ITR Filing Simplified: Know If You Should Use ITR-1, ITR-2, ITR-3, ITR-4… Before It's Too Late!
Filing your Income Tax Return (ITR) in India can feel overwhelming, especially with multiple forms to choose from. For the Financial Year 2024-25 (Assessment Year 2025-26), the Income Tax Department has introduced updates to simplify the process, but selecting the right ITR form—ITR-1, ITR-2, ITR-3, ITR-4, or others—is crucial to avoid penalties and ensure compliance. This blog breaks down the eligibility criteria, key changes, and filing deadlines to help you choose the correct form before it’s too late. The extended due date for most taxpayers is September 15, 2025, so let’s dive in
Why Choosing the Right ITR Form Matters
Each ITR form caters to specific taxpayer categories, income sources, and income levels. Filing with the wrong form can result in a defective return, leading to notices from the tax department, penalties, or delays in refunds. To make the process smoother, the Income Tax Department provides a “Help me decide which ITR form to file” tool on its e-filing portal. Here’s a clear guide to help you decide which form suits your financial profile.
ITR-1 (Sahaj): For Simple Income Sources
Who Should File?
ITR-1, also known as Sahaj, is designed for resident individuals with straightforward income sources and a total income up to ₹50 lakh. It’s ideal for salaried employees, pensioners, or those with limited additional income. You can file ITR-1 if your income includes:
- Salary or pension (from one or multiple employers).
- Income from one house property (excluding cases with brought-forward losses).
- Income from other sources, such as interest from savings accounts or fixed deposits (excluding lottery winnings or horse racing).
- Agricultural income up to ₹5,000.
- Long-term capital gains (LTCG) up to ₹1.25 lakh from listed equity shares or equity mutual funds under Section 112A (a new provision for AY 2025-26).
Who Cannot File?
You cannot use ITR-1 if you:
- Have total income exceeding ₹50 lakh.
- Are a Non-Resident Indian (NRI) or Resident but Not Ordinarily Resident (RNOR).
- Own more than one house property.
- Have income from business or profession (e.g., freelancing).
- Hold foreign assets, have foreign income, or are a company director.
- Have TDS deducted under Section 194N (large cash withdrawals) or deferred ESOP tax.
Key Update: For AY 2025-26, ITR-1 now allows reporting of LTCG up to ₹1.25 lakh under Section 112A, making it easier for small equity investors to file without switching to ITR-2.
ITR-2: For Complex Income Sources Without Business Income
Who Should File?
ITR-2 is suitable for individuals and Hindu Undivided Families (HUFs) with income from various sources but no business or professional income. It’s more flexible than ITR-1 and applies if you:
- Have total income exceeding ₹50 lakh.
- Earn income from salary, pension, or multiple house properties.
- Have capital gains (short-term or long-term, including LTCG above ₹1.25 lakh or from unlisted shares).
- Hold foreign assets or have foreign income.
- Have agricultural income exceeding ₹5,000.
- Are a company director or hold unlisted equity shares.
- Have income from other sources, including lottery winnings or gambling.
Key Update: For AY 2025-26, ITR-2 requires reporting capital gains separately for transactions before and after July 23, 2024, due to new tax rules announced in Budget 2024.
Who Cannot File?
Individuals or HUFs with income from business or profession must use ITR-3 or ITR-4 instead.
ITR-3: For Business or Professional Income
Who Should File?
ITR-3 is for individuals and HUFs with income from a business or profession, including:
- Proprietorship ventures or professional activities (e.g., doctors, lawyers, or consultants).
- Partnership income (excluding Limited Liability Partnerships).
- Capital gains, including from Futures & Options (F&O) or intraday trading.
- Income from salary, house property, or other sources alongside business income.
- Ownership of unlisted equity shares or directorship in a company.
Key Update: The asset disclosure limit in Schedule AL (for reporting assets and liabilities) has been raised from ₹50 lakh to ₹1 crore, easing the burden for middle-income business owners. Additionally, taxpayers must now specify the TDS section code in the Schedule-TDS section for better tracking.
Who Cannot File?
Those eligible for ITR-1, ITR-2, or ITR-4 (presumptive taxation) cannot file ITR-3.
ITR-4 (Sugam): For Presumptive Taxation
Who Should File?
ITR-4, or Sugam, is for resident individuals, HUFs, and partnership firms (other than LLPs) with total income up to ₹50 lakh who opt for the presumptive taxation scheme under:
- Section 44AD: Business income (e.g., retail, small traders) with turnover up to ₹3 crore (if cash receipts are ≤5% of total receipts) or ₹2 crore otherwise.
- Section 44ADA: Professional income (e.g., freelancers, doctors, consultants) with gross receipts up to ₹50 lakh, declaring income at 50% of receipts.
- Section 44AE: Income from plying, leasing, or hiring goods carriages (owning ≤10 vehicles).
ITR-4 also allows income from salary, one house property, other sources (excluding lottery winnings), and LTCG up to ₹1.25 lakh under Section 112A.
Who Cannot File?
You cannot use ITR-4 if you:
- Are an NRI or RNOR.
- Have total income exceeding ₹50 lakh.
- Own more than one house property.
- Have foreign assets or income.
- Are a company director or hold unlisted equity shares.
Key Update: Like ITR-1, ITR-4 now allows reporting LTCG up to ₹1.25 lakh under Section 112A, simplifying filing for small business owners with minor equity gains.
Other ITR Forms: ITR-5, ITR-6, ITR-7
- ITR-5: For firms, LLPs, Associations of Persons (AOPs), Bodies of Individuals (BOIs), cooperative societies, or other entities (not individuals or HUFs).
- ITR-6: For companies (except those claiming exemptions under Section 11 for charitable purposes), filed electronically with a digital signature.
- ITR-7: For trusts, charitable institutions, or entities claiming exemptions under Section 11.
Key Deadlines and Penalties for AY 2025-26
- Original Filing Deadline: September 15, 2025, for most taxpayers (extended from July 31). For those requiring audits, deadlines are October 31 or November 30, 2025.
- Belated Filing: If you miss the deadline, you can file a belated return by December 31, 2025, but expect:
- A late filing fee of ₹1,000 (if income is ₹2.5 lakh–₹5 lakh) or ₹5,000 (if income exceeds ₹5 lakh). No fee if income is below ₹2.5 lakh.
- Interest under Sections 234A, 234B, or 234C on unpaid taxes at 1% per month.
- Loss of certain deductions (e.g., under Sections 80-IA, 80-IB) and carry-forward of business or capital losses (except house property losses).
- Revised Filing: Correct mistakes in your return by filing a revised return by December 31, 2025.
- Verification Deadline: Verify your return within 30 days of filing via e-verification (recommended) or by sending a signed ITR-V to the Centralized Processing Center, Bengaluru.
Tips for Smooth ITR Filing
- Gather Documents: Collect Form 16, Form 26AS, Annual Information Statement (AIS), bank statements, investment proofs, and rent receipts (if applicable). ITRs are annexure-less, so no documents need to be attached, but keep them handy for audits or inquiries.
- Check Pre-filled Data: The e-filing portal auto-fills data like salary, TDS, and bank details. Verify PAN, Aadhaar linkage, contact details, and bank account accuracy.
- Opting for Tax Regime: ITR-1 and ITR-2 filers can choose between the old or new tax regime without filing Form 10-IEA. ITR-3, ITR-4, or ITR-5 filers with business income must submit Form 10-IEA to opt out of the new regime.
- e-Verify Promptly: Use Aadhaar OTP, net banking, or other e-verification methods to avoid delays. If opting for ITR-V, mail it within 30 days.
- Use Online Tools: Platforms like ClearTax or Tax2win offer AI-powered tools to auto-select the correct ITR form based on your income.
Recent Updates for AY 2025-26
- LTCG Reporting: ITR-1 and ITR-4 now include LTCG up to ₹1.25 lakh under Section 112A, reducing the need for ITR-2 for small investors.
- Asset Disclosure: Schedule AL reporting is now mandatory only if total income exceeds ₹1 crore (previously ₹50 lakh).
- TDS Transparency: ITR-3 requires specifying the TDS section code for better reconciliation.
- Enhanced Deduction Reporting: Detailed reporting for deductions like Section 80C or 80CCD is now required to ensure accuracy.
Conclusion
Choosing the right ITR form—ITR-1, ITR-2, ITR-3, ITR-4, or others—depends on your income sources, total income, and residential status. With the extended deadline of September 15, 2025, for most taxpayers, now is the time to review your finances, gather documents, and file accurately. Use the Income Tax Department’s e-filing portal or trusted platforms like Tax2win or ClearTax for a seamless experience. Don’t wait until it’s too late—file smart, avoid penalties, and ensure compliance
Disclaimer: Always consult a tax professional for personalized advice, especially for complex income sources or audit cases. For the latest updates, visit www.incometax.gov.in.
