Income tax
Short answer
The form follows your sources of income and your status. Salaried individuals with one house property and income under ₹50 lakh use ITR-1; add capital gains, foreign assets or more than one house property and you move to ITR-2; business or professional income takes you to ITR-3 or ITR-4; LLPs and firms file ITR-5, companies ITR-6, and trusts ITR-7. Filing on the wrong form makes the return defective and it must be revised.
Start with the simple case
ITR-1 (Sahaj) is for a resident individual with salary or pension, one house property, other income such as interest, and total income up to ₹50 lakh. If that describes you completely, you are done.
The moment any one of those boundaries is crossed, ITR-1 stops being available — and this is where most wrong filings happen, because the crossing is often invisible to the taxpayer.
The three things that quietly move you up
In practice, three situations catch salaried people out every year:
- Capital gains — including from listed shares, mutual funds or a property sale — move you to ITR-2, however small the gain.
- Any foreign asset or foreign income, including unexercised foreign stock held through an employer plan, requires ITR-2 and the Schedule FA disclosure.
- A second house property, even one that is let out at a loss, takes you out of ITR-1.
Business and professional income
ITR-4 (Sugam) is for those opting for presumptive taxation under Sections 44AD, 44ADA or 44AE, within the prescribed limits. Anyone maintaining regular books, or outside those limits, files ITR-3.
Founders frequently sit in an awkward middle: salary from their own company, consulting income, and ESOPs. That combination is usually ITR-3, and it is worth having someone check rather than guessing.
Entities
Partnership firms, LLPs and AOPs file ITR-5. Companies file ITR-6, unless claiming exemption under Section 11. Trusts, political parties and certain institutions file ITR-7.
What happens if you file the wrong one
The return is treated as defective under Section 139(9). The department issues a notice, and you get a window to file a corrected return. Miss the window and the original return can be treated as never filed — which cascades into loss of carried-forward losses and interest on any tax due. It is a recoverable mistake, but an avoidable one.
This article is general information, current at the date shown, and is not advice on your specific facts. Tax and corporate law change, and thresholds and deadlines are amended regularly — check the position before you act on it, or ask us.
More on Income tax
How are ESOPs taxed in India?
Two taxable events, two different heads of income, and the cash-flow trap that catches employees at exercise.
What should you do when you get an income tax notice?
How to read the section number, what each common notice actually wants, and the mistake that turns a small notice into a large one.