Which ITR form should I file?

ITR-1 covers salary, one house property and modest other income; ITR-2 adds capital gains, a second house and foreign income; ITR-3 is for anyone with business or professional income on regular books; ITR-4 is the presumptive-taxation form for business and professional income under sections 44AD and 44ADA. Filing on the wrong form makes the return defective under section 139(9), which starts a fifteen-day clock most people do not notice until it has run.

Side by side

A highlighted cell marks the option that wins on that criterion. Where nothing is highlighted, the two are genuinely equivalent.
Criterion	ITR-1Salary and one house. The simple one.	ITR-2Capital gains, more than one house, foreign income.	ITR-3Business or profession on regular books.	ITR-4Presumptive taxation under 44AD or 44ADA.
Salary or pension	Yes	Yes	Yes	Yes
Total income limit	₹50 lakh	No limit	No limit	₹50 lakh
House property	One only	Any number	Any number	One only
Capital gains	No	Yes	Yes	No
Business or professional income	No	No	Yes, on books	Yes, presumptive only
Foreign income or foreign assets	No	Yes	Yes	No
Director of a company	Not allowed	Yes	Yes	Not allowed
Holds unlisted equity shares	Not allowed	Yes	Yes	Not allowed
Books of account required	No	No	Yes	No
Agricultural income above ₹5,000	Not allowed	Yes	Yes	Not allowed
Available to a non-resident	No	Yes	Yes	No
Income from more than one employer	Yes	Yes	Yes	Yes
Carry forward of losses	Not permitted	Yes	Yes	Not permitted

Why some of those rows matter

Capital gains. This is the single commonest reason a return filed on ITR-1 is defective — one mutual fund redemption is enough.

Available to a non-resident. ITR-1 and ITR-4 are resident-only. An NRI with a single Indian rental property still files ITR-2.

Income from more than one employer. Permitted on every form, but the returns have to be combined — each employer computed tax as though they were your only one, so the combined return usually shows tax still payable.

The recommendation

Who should pick what

Straight answers by situation, including where the answer flips.

Salaried, one house, bank interest, nothing sold

ITR-1

It is the shortest form and everything you have fits inside it. Check the AIS first — an unnoticed mutual fund redemption moves you to ITR-2.

You sold shares, mutual fund units or property this year

ITR-2

Any capital gain, however small, puts ITR-1 out of reach. It is also the form for a second house, foreign assets and being a company director.

Freelancer or consultant with receipts under ₹75 lakh and a healthy margin

ITR-4

Section 44ADA lets you declare 50% of receipts as income and skip detailed books. It only makes sense if your real margin is at or above 50% — below that it costs more tax than proper accounts.

Business or profession with real expenses and a margin below the presumptive rate

ITR-3

Regular books let you deduct what you actually spent. Presumptive taxation fixes the margin regardless, so a genuinely low-margin business pays tax on profit it never made.

Start from the AIS, not from memory

The commonest way to end up on the wrong form is to file from Form 16 alone and forget a transaction. The Annual Information Statement lists securities sales, property transactions, dividends and interest the department already knows about — and any one of those can move you off ITR-1.

Open the AIS before choosing the form. It takes a minute and it is the single highest-value minute in the whole filing.

What a defective return actually means

A return filed on the wrong form is treated as defective under section 139(9). You get a notice with fifteen days to correct it, and if the correction is not made the return is treated as never filed — which means the filing date is lost, along with the carry-forward of losses and, if the due date has passed, the ability to file on time at all.

The notice arrives by email and on the portal. This is the specific reason to keep the email registered on the portal current.

The four forms in one sentence each

ITR-1, called Sahaj, is for a resident individual with total income up to ₹50 lakh from salary or pension, one house property and other income such as bank interest. It is the shortest return in the system and it is correct for a large share of salaried India.

ITR-2 is ITR-1 plus everything ITR-1 excludes and nothing that involves running a business: capital gains, more than one house, foreign income or assets, being a company director, holding unlisted shares, and agricultural income above ₹5,000.

ITR-3 is for anyone with income from business or profession who is keeping regular books — the full return, with a profit and loss account, a balance sheet and a depreciation schedule inside it.

ITR-4, called Sugam, is the short form for business or professional income declared under presumptive taxation. It is quick precisely because it declares a fixed margin rather than computing one.

Residential status changes the answer entirely

ITR-1 and ITR-4 are available only to a resident. A non-resident, or a resident but not ordinarily resident, cannot use either regardless of how simple their Indian income is — an NRI with a single rental property in India files ITR-2.

Residential status is determined by days present in India under section 6, and it can change in a year of relocation without anyone noticing. A return filed on ITR-1 in the year someone moved abroad is defective for that reason alone, which is a surprisingly common way to receive a 139(9) notice.

Presumptive taxation is a decision, not a form

Choosing ITR-4 means choosing sections 44AD or 44ADA, which declare a fixed percentage of turnover as income — 6% or 8% for business, 50% for a profession. That is a genuinely good deal for a high-margin consultant and a bad one for a low-margin trader.

It also carries a lock: opting out of presumptive taxation after using it triggers a tax audit requirement for the following five years. The form choice and the tax decision are the same decision.

How people get this wrong

Filing ITR-1 in a year with any capital gain, however small
Choosing the form from last year's filing without checking what changed
Filing ITR-1 while holding unlisted shares or serving as a company director, neither of which it permits
Choosing ITR-4 for the simplicity without checking whether the presumptive margin costs more tax
Missing the fifteen-day window on a defective return notice

Questions people ask

I sold ₹5,000 of mutual funds. Does that really move me off ITR-1?

Yes. There is no de minimis — any capital gain requires ITR-2. The amount does not matter, only that a gain arose.

Can I file ITR-2 even if ITR-1 would do?

Yes. ITR-2 is a superset, and filing the longer form when the shorter would have sufficed is not a defect. The reverse is.

What happens if I ignore a defective return notice?

The return is treated as never filed. You lose the filing date, the carry-forward of losses, and — if the due date has passed — the ability to file a timely return at all.

I have salary and freelance income. Which form?

ITR-3 if you are keeping books, or ITR-4 if you are declaring the freelance income under section 44ADA presumptively. Salary sits comfortably inside either — what pushes you off ITR-1 is the professional receipts, not the salary.

Does the form choice affect how much tax I pay?

Only through ITR-4, because choosing it means choosing presumptive taxation and therefore a fixed declared margin. ITR-1, ITR-2 and ITR-3 compute the same liability on the same facts; they differ only in what they have room to report.

Once you have decided

Terms worth knowing

Have it worked out on your numbers

General rules only get you so far. We work the answer out on your actual figures, with a fixed quote before anything starts.