‘Right ITR Form Key To Smooth Tax Filing’

Choosing incorrect return category may trigger defective submissions, delayed refunds, scrutiny notices and compliance complications later

As the income tax return filing season for Assessment Year 2026-27 gathers pace, taxpayers across categories are preparing documents, reconciling tax deductions and reviewing income details. Yet, before uploading any figures, one critical step often gets overlooked — selecting the correct Income Tax Return (ITR) form. While it may appear to be a simple procedural choice, tax experts warn that using the wrong form can result in defective returns, denial of benefits, delayed refunds and even notices from the Income Tax Department.

The Central Board of Direct Taxes (CBDT) has notified seven different ITR forms — ITR-1 to ITR-7 — each meant for a specific category of taxpayers and income profiles. Choosing the appropriate form depends on factors such as the nature of income, residential status, ownership of assets, business activity and eligibility for exemptions.

For salaried taxpayers and pensioners with relatively simple income structures, ITR-1 or “Sahaj” continues to remain the most widely used form. 

 It is available to resident individuals with annual income up to ₹50 lakh derived from salary or pension, income from up to two house properties and income from other sources such as bank interest. However, the form excludes lottery winnings, racehorse income and substantial agricultural income above ₹5,000.

A notable change in AY 2026-27 is the relaxation allowing taxpayers to report income from two house properties in ITR-1, compared to the earlier restriction of one property. Taxpayers with limited long-term capital gains under Section 112A — not exceeding ₹1.25 lakh and without carried-forward losses — can also continue using ITR-1. Once the income structure becomes more complicated, taxpayers generally shift to ITR-2. This form applies to individuals and Hindu Undivided Families (HUFs) that do not earn business income but may have capital gains, foreign assets, foreign income or income from more than two house properties. 

Directors in companies and holders of unlisted equity shares are also required to use ITR-2.

Taxpayers earning income from business or profession must file ITR-3, which covers proprietors, professionals and partners receiving taxable remuneration or profit shares from firms. 

Meanwhile, small businesses and professionals opting for presumptive taxation schemes under Sections 44AD, 44ADA and 44AE can use ITR-4 or “Sugam”, provided turnover and income remain within prescribed thresholds.

Other entities such as firms, LLPs, co-operative societies and associations generally file ITR-5, while companies use ITR-6. Charitable trusts, political parties, educational institutions and specified non-profit organisations continue filing under ITR-7. The new forms also introduce refined disclosures aligned with Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) data. 

Taxpayers should carefully evaluate all income sources and disclosures before choosing a form, as a small mistake at the filing stage can create larger compliance problems later.

(The author is Partner at B D Jokhakar & Co, Chartered Accountants, Mumbai)