Filing your Income Tax Return (ITR) isn’t just about reporting your income and taxes paid — it’s also about choosing the correct ITR form. Filing the wrong ITR form can lead to delays, rejection of your return, and even penalties.
For the Financial Year 2024–25 (Assessment Year 2025–26), the Income Tax Department has specific rules for who can file which ITR form. This guide will help you understand which form is right for you and what happens if you choose the wrong one.
ITR-1 (Sahaj): For Salaried Individuals with Simple Incomes
Who can file ITR-1:
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Individuals who are Resident and Ordinarily Resident
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Total income up to ₹50 lakh
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Income sources include:
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Salary or pension
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One house property
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Other sources like interest income
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Who cannot file ITR-1:
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Individuals with:
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Income from capital gains
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More than one house property
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Foreign assets or income
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Business or professional income
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Holding directorship in a company
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Investments in unlisted equity shares
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What can go wrong if filed incorrectly:
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Return may be treated as defective under Section 139(9)
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Refunds may be delayed or rejected
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You may be asked to revise and refile
ITR-2: For Individuals and HUFs Without Business or Professional Income
Who should file ITR-2:
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Individuals and Hindu Undivided Families (HUFs) with:
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Income from salary/pension
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Income from more than one house property
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Capital gains (from sale of stocks, mutual funds, property, etc.)
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Foreign income or assets
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Total income above ₹50 lakh
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Directorships or investments in unlisted shares
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Who should not file ITR-2:
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Anyone with business or professional income
Filing the wrong form may lead to:
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Notices for incorrect filing
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Loss of ability to carry forward capital losses
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Questions on source of income during assessments
ITR-3: For Individuals and HUFs with Business or Professional Income
Who should file ITR-3:
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Individuals or HUFs earning:
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Income from business or profession (like consultants, freelancers, shop owners, etc.)
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Income as a partner in a firm
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All incomes mentioned under ITR-2 plus business income
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Common errors:
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Many freelancers and professionals mistakenly file ITR-1 or ITR-2
Consequences of wrong filing:
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Tax return may be rejected
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You may not be able to claim valid business expenses
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May lead to a scrutiny notice for income mismatch
ITR-4 (Sugam): For Presumptive Income Taxpayers
Who should file ITR-4:
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Individuals, HUFs, and firms (not LLPs) opting for presumptive taxation under:
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Section 44AD (for small businesses)
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Section 44ADA (for professionals)
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Section 44AE (for transporters)
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Total income up to ₹50 lakh
Who cannot file ITR-4:
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Non-residents
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Those with:
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Capital gains
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Foreign income or assets
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More than one house property
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Income exceeding ₹50 lakh
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Investments in unlisted equity shares
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Directorship in a company
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What goes wrong if filed incorrectly:
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Your return can be marked invalid
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Refunds may be held up
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Penalties under incorrect reporting
What Happens If You File the Wrong ITR Form?
Filing the incorrect ITR form is not just a minor error — it can lead to serious issues:
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Defective Return Notice under Section 139(9)
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Refund delays or outright rejection
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Inability to carry forward losses
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Scrutiny or reassessment notices
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Penalty of ₹5,000 to ₹10,000 under Section 234F
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Loss of compliance record when applying for loans, visas, or tenders
Final Thoughts
Choosing the right ITR form is just as important as calculating your income and taxes correctly. Even a small mismatch between your income sources and ITR form can invalidate your return, attract notices, or result in loss of refund.
If you’re unsure, consult a tax professional or use the Income Tax Department’s online tool to help determine the right form. It’s always better to file it right the first time than to deal with legal and financial consequences later.