Income Tax: ITR-1 or ITR-2? Which one should you choose when filing returns? Eligibility, differences and more explained

Selecting the right ITR form is essential when filing income tax returns. Filing your return using the wrong form can lead to rejection by the Income Tax Department and even a delay in refunds. Among individual taxpayers, the most common confusion arises between ITR-1 (Sahaj) and ITR-2, both designed for taxpayers with specific income profiles.

Here’s a detailed guide to understand the key differences between these two forms –

What is Form ITR-1?

Form ITR-1, also referred to as ITR-1 (SAHAJ), is the most appropriate form for salaried individuals. This form should be selected by taxpayers with a total annual income of up to ₹50 lakh, owning one house property, agricultural income not exceeding ₹5,000, deriving income from other sources and long-term capital gains of up to ₹1.25 lakh under Section 112A.

Who is not eligible for Form ITR-1?

Individuals ineligible to file the ITR-1 form are —

What is ITR-2?

ITR-2 covers a wider range of income sources than ITR-1. Form ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) with no business or professional income. Individuals and HUFs with a salaried income of more than ₹50 lakh, more than one house, all types of capital gains, foreign income, taxpayers owning unlisted shares, and agricultural income of more than ₹5,000 are eligible to file the ITR-2 form.

Who is not eligible for ITR-2?

Taxpayers ineligible for filing returns via ITR-2 are — 

In conclusion, it is extremely important for every taxpayer to understand the eligibility criteria of every income tax return form before filing. In case of any doubts, a taxpayer must reach out to a professional or check the official guidelines on the Income Tax Department’s website. 

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Readers are advised to consult a qualified tax professional for guidance specific to their financial situation and compliance requirements.