Choosing the wrong ITR form is one of the most common errors in income tax filing — it can result in a defective return notice under Section 139(9). Here's a clear breakdown of who should file ITR-1 (Sahaj) vs ITR-2 for Assessment Year 2026–27.
ITR-1 (Sahaj) — Who Can File
- Resident individuals (NOT NRIs, NOT HUF) only
- Total income up to ₹50 lakh
- Income from salary or pension
- Income from one house property (not brought forward loss)
- Interest income (bank FD, savings, etc.)
- Agricultural income up to ₹5,000
- Family pension
- Long-term capital gains under Section 112A (listed equity shares and equity mutual funds) up to ₹1.25 lakh, with no capital losses
Who CANNOT File ITR-1
- NRIs and RNOR (Resident but Not Ordinarily Resident)
- Income above ₹50 lakh
- Short-term capital gains, long-term gains above ₹1.25 lakh, or any capital losses
- Two or more house properties
- Income from business or profession
- Director in a company
- Investment in unlisted equity shares
- Foreign assets or foreign income
- Tax relief claimed under Sec 90/90A/91 (DTAA)
- Income from lottery, horse racing, betting
ITR-2 — Who Should File
- Individuals and HUF with income NOT from business or profession
- Any income above ₹50 lakh
- Capital gains (shares, mutual funds, property, gold, crypto)
- Two or more house properties
- Foreign assets or foreign income (must report even if exempt)
- NRIs with Indian income
- Directors of Indian companies
- Holders of unlisted equity shares
- Income from other sources with winnings from lottery/gambling
| Criteria | ITR-1 (Sahaj) | ITR-2 |
|---|---|---|
| Residential status | Resident only | Resident, RNOR, NRI |
| Who files | Individual only | Individual & HUF |
| Income limit | Up to ₹50 lakh | No limit |
| Capital gains | Only Sec 112A LTCG up to ₹1.25 lakh, no losses | Allowed (all types) |
| House property | Max 1 | 2 or more |
| Business income | Not allowed | Not allowed (use ITR-3) |
| Foreign assets/income | Not allowed | Mandatory to report |
| F&O trading | Not allowed | Not allowed (use ITR-3) |
| Directors in company | Not allowed | Allowed |
| Complexity | Simple (no schedules for CG) | Moderate (CG schedules) |
Common Mistake: Using ITR-1 After Selling Mutual Funds or Shares
Since AY 2025-26, ITR-1 can report long-term gains under Section 112A of up to ₹1.25 lakh from listed equity shares and equity mutual funds — provided there are no capital losses to set off or carry forward. Any short-term gain, any loss, long-term gains above ₹1.25 lakh, or gains from debt funds, property, gold or crypto still need ITR-2. AIS shows every redemption, and CPC matches it with your return — the wrong form triggers a defective return notice under Section 139(9).
