Tax
Which ITR form to file: ITR-1, ITR-2, ITR-3 or ITR-4
Choose the correct ITR form for AY 2026-27 by income type, residence and disqualifiers, including the new two-house-property rule.
Use ITR-1 only for a resident ordinary individual with a tightly limited set of income sources; ITR-2 when there is no business or professional income but ITR-1 is too narrow; ITR-3 when business or professional income is present; and ITR-4 only when an eligible resident taxpayer chooses presumptive taxation and meets that form’s restrictions. The form is decided by every source of income and every disqualifier, not by your job title.
If one unusual item appears — a foreign account, short-term capital gain, directorship, unlisted shares or a loss to carry forward — it can move the whole return to another form.
Pick the year before the form
The return being filed in 2026 is usually for AY 2026-27, covering income earned in FY 2025-26. The Income Tax Department confirms that this return is governed by the Income-tax Act, 1961 even though the Income-tax Act, 2025 took effect on 1 April 2026.
Tax Year 2026-27 is different: it is income earned from 1 April 2026 to 31 March 2027 under the new Act, and its return comes later. You do not file a second return now merely because both labels contain 2026-27.
Select AY 2026-27 in the portal, then use its Help me decide which ITR form to file service. The wizard asks about residence, income types and special situations and recommends the applicable form and schedules. That current-year result is safer than a checklist saved from last year.
Download or note the recommendation with the answers you gave. If a fact changes during reconciliation, run the questions again before submitting rather than forcing the earlier result to fit.
The short decision table
| Your position for AY 2026-27 | Likely individual return |
|---|---|
| Resident ordinary individual, income within ₹50 lakh and only the sources permitted by the simplest form | ITR-1 |
| Individual or HUF, no business/professional income, but not eligible for ITR-1 | ITR-2 |
| Individual or HUF with business or professional income | ITR-3 |
| Eligible resident individual/HUF or resident firm other than LLP using specified presumptive provisions, within the form’s restrictions | ITR-4 |
“Likely” matters. The table finds the family; the form-specific conditions decide the answer. ITR-1 and ITR-4 are concessions for simpler cases, not defaults that every salaried person or small business can force themselves into.
ITR-1: simple salary cases, with hard exclusions
For AY 2026-27, ITR-1 is for a resident individual other than resident-not-ordinarily-resident, with total income up to ₹50 lakh and only permitted sources. Those sources include salary or pension, up to two house properties under the form-specific FAQ, ordinary other-source income such as interest and dividend, agricultural income up to ₹5,000, and long-term capital gain chargeable under section 112A up to ₹1,25,000.
That last allowance is narrow. Short-term capital gain rules out ITR-1. So does section 112A long-term capital gain above ₹1,25,000, or another kind of capital gain.
Common disqualifiers include:
- being a director in a company;
- holding unlisted equity shares at any time during the year;
- foreign assets, signing authority in a foreign account, or foreign-source income;
- tax deducted on certain cash withdrawals;
- deferred tax on an eligible-start-up ESOP;
- a brought-forward loss or a loss to carry forward; or
- total income over ₹50 lakh.
The department’s broad salaried overview still contains older “one house property” wording, while its form-specific ITR-1 FAQ says up to two for AY 2026-27. Use the current form FAQ, utility and wizard rather than repeating the old one-property rule.
ITR-2: complex personal income, but no business
ITR-2 is for an individual or HUF who has no profits or gains from business or profession and cannot use ITR-1. There is no ₹50 lakh ceiling on ITR-2.
It is commonly the correct form for a non-resident or resident-not-ordinarily-resident individual, someone with capital gains outside ITR-1’s small permitted slice, more complex house-property income, foreign income or assets, a company director, a holder of unlisted shares, or a person carrying forward eligible losses.
Do not choose ITR-2 merely because it contains more schedules. If you have freelance, consultancy, trading-business or other business/professional income, ITR-2 is expressly unavailable. That moves the case to ITR-3 or, where every presumptive condition is met, ITR-4.
ITR-3 and ITR-4: business income is the fork
ITR-3 is the broad return for individuals and HUFs with business or professional income. It can also carry salary, house property, capital gains and other-source income. A partner’s remuneration, interest, bonus or commission from a firm is business/professional income for this purpose; the fact that it looks like a regular payment does not turn it into salary.
ITR-4 is an optional simplified form, not “ITR-3 for small businesses”. It is limited to eligible resident individuals, HUFs and resident firms other than LLPs using the specified presumptive provisions, with total income within ₹50 lakh and only permitted additional sources. The AY 2026-27 form-specific FAQ allows up to two house properties and the same limited listed-equity long-term gain, but excludes short-term gains, foreign assets/income, company directors, unlisted equity holders and several other cases.
Choosing presumptive taxation affects how income is computed and reported. If you are unsure whether your activity and receipts qualify, that is the point to use a tax professional, not the point to choose the shorter form.
Three traps that change the answer
First, salary is not the same as having only salary income. Bank interest, dividends, rent, gains and freelance receipts all count when selecting the form. Reconcile the documents in the Form 16, AIS and 26AS guide before deciding.
Second, tax regime does not select the ITR form. Old versus new changes exemptions, deductions and the tax calculation; the form still follows residence and income sources. Compare the bill separately on the income-tax calculator and read the regime comparison.
Third, pre-filled data is not an eligibility decision. A capital gain or foreign asset does not become safe to omit because the portal failed to pre-fill it. The return has to contain the correct schedule even when the department’s data is incomplete.
A defensible way to choose
List every income source first: employment, each property, interest, dividends, gains, business or professional receipts and foreign income. Then list the status flags: residence, directorship, unlisted shares, foreign assets, deferred ESOP tax and losses.
Run those facts through the portal wizard, read the current form-specific FAQ, and open the schedules before filing. If your result is ITR-1 or ITR-4, check every exclusion because those forms are defined as much by what they cannot accept as by what they can.
Once selected, follow the filing sequence in the step-by-step ITR guide: reconcile the information statements, choose the regime, pay any balance, submit and e-verify. The right form is the container; the return is still only correct when every figure inside it is correct.
Common questions
Can a salaried employee with capital gains file ITR-1?
Only in a narrow case for AY 2026-27: the form-specific Income Tax Department guidance permits long-term capital gain chargeable under section 112A up to ₹1,25,000. Short-term capital gain, any other capital gain, or that permitted long-term gain above the limit rules out ITR-1. Because the capital-gain category matters, use the portal’s “Help me decide” questions rather than selecting ITR-1 merely because salary is your main income.
Can ITR-1 now report two house properties?
Yes, according to the department’s form-specific ITR-1 FAQ for AY 2026-27. It says income from up to two house properties can now be disclosed. Some broader overview text on the same portal still says one house property, which is why older guides conflict. Follow the current utility and form-specific validation, and use the portal wizard if your ownership, co-ownership, loss or rental position makes the case more complicated.
Is ITR-2 only for people with capital gains?
No. ITR-2 is the general individual/HUF return for a person who is not eligible for ITR-1 and has no business or professional income. It can also be required because of non-resident status, foreign assets or foreign income, total income above the ITR-1 ceiling, a company directorship, unlisted shares, losses to carry forward, or another source that the simpler form cannot accept.
Does a freelancer always have to use ITR-3?
A freelancer has professional income, so ITR-1 and ITR-2 are not the right forms. ITR-3 is the broad business/profession return. ITR-4 may be available where the person is resident, uses an eligible presumptive-tax provision and meets all of that simplified form’s income and source restrictions. Presumptive taxation is a tax position, not a label to choose merely because ITR-4 is shorter.
What happens if I choose the wrong ITR form?
The return can be treated as defective and the department may ask you to correct it within the time in its notice. If the defect is not cured, the return can be treated as invalid. Correcting the form early is much easier than defending a return that omitted a schedule it could not display, so use the portal wizard and the current form instructions before submission.
Sources
Rates and rules on this page were read directly from the following sources on the dates shown. Figures change — if you are about to act on one, confirm it at the source.
- Salaried individuals — returns applicable for AY 2026-27
- File ITR-1 (Sahaj) online — FAQs for AY 2026-27
- ITR-2 FAQs for AY 2026-27
- File ITR-4 (Sugam) online — FAQs for AY 2026-27
- Identification and generation of applicable ITR — FAQ
- Income tax returns and the transition to the Income-tax Act, 2025 — FAQs