Comprehending ITR-1 and ITR-2 is vital for precise tax filing and compliance; it ensures that you complete the documents that conform to your eligibility. A number of Overseas Citizens of India (OCIs) and Non-Resident Indians (NRIs) often become confused regarding whether they can file ITR 1 or not. ITR-1 (Sahaj) streamlines tax returns for resident individuals with direct incomes up to Rs 50 lakh from streams like interest and salary. In contrast, ITR-2 alludes to more complex income scenarios, like multiple properties, foreign assets, and capital gains, making it critical for higher-income individuals, OCIs/NRIs, and those with various income sources. Understanding which form to use ensures correct tax management and prevents legal complications.
Discover all you require to know about ITR 1 vs ITR 2, its significant differences, applicability, and penalty, and which one to submit as a taxpayer.
Meaning of ITR 1
ITR-1, also called Sahaj, is a streamlined income tax return form for resident individuals within India whose total income does not cross Rs 50 lakh in a financial year. ITR 1 implies a form that includes income from salary, family pension, one house property, agricultural income (till Rs 5000), and different sources like interest from savings accounts and deposits. Also, this might also include clubbed income of minor, or spouse, so long as the streams of income are within the fixed brackets–it allows for a scenario where filing is not easily accomplished or a direct income stream.
Meaning of ITR 2
ITR-2 is an income tax return form for Hindu Undivided Families (HUFs), individuals, OCIs, and NRIs who do not have income from a profession or business. It comprises income from salary, capital gains, multiple house properties, foreign income, and winnings from lotteries. It includes agricultural income exceeding Rs 5000 and earnings from virtual digital assets like cryptocurrency. This form also applies to residents with foreign tax credits, those with unlisted equity shares, and directors of companies. It’s apt for higher incomes over Rs 50 lakh from multiple sources.
Applicability of ITR-1
You can file ITR-1 if:
- Your total income is up to Rs. 50 lakhs.
- You are a resident individual (Not applicable to non-residents and HUFs).
- Your income is from single-house property, salary, and other sources (like dividends, interest, etc.).
- You do not have any capital gains from property sales or stocks.
- Agricultural income does not exceed Rs 5,000.
- Other sources of income comprise winnings from the racehorses and lottery
Who Cannot File ITR-1?
You cannot file ITR-1 if:
- You possess capital gains income.
- You have a professional or business income.
- You have capital gains income.
- You are a director in a company.
- Your total income surpasses Rs 50 lakh.
- You are a Non-Resident Indian (NRI).
- You earn from more than a single-house property.
- You own unlisted equity shares.
Applicability of ITR-2
You must file ITR-2 if:
- Your total income exceeds Rs 50 lakh.
- You have capital gains from selling property, shares, etc.
- You are a director in a company.
- You are a HUF or individual but not eligible for ITR-1.
- You possess income from over one house property.
- You have foreign assets or income.
- You receive income from betting or lottery winnings.
- You own unlisted equity shares.
- Exclude those who are qualified for ITR1
- Agriculture income that crosses INR 5,000
Who Cannot File ITR-2?
You cannot file an ITR-2 if you possess professional or business income. In such a case, you must utilize ITR-3 or another relevant form.
ITR 1 vs ITR 2: Popular Mistakes to Avoid
When filing your income tax return (ITR) in India, it is crucial to choose the correct form and avoid common mistakes that may lead to penalties and complications. Here are five common mistakes to be aware of when making a choice in ITR 1 and ITR 2:
- Choosing the wrong form: One common mistake may be that the taxpayer did not select the proper ITR form. ITR 1 is most suitable for individuals with simpler financial situations, while ITR 2 is for more complicated financial profiles.
- Incomplete information: Incomplete or inadequate information can cause potential penalties, or delays in response. Completing and verifying every section of the return is very important especially regarding deductions, income or exemption.
- Mismatched Aadhaar and PAN: It is also important to check if your Permanent Account Number (PAN) is linked to your Aadhaar number. Mismatched information can delay the response time of your tax return.
- Incorrect Deductions: Claiming a deduction that is excessive, or inaccurate, may lead to investigation into the deduction and potential penalties. Always ensure that your deductions are substantiated with formal documents, as well as, tax code compliance.
- Filing late: If you file after the due date, your return is subject to penalties. It is preferred to have a filing schedule, and be prepared to file return promptly.
Due Date For Filing ITR For AY 2025-26
For the Assessment Year 2025-26, the due date for filing the return, according to section 139(1), is July 31, 2025, unless prolonged by the government.
Numerous taxpayers hold that they have no more obligation if they have paid their taxes. Further, skipping the ITR filing deadline carries legal consequences. Valid from the financial year 2017-18, a late filing fee is operative for filing returns following the due date.
ITR Filing Last Date for 2025
The last date for filing Income Tax Return (ITR) for FY 2024-25 (AY 2025-26) minus a late fee is July 31, 2025.
Late Filing Fees u/s 234F
- Applicable from FY 2017-18, a late filing fee will be operative for filing your returns after the due date u/s 234F.
- For example, the due date for filing returns for FY 2024-25 is July 31, 2025. If you omit to file the ITR by the due date, you can submit the belated return by December 31, 2025. Nonetheless, you need to pay the penalty for late filing.
- If you file your ITR after the due date of July 31, 2025, but before December 31, 2025, you will have to pay a maximum penalty of Rs 5000.
- Small taxpayers receive relief—if the total income is Rs. 5 lakh or less penalty for delay shall be Rs. 1,000.
Consequences of Not Filing ITR 2
Failing to file ITR-2 generated or any income tax return filed before the prescribed due date leads to a penalty of Rs. 5,000. However, this penalty is only in the case where the tax returns are filed prior to December 31 of the assessment year which requires the returns. This penalty is Rs 1,000 if the total taxable income is under Rs 5 lakhs.
The taxpayer cannot file income tax returns until he pays the outstanding income tax. Until then, interest of 1% per month or a portion of the month is levied on the outstanding tax amount.
If the taxpayer fails to file the income tax returns even after December, the income tax officers may publish notices. Suppose the taxpayer fails to file the income tax returns even after getting notices from the income tax department. In that case, the income tax officers can launch proceedings against the taxpayer, which may lead to imprisonment between three months and two years with a fine. If the tax outstanding is high, imprisonment could be seven years.
Moreover, a penalty is levied, which could be 50% of the amount of tax due where the taxpayer has underlined the income.
Key Differences Between ITR 1 and ITR 2
The significant differences between these two forms are specified in the table:
| Criteria | ITR 1 | ITR 2 |
| Exempt income | Exempt income, such as agricultural, income till Rs 5,000 | Exempt income, such as agricultural income, of over Rs 5,000 |
| Income from property | Taxpayer earning revenue from just one house property | Taxpayer earning income from more than a single house property |
| Property losses | Losses from property listed in the same financial year | Brought forward losses in income from different sources |
| Income from other sources | Not earning income from different sources like gambling, lotteries, etc. | Earning income from different sources like lotteries, gambling, etc. |
| Income limit | Under Rs 50 lakhs | Over Rs 50 lakhs |
Bottom Line
Understanding the different ITR forms is absolutely necessary as they play a vital part in the filing of income tax returns in India. The ITR 1 module is suitable for individuals with regular financial situations, whereas the ITR2 module is for individuals coping with more complex financial situations. You can make the right selection of form (ITR1 vs ITR2) and avoid making inadvertent mistakes and qualified consequences by thoroughly considering your economic activities and income sources. Make the ITR filing process simple, even with our experts!
