July 07, 2025
4 mins read
When you file your income tax return, one of the most important steps is choosing the correct form. Many taxpayers get confused when it comes to ITR 1 vs ITR 2. Both forms are for individuals. However, they are not the same. Each form has its own set of rules.
If you choose the wrong one, your return might be rejected. You may also have to pay a late fee. To avoid this, it helps to understand the difference between ITR 1 and ITR 2. This article explains both forms in detail so you can file your income tax return filing the right way.
ITR 1 is applicable for salaried resident individuals whose total income for the year does not exceed ₹50 lakh. This form is also known as Sahaj and is meant for those with simple income sources and no foreign connections or business income. You can use this form only under specific conditions.
You are a resident individual (not NRI or HUF).
Your total income is up to ₹50 lakh in a financial year.
Your income is from:
Salary or pension
Only one house property
Agricultural income up to ₹5,000
Long Term Capital Gain under Section 112A, not exceeding ₹1.25 lakh
Other sources like savings bank interest, fixed deposit interest, etc. (excluding gambling, lottery, horse racing, etc.)
Your residential status is Non-Resident or Resident but Not Ordinarily Resident (RNOR).
Your income exceeds ₹50 lakh in total.
You earn from more than one house property.
You have income from business or profession.
Your income includes lottery, gambling, horse racing, or any similar source.
You want to report capital gains other than the limited 112A exemption.
Your agricultural income exceeds ₹5,000.
You are a director in a company.
You have deferred tax on ESOPs from an eligible start-up.
ITR 2 is meant for individuals and Hindu Undivided Families who are not eligible to file ITR 1, but also have no business or professional income. It supports more types of income, including capital gains, foreign income, multiple properties, and high-value income. Understanding its use is essential for correct income tax return filing.
You are a resident or non-resident individual or an HUF.
Your income exceeds ₹50 lakh in a year.
Your income is from any of these sources:
Salary or pension
More than one house property
Capital gains (short-term or long-term, not limited to Section 112A)
Agricultural income above ₹5,000
Other sources, including lotteries, gambling, horse racing, etc.
Foreign assets or foreign income
You have:
Brought forward losses from earlier years
Deferred tax on ESOPs from a recognised start-up
Directorship in any company
Claims under Double Taxation Avoidance Agreement (DTAA) — sections 90/91
You earn income from business or profession (use ITR 3 instead).
You are a company, firm, or trust — these must file different forms.
Here’s a side-by-side view of ITR 1 vs ITR 2 to help you decide which one to file. Knowing the difference between ITR 1 and ITR 2 ensures accurate income tax return filing and avoids future issues.
Particulars | ITR 1 | ITR 2 |
Who can file | Resident Individuals only | Resident and Non-Resident Individuals, HUFs |
Income Limit | Total income up to ₹50 lakh | No income limit |
Only Section 112A gains up to ₹1.25 lakh | All types of capital gains and losses | |
House Property | Income from one house only | Income from multiple houses allowed |
Agricultural Income | Up to ₹5,000 only | More than ₹5,000 |
Other Sources | Bank interest, FD interest, etc. | Includes lottery wins, betting, horse racing |
Foreign Income or Assets | Not allowed | Required to be reported |
Directorship in a company | Not allowed | Must file ITR 2 if you're a director |
Brought Forward Losses | Cannot claim or carry forward losses | Allowed |
ESOP tax deferral (eligible startups) | Not applicable | Applicable |
DTAA relief | Not allowed | Allowed |
This breakdown will help you clearly understand the difference between ITR 1 and ITR 2 before you begin your income tax return filing.
Let’s look at the type of income each form supports in more detail. If you want to know which form is suitable for your income type, this section simplifies ITR 1 vs ITR 2 for you.
Income Source | Covered in ITR 1 | Covered in ITR 2 | Notes |
Salary / Pension | Yes | Yes | Common to both forms. |
Income from one house property | Yes | Yes | Both allow one property. |
Income from more than one house property | No | Yes | ITR 1 does not allow this. |
Agricultural income up to ₹5,000 | Yes | Yes | Both allow it within the ₹5,000 limit. |
Agricultural income above ₹5,000 | No | Yes | ITR 2 must be used. |
Capital gains under Section 112A (≤ ₹1.25L) | Yes | Yes | Both allow it with limits in ITR 1. |
Other capital gains (real estate, stocks) | No | Yes | ITR 2 is mandatory for all other capital gains. |
Interest from savings, FD, RD, etc. | Yes | Yes | Regular interest income is allowed in both. |
Income from lotteries, gambling, betting | No | Yes | ITR 1 excludes these sources. |
Foreign income or foreign assets | No | Yes | ITR 2 allows declaration of foreign sources. |
Director in a company | No | Yes | ITR 2 is mandatory. |
Deferred tax on ESOPs from start-ups | No | Yes | Must be reported in ITR 2. |
Professional or business income | No | No | Neither form supports business income. Use ITR 3 instead. |
If your income is straightforward, ITR 1 may be fine. But if you earn from multiple sources or higher-value assets, ITR 2 is the right choice.
Filing your income tax return online is quick. Follow these simple steps:
Visit incometax.gov.in
Log in using your PAN and password.
Go to ‘e-File’ > ‘Income Tax Return’.
Choose the assessment year and the correct ITR form.
Review the pre-filled income details.
Make changes if needed.
Submit and verify using OTP, Aadhaar, or net banking.
Make sure your details match your income proofs. This helps avoid errors, notices, or delays in claiming any tax rebate.
Now that you understand ITR 1 vs ITR 2, choosing the right form should be easier. Filing the correct form ensures your income tax return filing is valid and complete.
Gather your salary slips, interest statements, and capital gains reports before you begin. Choose carefully based on your income type. Filing on time also helps you get your tax rebate, if any, without delay.
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Even if the company is not active, directors must use ITR 2. ITR 1 is not allowed for anyone holding a directorship during the financial year.
No. If your income exceeds ₹50 lakh, ITR 1 is not applicable. You must file ITR 2, even if the sources are only salary and interest.
As a non-resident, you cannot file ITR 1. Even for Indian bank interest, ITR 2 must be used for proper income tax return filing.
Neither ITR 1 nor ITR 2 is applicable. You must file ITR 3 if you have professional or business income in addition to salary.
If you meet all ITR 1 conditions, you can use it. But ITR 2 is also valid and optional even if your income is under ₹50 lakh.
There are no penalties for using ITR 2 instead of ITR 1. ITR 2 is just more detailed. Many taxpayers use it for safety and full disclosure.
A late fee under Section 234F will apply. The amount can go up to ₹5,000 depending on your total income and how late the filing is.
Yes. If your capital gains are beyond the ₹1.25 lakh limit or not under Section 112A, ITR 2 is the correct and required form.
Only if it’s under Section 112A and below ₹1.25 lakh. Any other capital gain — or a higher amount — means you must file ITR 2
The difference between ITR 1 and ITR 2 lies in complexity. ITR 1 is simple and restricted. ITR 2 is longer and suited for more income types
No upload is needed for either form. But keep all relevant proofs ready in case the department asks for them later during review.
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