Introduction
Income Tax Return (ITR) filing season can be confusing, especially when you’re unsure which ITR form to use. For the Assessment Year (AY) 2025–26 corresponding to the Financial Year (FY) 2024–25, the Indian Income Tax Department has prescribed different forms for different types of taxpayers. Choosing the correct form is the first and most essential step for accurate and compliant tax filing.
This blog explains the differences between ITR-1, ITR-2, ITR-3, and ITR-4, supported by Indian tax codes and real-life scenarios for Indian taxpayers.
Legal Reference and Applicability
The Income Tax Act, 1961 governs the filing of income tax returns, and the forms are notified under Rule 12 of the Income Tax Rules, 1962.
- Section 139(1) of the Income Tax Act requires individuals and certain entities to file income tax returns based on their income source, residential status, and other factors.
- The forms are updated annually by the Central Board of Direct Taxes (CBDT) and notified via the Income Tax Department’s e-filing portal.
Quick Comparison Table
| ITR Form | Who Can File | Income Type Covered | Turnover Limit (if any) |
|---|---|---|---|
| ITR-1 (Sahaj) | Resident individuals | Salary, one house property, other sources | Up to ₹50 lakh |
| ITR-2 | Individuals & HUFs | Capital gains, more than one house property, foreign income | No limit |
| ITR-3 | Individuals & HUFs | Income from business/profession (not presumptive) | No limit |
| ITR-4 (Sugam) | Individuals, HUFs, Firms (non-LLP) | Presumptive income under 44AD, 44ADA, 44AE | Up to ₹50 lakh (Profession) or ₹2 crore (Business) |
Detailed Breakdown of Each ITR Form
ITR-1: Sahaj
Applicable For:
- Resident Individuals
- Total income up to ₹50 lakh
- Income from salary/pension
- One house property
- Income from other sources (like interest, dividend)
Not Applicable For:
- Capital gains
- More than one house property
- Foreign assets or income
- Directors in a company
- Holding unlisted equity shares
ITR-2
Applicable For:
- Individuals and HUFs
- Income from multiple house properties
- Capital gains (shares, mutual funds, real estate)
- Foreign income or foreign assets
- Agricultural income over ₹5,000
Not Applicable For:
- Income from business or profession under regular method (non-presumptive)
ITR-3
Applicable For:
- Individuals or HUFs
- Income from business/profession
- Income as a partner in a firm
- Stock market trading, speculative income
- Audit cases under Section 44AB
Not Applicable For:
- Entities other than individuals or HUFs
ITR-4: Sugam
Applicable For:
- Individuals, HUFs, Firms (except LLPs)
- Income under presumptive taxation:
- Section 44AD: Small business
- Section 44ADA: Professionals (Doctors, CAs, Architects, etc.)
- Section 44AE: Transporters
Not Applicable For:
- Income over ₹50 lakh (professionals) or ₹2 crore (business)
- If you have foreign income or assets
- If books of accounts are required to be maintained
Choosing the Right ITR Form: Real-Life Examples
Example 1: Mr. Ramesh is a salaried employee earning ₹18 lakh, owns one house, and earns ₹25,000 from savings account interest.
Correct Form: ITR-1
Example 2: Ms. Priya owns two flats (rented), earns from FDs, and sold mutual funds last year.
Correct Form: ITR-2
Example 3: Mr. Arjun is a freelance software developer earning ₹35 lakh and maintains books of accounts.
Correct Form: ITR-3
Example 4: Mrs. Sneha is a small trader with ₹45 lakh turnover and opts for presumptive taxation under 44AD.
Correct Form: ITR-4
Step-by-Step Guide to File Your ITR Using the Correct Form
Step 1: Determine your income sources (salary, rent, trading, business)
Step 2: Check the income limits and form applicability.
Step 3: Download Form 26AS and AIS from the income tax portal.
Step 4: Collect documents like Form 16, interest certificates, rent receipts, etc.
Step 5: Use the pre-filled form available on the e-filing portal or upload JSON via offline utility.
Step 6: Verify all entries manually and cross-check tax deductions.
Step 7: Submit and e-verify your return using Aadhaar OTP, net banking, or EVC.
Conclusion
Selecting the correct ITR form is essential for smooth tax filing and avoiding notices from the department. A mismatch in the form selection and your income sources can lead to defective return notices or refund delays. If you’re unsure, consult a professional before filing.
Reach out Today!
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Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. The information in this blog is meant for educational purposes and does not substitute formal professional advice.
Frequently Asked Questions
1. Can I file ITR-1 if I have rental income from two houses?
No, you need to file ITR-2 if you own more than one house property.
2. I am a freelancer with ₹12 lakh income. Which ITR form is applicable?
If you opt for presumptive taxation under Section 44ADA, you can file ITR-4. Otherwise, file ITR-3.
3.What happens if I choose the wrong ITR form?
Your return may be marked as defective under Section 139(9) and may need to be revised.
4. I have foreign bank accounts. Can I file ITR-1?
No. You must file ITR-2 if you have foreign assets or income.
5. Can a salaried person file ITR-4?
Only if the salaried person also has presumptive business/professional income and meets other conditions. Otherwise, ITR-1 or ITR-2 is applicable.