When it comes to filing income tax returns, choosing the right ITR form is essential. If a taxpayer files a wrong ITR form, the IT department can reject the return and even charge a penalty for missing the deadline. In this regard, individual taxpayers usually have confusion when it comes to choosing between ITR 1 and ITR 2.
Both income tax return forms cover almost the same income categories but have subtle differences that set them apart. So, if you are planning to file your IT returns, give this article a read. You will gain a clear understanding of the difference between ITR 1 and 2, their applicability, and more.
Form ITR-1, also known as ITR-1 (SAHAJ) is one of the ITR forms that is best suited for salaried individuals. This form is for taxpayers having salary income, one house property, agricultural income not exceeding Rs. 5000, income from other sources, and long-term capital gains u/s 112A not exceeding Rs. 1.25 lakhs. However, the total income of the taxpayer opting for ITR-1 should not be more than Rs. 50 lakhs for the financial year.
Resident individuals with total income below Rs. 50 lakhs, can file Form ITR-1 if they fulfill the following conditions:
Taxpayers are not eligible to file ITR 1 in the following cases:
Form ITR-2 is specifically for individuals and HUFs who do not have business or professional income. Individuals and HUFs with income from salary, multiple house property, all kind of capital gains, foreign income, taxpayers holiding unlisted shares, and agricultural income exceeding Rs. 5,000 can file ITR-2. Taxpayers with total income more than Rs. 50 lakhs in the financial year can also opt for Form ITR-2. ITR-2 covers a more broader range of income sources compared to ITR-1.
ITR-2 is applicable for salaried resident individuals, Hindu Undivided Families (HUFs) and Non-Resident. ITR-2 is applicable to taxpayers who fulfill the following conditions:
An individual or HUF is not eligible to file ITR 2 under the following circumstances:
Here are the key differences between ITR 1 and ITR 2:
Particulars | ITR-1 | ITR-2 |
Applicant type | Resident Individual | Individuals (resident or non-resident) and HUFs |
Total Income | Up to Rs. 50 lakh | More than Rs. 50 lakh |
Capital Gains Income | Under section 112A which does not exceed Rs 1.25 lakh, and does not have any carry forward or brought forward of losses under the head | All Capital Gains Income and losses |
Income from Other Sources | Excluding activities like horse racing, gambling, lotteries, etc. | Including activities like lotteries, gambling, horse racing, card games, etc. |
Agriculture Income | Up to Rs. 5,000 | More than Rs. 5,000 |
Income from Property | Up to 1 house | More than 1 house |
So, the next time you get ready to file your income tax returns, check out which form you must submit. Additionally, consider collecting all your income proofs in one place before starting the return filing process. Doing so will enable you to complete the entire process without facing any hassles.