Filing your Income Tax Return (ITR) doesn’t have to be a puzzle. If terms like ITR-1, ITR-2, or ITR-6 sound confusing — don’t worry. You’re not alone! Many taxpayers struggle to figure out which ITR form they need to file, especially with updated rules every year.
In this guide, we’ll break down each ITR form in plain English, show you who should use which form, and update you on the latest changes for FY 2024–25.
Recent Updates and Changes to ITR Forms (AY 2025-26)
The Income Tax Department is constantly working to streamline the ITR filing process. Here are some key updates and changes for AY 2025-26 that you should be aware of:
- 1. Extended Due Dates: The Central Board of Direct Taxes (CBDT) has extended the deadline for filing ITRs for most individual taxpayers to September 15, 2025, from the usual July 31st. This is a welcome relief, giving you more time to get your documents in order.
- 2. Simplified ITR-1 & ITR-4 for Capital Gains: Good news for small investors! You can now use the simpler ITR-1 (Sahaj) and ITR-4 (Sugam) even if you have long-term capital gains (LTCG) from listed equity shares and mutual funds up to ₹1.25 lakh (under Section 112A). Previously, even small capital gains often necessitated more complex forms.
- 3. Aadhaar Enrolment ID No Longer Accepted: From this assessment year, you must provide your actual Aadhaar number for PAN applications and ITR filings. The Aadhaar Enrolment ID field has been removed from all ITR forms.
- 4. Mandatory TDS Section Disclosure: If you have income where Tax Deducted at Source (TDS) has been applied (other than salary), you'll now need to explicitly mention the specific TDS section (e.g., 194J, 194C) in ITR forms 1, 2, 3, and 5 to claim your tax credit.
- 5. New Capital Gains Rules from July 23, 2024: Budget 2024 introduced revised taxation rules for capital gains, effective from July 23, 2024. The ITR forms now require you to report the date of transfer of capital assets to determine which rules apply.
- 6. Asset and Liability Reporting Threshold Raised: The requirement to disclose assets and liabilities in Schedule AL of the ITR has been raised. Now, only taxpayers with a gross total income exceeding ₹1 crore need to provide these details (previously ₹50 lakh). This applies to ITR-2 and ITR-3.
- 7. Buyback Proceeds as Deemed Dividends: From October 1, 2024, proceeds from buybacks by domestic listed companies will be treated as deemed dividends in the shareholder's hands. This needs to be reported in ITR-2 or ITR-3 under "Income from Other Sources."
- 7. Form 10BA Mandatory for Section 80GG: If you're claiming deductions for house rent under Section 80GG (for those not receiving HRA), you must now submit Form 10BA along with your return.
Which ITR Form is Right for You? A Simplified Breakdown
Choosing the correct ITR form is crucial to avoid complications. Here's a breakdown to help you identify the right one based on your income sources and taxpayer category:
1. ITR-1 (Sahaj) – The Simplest One!
Who can use it?
- Resident individuals (excluding Not Ordinarily Resident and Non-Resident)
- Total income up to ₹50 lakh
- Income from:
- a. Salary or Pension
- b. One House Property (excluding cases where loss is carried forward)
- c. Other Sources (e.g., interest income, family pension – excluding winnings from lottery or horse races)
- d. Agricultural income up to ₹5,000
- e. Long-term capital gains (LTCG) under Section 112A up to ₹1.25 lakh (new inclusion!)
Who CANNOT use it?
- Individuals with total income exceeding ₹50 lakh
- Individuals with income from business or profession
- Individuals who are Directors in a company
- Individuals who have invested in unlisted equity shares
- Individuals owning assets (including financial interest in any entity) located outside India
- Individuals having foreign income
- Individuals with more than one house property
- Individuals having capital gains (except the new LTCG up to ₹1.25 lakh under Section 112A)
- Individuals where TDS has been deducted under Section 194N
- Individuals with brought forward loss or loss to be carried forward
Example:
Priya is a salaried employee with a single house property she lives in. Her total income is ₹45 lakh, including interest from her savings account. She recently sold some listed mutual funds and made an LTCG of ₹80,000. She can use ITR-1.
2. ITR-2 – For Individuals and HUFs with Capital Gains and More
Who can use it?
- Individuals and Hindu Undivided Families (HUFs) who are not eligible to file ITR-1
- Individuals/HUFs who do not have income from "Profits and Gains from Business or Profession"
- Individuals/HUFs with income from:
- a. Salary or Pension
- b. More than one House Property
- c. Capital Gains (Short-term or Long-term, including those exceeding the ITR-1 limit)
- d. Other Sources (including winnings from lottery or horse races)
- e. Foreign assets or foreign income
- f. Director in a company
- g. Investment in unlisted equity shares
Who CANNOT use it?
- Individuals or HUFs with income from "Profits and Gains from Business or Profession."
Example:
Rajesh is a retired individual receiving a pension and also has income from the sale of shares, resulting in significant capital gains. He owns two house properties. He cannot use ITR-1 and should opt for ITR-2.
3. ITR-3 – For Business Owners and Professionals
Who can use it?
- Individuals and Hindu Undivided Families (HUFs) having income from "Profits and Gains from Business or Profession"
- Individuals/HUFs who are partners in a firm
- Individuals/HUFs with income from:
- a. Salary or Pension
- b. House Property
- c. Capital Gains
- d. Other Sources
- Individuals who are Directors in a company
- Individuals who have invested in unlisted equity shares
Who CANNOT use it?
- Those who are eligible to file ITR-1, ITR-2, or ITR-4.
Example:
Sunita runs a successful digital marketing agency. Her income primarily comes from her business. She also has some capital gains from mutual funds. Sunita must file ITR-3.
4. ITR-4 (Sugam) – Simplified for Presumptive Income
Who can use it?
- Resident individuals, HUFs, and Firms (other than LLPs)
- Total income up to ₹50 lakh
- Income from Business & Profession computed under the Presumptive Taxation Scheme (Sections 44AD, 44ADA, or 44AE)
- Income from:
- a. Salary/Pension
- b. One House Property
- c. Other Sources
- d. Long-term capital gains (LTCG) under Section 112A up to ₹1.25 lakh (new inclusion!)
Who CANNOT use it?
- Individuals with total income exceeding ₹50 lakh
- Individuals who are Directors in a company
- Individuals who have invested in unlisted equity shares
- Individuals owning foreign assets or having foreign income
- Individuals with capital gains (except the new LTCG up to ₹1.25 lakh under Section 112A)
- Individuals with agricultural income exceeding ₹5,000
Example:
Amit is a freelance graphic designer who opts for the presumptive taxation scheme under Section 44ADA. His gross receipts are ₹35 lakh. He also has a salary from a part-time job and interest income. He can use ITR-4.
5. ITR-5 – For Firms, LLPs, AOPs, BOIs, etc.
Who can use it?
- Persons other than:
- a. Individual
- b. HUF
- c. Company
- d. Person filing ITR-7
- This includes:
- a. Firms (Partnership Firms)
- b. Limited Liability Partnerships (LLPs)
- c. Association of Persons (AOPs)
- d. Body of Individuals (BOIs)
- e. Co-operative Societies
- f. Local Authorities
- g. Artificial Juridical Persons
- h. Estates of insolvent/deceased
Example:
A partnership firm running a consulting business would file ITR-5.
6. ITR-6 – For Companies (excluding those claiming Section 11 exemption)
Who can use it?
- Companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes).
- Mandatory electronic filing with a digital signature.
Example:
Any private limited company or public limited company not claiming religious/charitable exemptions would file ITR-6.
7. ITR-7 – For Specific Entities and Trusts
Who can use it?
- Persons, including companies, who are required to furnish a return under Sections 139(4A), 139(4B), 139(4C), or 139(4D). This typically includes:
- a. Charitable and Religious Trusts
- b. Political Parties
- c. Scientific Research Associations
- d. News Agencies
- e. Universities, Colleges, and other Educational Institutions
- f. Hospitals and other Medical Institutions
Example:
A registered charitable trust receiving donations would file ITR-7.
