Filing income tax returns is not merely about uploading numbers. The first and most crucial step is selecting the correct Income Tax Return (ITR) form. A wrong form can render your return defective under Section 139(9), delay processing, or even result in notices. On the other hand, using the right form ensures smooth validation, faster refunds, and compliance clarity.
This guide explains the ITR form selection criteria for FY 2024-25 (AY 2025-26), with added insights on when a form may be beneficial or restrictive.
ITR-1 (Sahaj): Simplified for Salaried Individuals
Who can file:
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Resident individuals (excluding NRIs and RNORs)
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Total income up to ₹50 lakh
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Income from:
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Salary or pension
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One house property
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Other sources (interest, dividends, family pension)
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Long-Term Capital Gains (LTCG) from listed equity shares/equity mutual funds up to ₹1.25 lakh
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Agricultural income up to ₹5,000
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Who cannot file:
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Income > ₹50 lakh
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More than one house property
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Any capital gains other than permitted LTCG
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Income from business/profession
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Foreign income/assets, lottery winnings, director in a company, unlisted equity shares, or ESOP deferred tax liability
Benefit of ITR-1:
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The simplest form—auto-population from AIS/TIS makes it user-friendly.
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Faster processing and quicker refunds as scrutiny risk is minimal.
Caution: Do not “force-fit” yourself here for simplicity. If you have any capital gains beyond ₹1.25 lakh or foreign income, shifting to ITR-2 is mandatory.
ITR-2: For Salaried, Investors, and NRIs with Broader Income
Who can file:
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Individuals/HUFs not eligible for ITR-1
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Income includes:
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Capital gains (short-term or long-term, beyond ITR-1 limits)
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More than one house property
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Agricultural income > ₹5,000
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Foreign income/assets
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Income > ₹50 lakh
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NRI or RNOR taxpayers
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Benefit of ITR-2:
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Comprehensive form that captures investment activity, capital gains, foreign assets, and multiple income heads.
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Ideal for professionals or salaried individuals with ESOPs, share trading, or overseas income.
Caution: Requires detailed disclosures (foreign assets, directorships, unlisted shares). Accuracy is critical, as errors often trigger scrutiny.
ITR-3: For Business & Professional Income (Non-Presumptive)
Who can file:
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Individuals/HUFs with income from business or profession under normal provisions
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Freelancers, consultants, commission agents, F&O traders, and business owners not under presumptive schemes
Benefit of ITR-3:
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Enables claiming detailed expenses, depreciation, and deductions against business/professional income.
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Flexibility to carry forward losses for tax planning.
Caution: Compliance-heavy. Requires maintaining books of account, balance sheets, and P&L statements. Audit requirements under Section 44AB may apply depending on turnover.
ITR-4 (Sugam): Presumptive Taxation Route
Who can file:
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Individuals, HUFs, or Firms (other than LLPs) opting for presumptive taxation under:
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Section 44AD (small businesses)
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Section 44ADA (professionals)
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Section 44AE (transporters)
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Can also report: salary/pension, one house property, other sources, and agricultural income up to ₹5,000
Who cannot file:
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Those with capital gains, foreign income/assets, or brought-forward losses
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Those not eligible for presumptive taxation
Benefit of ITR-4:
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Minimal compliance—no detailed books of accounts, just a presumptive declaration of income (6%/8% for business, 50% for professionals).
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Saves effort and audit costs for small taxpayers.
Caution: Once opted, presumptive schemes have lock-in conditions (especially Section 44AD). Exiting early may restrict re-entry for the next 5 years.
Other Forms
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ITR-5: For firms, LLPs, AOPs, BOIs not filing ITR-7
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ITR-6: For companies (except those claiming exemption under Section 11)
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ITR-7: For trusts, political parties, charitable institutions, etc., filing under Sections 139(4A)–(4D)
Key Updates for AY 2025-26
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LTCG up to ₹1.25 lakh allowed in ITR-1 – easing compliance for small equity investors.
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Expanded Profession Codes in ITR-3/4 – e.g., influencers, F&O traders, betting, etc., for accurate reporting.
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Extended Due Date – Non-audit cases: 15th September 2025 (instead of 31st July).
Quick Selection Matrix
| Income Type / Condition | Correct ITR Form | Benefit Highlight |
|---|---|---|
| Salary, 1 house, ≤ ₹50L income, LTCG ≤ ₹1.25L | ITR-1 | Simplest form, faster refunds |
| Multiple properties, capital gains, foreign assets, income > ₹50L | ITR-2 | Best for investors & NRIs |
| Business/professional income (non-presumptive) | ITR-3 | Expense & loss claim flexibility |
| Presumptive income under 44AD/44ADA/44AE | ITR-4 | Minimal compliance burden |
| Firms, LLPs, Companies, Trusts | ITR-5/6/7 | Entity-specific compliance |
Final Professional Tips
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Match your income profile with the correct form—don’t choose a form for simplicity alone.
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Plan strategically: opting for ITR-3 allows expense claims, while ITR-4 reduces compliance but limits deductions.
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Use reporting to your advantage: correctly disclosing capital gains or foreign assets reduces scrutiny risk.
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Stay timely: non-audit taxpayers must file by 15th September 2025; audited cases follow their statutory due dates.
Conclusion: Selecting the right ITR form is both a compliance necessity and a strategic choice. While ITR-1 and ITR-4 offer simplicity, ITR-2 and ITR-3 provide flexibility and tax-planning advantages. Understanding these nuances ensures smooth processing, minimizes risk of notices, and can even accelerate refunds.
