25 March 2026 · 49Tax
ITR-1 vs ITR-2: Which Form Should You File?
Confused between ITR-1 and ITR-2? This guide explains who should file which form, the key differences, and how to decide based on your income sources.
Quick Answer
- File ITR-1 if you are salaried with income up to Rs 50 lakh, one house property, and no capital gains.
- File ITR-2 if you have capital gains (stocks, mutual funds, property), multiple house properties, foreign income, or income above Rs 50 lakh.
ITR-1 vs ITR-2: Side-by-Side Comparison
| Criteria | ITR-1 (Sahaj) | ITR-2 |
|---|---|---|
| Income limit | Up to Rs 50 lakh | No limit |
| Salary/pension | Yes | Yes |
| House properties | One only | Multiple |
| Capital gains | Not allowed | Stocks, mutual funds, property, crypto |
| Foreign income/assets | Not allowed | Allowed |
| Dividends above Rs 5,000 | Not allowed | Allowed |
| Agricultural income above Rs 5,000 | Not allowed | Allowed |
| Business/professional income | Not allowed | Not allowed (use ITR-3) |
| Complexity | Simple | More detailed |
When You Must Use ITR-2
You cannot use ITR-1 and must file ITR-2 if any of these apply:
1. You Have Capital Gains
If you sold shares, mutual funds, property, or any capital asset during the year, you need ITR-2. This includes:
- Short-term capital gains (STCG) from equity sold within 12 months
- Long-term capital gains (LTCG) from equity exceeding Rs 1.25 lakh
- Property sale gains
- Debt mutual fund gains
Even if you made a capital loss, you still need ITR-2 to carry it forward.
For a detailed guide on reporting capital gains, see: Capital Gains Tax on Stocks & Mutual Funds
2. Your Income Exceeds Rs 50 Lakh
If your total gross income from all sources is above Rs 50 lakh, ITR-1 is not available. You must use ITR-2 (or ITR-3 if you have business income).
3. You Have Multiple House Properties
ITR-1 allows income from only one house property. If you own and rent out more than one property, use ITR-2.
4. You Have Foreign Income or Assets
If you hold bank accounts, property, or financial assets outside India, or earn income from abroad, ITR-2 is mandatory. This includes foreign equity investments and RSUs from foreign employers.
5. You Are a Director in a Company
Company directors must file ITR-2 regardless of their income level.
Common Scenarios
Scenario 1: Salaried + SIP in mutual funds (no redemptions) → File ITR-1. Owning mutual funds does not require ITR-2 — only selling them does.
Scenario 2: Salaried + sold ELSS after 3 years → File ITR-2. The redemption triggers LTCG, even if it is within the Rs 1.25 lakh exemption limit.
Scenario 3: Salaried + Rs 8,000 in dividends → File ITR-2. Dividend income above Rs 5,000 requires ITR-2.
Scenario 4: Salaried at Rs 48 lakh + Rs 3 lakh savings interest → File ITR-2. Total income exceeds Rs 50 lakh.
What If You File the Wrong Form?
Filing the wrong ITR form can lead to:
- A defective return notice under Section 139(9)
- You get 15 days to correct and re-file
- If you do not correct it, the return is treated as invalid
It is better to pick the right form upfront.
Not sure which one? The income tax e-filing portal offers a "Help me decide which ITR Form" option when you start a return — answer a few questions about your income sources and it will guide you to the right form.