 vs ITR-2: Key Differences, Eligibility & Applicability Explained
When filing your income tax return (ITR), choosing the right form is critical. Filing under the wrong ITR form can lead to rejection, penalties, or missed tax benefits. For individual taxpayers, the confusion often lies between ITR-1 and ITR-2, as both apply to salaried individuals but have distinct eligibility conditions. This article will help you clearly understand the differences, applicability, and criteria for choosing between ITR-1 and ITR-2 for AY 2025–26 (FY 2024–25).
What is ITR-1 (Sahaj) and Who Can File It?
ITR-1, also known as Sahaj, is applicable for resident individuals with relatively simple income profiles. It is the most commonly used ITR form for salaried individuals.
You can file ITR-1 if:
- You are a Resident Individual (Not HUF/Company/Firm)
- Your total income is up to ₹50 lakhs
- Your income sources include:
- Salary or Pension
- One House Property (excluding cases with brought-forward losses)
- Agricultural income not exceeding ₹5,000
- Long Term Capital Gains (LTCG) under Section 112A up to ₹1.25 lakh (with no other capital gains and no carry-forward losses)
- Other sources (e.g., Interest from savings account, FDs, etc.)
You cannot file ITR-1 if:
- Your total income exceeds ₹50 lakhs
- You are a Non-Resident or Resident but Not Ordinarily Resident (RNOR)
- You have income from more than one house property
- You have capital gains (other than LTCG under section 112A up to ₹1.25 lakh)
- You earn income from business or profession
- You have income from lottery, horse racing, gambling, etc.
- You want to carry forward any losses
- You own foreign assets or have foreign income
- You have deferred tax on ESOPs from eligible start-ups
- You’re a Director in a company or hold unlisted equity shares
What is ITR-2 and Who Should File It?
ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) with more complex income sources or financial scenarios.
You should file ITR-2 if:
- You are an Individual or HUF, Resident or Non-Resident
- Your total income exceeds ₹50 lakhs
- You have:
- Income from more than one house property
- Capital gains (short or long-term, including carry-forward losses)
- Income from foreign assets or foreign income
- Agricultural income exceeding ₹5,000
- Income from lottery, betting, horse races, etc.
- ESOPs with deferred tax under eligible start-ups
- Investments in unlisted equity shares
- You’re a director in a company
- DTAA claims under Section 90/91
- Brought forward losses from earlier years
You cannot file ITR-2 if:
- You have income from business or profession
- You are a Company, Firm, or Trust
For such cases, you need to file ITR-3 or another suitable form.
ITR 1 vs ITR 2 – Side-by-Side Comparison:
Final Words:
Choosing the correct ITR form helps avoid unnecessary delays, notices, or penalties. If you have simple salaried income, ITR-1 is usually sufficient. However, if you fall under any of the disqualifying conditions, you should opt for ITR-2 to ensure full disclosure and compliance. Always gather your documents—Form 16, interest certificates, capital gain statements, TDS certificates, and property details—before filing to ensure a smooth process.
Disclaimer:
This article is for informational and educational purposes only. It reflects the author’s personal views and is not intended to be legal or financial advice. Please consult a tax expert or CA before filing your income tax return.
