🛡️ Why Choosing the Right ITR Form Matters

Filing your ITR with the wrong form can:

• Lead to defective return notices.
• Delay refunds.
• Create compliance complications.

With recent CBDT updates allowing long-term capital gains (LTCG) up to ₹1.25 lakh under ITR-1 and ITR-4, it’s important to know which form fits your income structure for AY 2025-26.

🗂️ ITR-1 (Sahaj)

✅ Who Can File:

• Resident individuals with total income up to ₹50 lakh from:
  • Salary/Pension
  • One house property
  • Other sources (interest, etc.)
  • Agricultural income up to ₹5,000
• Now allows LTCG up to ₹1.25 lakh from listed equity or equity mutual funds (Sec 112A), without brought-forward losses.

❌ Who Cannot Use:

• NRIs or RNORs
• Those with more than one house property
• Capital gains exceeding ₹1.25 lakh or other types of gains
• Foreign income or assets
• Business or professional income
• Lottery or betting winnings
• Unlisted equity shares
• Company directors

🪐 Best For: Salaried individuals with simple tax structures and small LTCG from listed equity/MFs.

📈 ITR-2

✅ Who Can File:

• Residents, NRIs, and HUFs with:
  • Salary/Pension income
  • Income from multiple properties
  • Capital gains of any type or amount (shares, real estate, crypto)
  • Foreign income/assets
  • Lottery winnings
  • Unlisted equity shares
  • Company directorship

❌ Who Cannot Use:

• Taxpayers with business or professional income (non-presumptive) requiring ITR-3/4.

🪐 Best For: Individuals with capital gains above ₹1.25 lakh, multiple properties, foreign assets/income, or complex investment portfolios.

💼 ITR-3

✅ Who Can File:

• Individuals and HUFs with:
  • Business or professional income (non-presumptive) requiring accounting or audit
  • Income from speculative business, futures & options, or intraday trading
  • Partnership firm income
  • Unlisted equity shares
  • Capital gains of any type or amount
  • Salary/pension income alongside business/profession

❌ Who Cannot Use:

• Presumptive taxpayers under Sec 44AD/44ADA/44AE (use ITR-4).

🪐 Best For: Freelancers, consultants, traders, or small business owners with regular books of accounts and capital gains.

🔢 ITR-4 (Sugam)

✅ Who Can File:

• Individuals, HUFs, and firms (excluding LLPs) opting for presumptive taxation under Sec 44AD, 44ADA, 44AE, with:
  • Total income up to ₹50 lakh
  • Income from salary, one house property, other sources
  • Now allows LTCG up to ₹1.25 lakh from listed equity/mutual funds under Sec 112A (new update for FY 2024-25).

❌ Who Cannot Use:

• NRIs or RNORs
• Those with foreign assets/income
• Capital gains beyond ₹1.25 lakh
• More than one house property
• Unlisted shares or company directorship
• Business income requiring books or audit
• Lottery/betting winnings

🪐 Best For: Small business owners, freelancers, and professionals using presumptive taxation with simple income structures.

🆕 Key Updates for FY 2024-25 (AY 2025-26)

✅ ITR-1 and ITR-4 now allow LTCG up to ₹1.25 lakh from listed equity and equity mutual funds under Sec 112A.
✅ This aligns with Budget 2024 changes to simplify filing for small investors.
✅ Utilities for ITR-1 and ITR-4 are live on the e-filing portal; ITR-2 and ITR-3 utilities will follow shortly.

🛠️ Quick Reference Table

🧭 Which Form Should You File?

✅ Salary-only, 1 property, LTCG ≤ ₹1.25L (listed equity) → Use ITR-1
✅ Salary with LTCG > ₹1.25L, multiple properties, foreign income → Use ITR-2
✅ Self-employed/professional (non-presumptive) with capital gains → Use ITR-3
✅ Presumptive business/professional (Sec 44AD/44ADA/44AE) with salary, 1 house, LTCG ≤ ₹1.25L → Use ITR-4

🗂️ Next Steps to Prepare

✅ Check your eligibility: Review your income sources, capital gains, and foreign income/assets.
✅ Wait for ITR-2/3 utilities if required, or file early using ITR-1/4 if eligible.
✅ Gather documents:

• Form 16
• Interest certificates
• TDS/TCS statements
• Capital gains statements
• Foreign income proofs
• P&L and audit reports (if applicable)
  ✅ Consult a CA if your income structure is complex (e.g., multiple capital gains, foreign assets, crypto transactions, business income).

🧘 Why Filing Early Helps

✅ Avoids last-minute portal slowdowns.
✅ Enables faster refunds.
✅ Gives time to correct AIS/TIS mismatches.
✅ Reduces stress before the September 15 extended filing deadline.

📚 Further Reading

• Income Tax Department – ITR Forms
• Economic Times Guide on ITR Changes
• CBDT Press Releases

❓ FAQs

Q: Can NRIs file ITR-1 or ITR-4?
No, NRIs must use ITR-2 or ITR-3 based on their income type.

Q: Can I claim LTCG above ₹1.25L in ITR-1 or ITR-4?
No, for LTCG exceeding ₹1.25 lakh, use ITR-2 or ITR-3.

Q: Can ITR forms be revised after filing?
Yes, you can file a revised return before the assessment year ends to correct errors.

Q: Should I wait for ITR-2/3 utilities if I need them?
Yes, if your income structure requires these forms, wait for the e-filing utilities to avoid defective returns.

🚀 Final Thoughts

Filing the correct ITR form is as critical as timely filing. With updated allowances for small LTCG in ITR-1 and ITR-4 for FY 2024-25, many taxpayers can now simplify filing, but it’s essential to match your income profile correctly.

Filing your ITR accurately and on time isn’t just about avoiding penalties; it’s about peace of mind, faster refunds, and financial clarity.

✅ Need help choosing the correct ITR form for FY 2024-25 (AY 2025-26)?
✅ Want personalized filing support to avoid notices and ensure compliance?
✅ Unsure about capital gains reporting or presumptive taxation?

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