As everyone who earns money in India is responsible for paying his or her own taxes, the salaried employee is a major portion of this population who must file Income Tax Returns (ITR). It is one of the most frequent questions asked by salaried persons during tax season: Which ITR form to use? The answer is more nuanced than “just one form” — it depends on a few things, including the type of income, your income amount and other financial details.
In this comprehensive guide, we will determine which ITR form is applicable to salaried individuals for Assessment Year 2025-26 (Financial Year 2024-25), and we will discuss how to choose the right one.
What is an ITR Form?
An Income Tax Return (ITR) form is a file with the Earnings Tax Division to declare your income, declare deductions and disclose tax liabilities and payments. CBDT issues different types of forms for different types of taxpayers.
Each of the ITR forms is for particular types of taxpayers — salaried, self-employed, HUFs, companies and so on. Filing incorrect forms will only result in defective return notices, penalties or a delay in processing.
ITR Forms for Salaried Individuals
For those who are employed on a salary basis, the forms below are the most commonly used:
Let us break down the above forms one by one.
ITR-1 (Sahaj): Most Salary Individuals
Also referred to as Sahaj, most salaried individuals in India use this simple ITR-1 form.
Who Can File ITR-1?
You can file ITR-1 if:
- You are an individual resident of India (not an HUF or company).
- Your gross total income is below ₹50 lakh.
Your income includes:
- Salary or pension
- Any house property (other than loss to be carried forward).
- Other (for example, interest on savings account, FD, etc.)
You do not have:
- Capital gains
- Foreign income or foreign assets
- Agricultural income exceeding ₹ 5,000
- Profits or gains from a business or profession
Example:
A software engineer with a salary of ₹15 lakh who lives in a rented flat and earns ₹50,000 as interest from fixed deposits, can file a return using ITR-1.
ITR-2: For Salaried Individuals with Additional Income
If you have a more complex income situation, you may need to file ITR-2.
Who Should Use ITR-2?
You should use ITR-2 if:
You are a salaried person, but:
- Your aggregate income is more than ₹50 lakh
- You have a capital gain (e.g., selling mutual funds, shares, or property)
- You own multiple House Properties.
- You are a Foreign Source of Income or Foreign Property
- You are a director in a company
- You have more than ₹5,000 of agricultural income
- You cannot have income from a business/profession
Example:
A bank employee with an annual salary of ₹30 lakh who also sold equity shares during the year is required to file ITR-2.
ITR-3 and ITR-4: For Salaried Individuals?
Salaried employees typically do not use ITR-3 and ITR-4 unless they have income from a proprietorship or freelancing business. Individuals who have opted for the presumptive taxation scheme, Section 44AD/44ADA, use ITR-4.
If you earn all your income through a salary and interest, these forms do not apply to you.
ITR Form Comparison for Salaried Employees
| Criteria | ITR-1 (Sahaj) | ITR-2 |
| Income Limit | Up to ₹50 lakh | No limit |
| Salary/Pension Income | Yes | Yes |
| House Property | One property | Multiple properties |
| Capital Gains | No | Yes |
| Foreign Assets/Income | No | Yes |
| Agricultural Income > ₹5,000 | No | Yes |
| Director in a Company | No | Yes |
| Business/Professional Income | No | No |
How to Choose the Right ITR Form?
The ITR form suitable for you would depend on:
- Assess your income sources: If you have a salary and money from banks, ITR-1 is
- Check the income amount: If your total income is above ₹50 lakh, you need to file ITR-2.
- Review investments/sales: Have you sold any stocks/mutual funds? Go for ITR-2.
- It also looks at property ownership; more than one house means ITR-2.
- Foreign income/assets check: Disclosure is allowed only for ITR-2
Options to File the ITR – Online and Offline
The Income Tax Department provides the option to file ITR forms online and offline.
- Mode of filing: Tax e-filing portal: https://www.incometax.gov.in
- Form 704 and Form 710 for senior citizens aged 80 and above using physical forms
However, salaried people tend to choose the online option, since data from Form 16 and Form 26AS is pre-filled and it is easier.
Implications Of Filing the Incorrect ITR Form
Here are the adverse effects of filing using the incorrect ITR form:
- Notice of defect under Section 139(9)
- Delay in refund processing
- Rejection of ITR
- How to avoid the penalties for incorrect disclosures
When to Select the Correct Form: Always Confirm Your Sources of Income
Conclusion
Picking the correct ITR form is the first step in a hassle-free tax filing process. For salaried individuals, ITR-1 is usually adequate, but if you are dealing with capital gains, higher income, or foreign assets, opt for ITR-2, which is a safer and more suitable option.
If you are in doubt, you may either consult a chartered accountant or use the wizard feature on the Income Tax e-filing portal that can help you choose the appropriate form. The wrong ITR could cause undue delay and scrutiny — better to be safe than sorry.
FAQs
1. I have a side gig or freelancing income; can I file ITR-1?
No. For business income/freelancing income, ITR-3/ITR-4 will be used depending on whether you are taxed under the normal tax regime or under the presumptive scheme.
2. I had a job change during the year. Can I still use ITR-1?
Yes, provided that your total income is less than ₹50 lakh and you have a salary, one house property, and interest income only. Provide information from each of your Form 16s.
3. Is ITR filing mandatory if my income is less than the taxable limit?
No, but it is good to file ITR if you have:
- TDS deducted
- Apply for loans or visas if you plan to
- Losses on investments that can be carried forward
- Income just below the threshold
4. Can ITR-1 be used by NRIs?
FRPF to No: ITR-1 is applicable only for resident individuals. Even if the income consists of only salary and Interest, NRIs must use ITR-2.
5. How to file ITR for foreign shares I received through ESOP?
You will need to report if you have (or sold) foreign shares (including ESOPs). For this purpose, the correct form is ITR-2.
