ITR-1 vs ITR-2: Key Differences, Meaning & Eligibility

Introduction

Navigating India’s income tax return process can be challenging, especially when deciding whether to file ITR-1 or ITR-2. Choosing the wrong form can lead to errors, delays, or even penalties, making it essential to understand the distinctions clearly. Many individual taxpayers get confused because both ITR-1 (SAHAJ) and ITR-2 apply to similar income sources, yet they differ in key areas.

The primary difference is that ITR-1 is meant for individuals with salaried income up to ₹50 lakhs, while ITR-2 is intended for those with capital gains, multiple house properties, or more complex income structures.

This article covers everything you need to know about ITR-1 vs ITR-2, helping you choose the correct form with confidence. With Auriga Accounting pvt. ltd. you can file your ITR-1 or ITR-2 smoothly with expert guidance.

ITR-1 (Sahaj) – A Brief Overview

ITR-1, commonly known as SAHAJ, is a simplified income tax return form designed for Indian resident individuals with straightforward income sources. It is suitable for those earning income from salary, one house property, other sources (such as interest), and agricultural income up to ₹5,000.

For resident salaried individuals with a total annual income up to ₹50 lakh, ITR-1 offers a quick and hassle-free filing experience. The form’s primary purpose is to streamline tax filing and promote timely compliance for taxpayers with uncomplicated financial profiles.

Who Should File ITR-1?

Resident individuals can opt for ITR-1 if their total income does not exceed ₹50 lakh and comes from the following sources:

Eligible Income Sources:

Salary
One house property
Family pension
Agricultural income (up to ₹5,000)

Other permissible income includes:

Interest from savings accounts
Interest on bank/post office/co-operative society deposits
Interest on income tax refund
Interest on enhanced compensation
Any other interest income
Family pension
Clubbed income of spouse or minor child (only if the original income falls within the permitted limits and is not under the Portuguese Civil Code)

Key Sections and Components of the ITR-1 Form

ITR-1 is structured to be simple and user-friendly. It contains the following major sections:

Pre-Filled Sections

Personal Information
Includes basic taxpayer details—name, PAN, date of birth, and residential status.
Gross Total Income
Summarises total income from all eligible sources such as salary, house property, and other income.
Total Deductions
Covers deductions claimed under sections like 80C, 80D, 80DD, and others.
Tax Paid
Displays tax already paid, including TDS, advance tax, and self-assessment tax.
Total Tax Liability
Automatically computes tax liability after adjusting income and deductions.

Summary Section

Tax Computation
Provides a final summary of tax liability, tax credits, and the net tax payable or refundable.

Benefits of Filing with ITR-1 (Sahaj)

Simple and User-Friendly: Designed for taxpayers with basic income structures.
Streamlined Filing: Reduces complexity, offering a smooth and quick filing process.
Encourages Compliance: Clear instructions and pre-filled data make timely filing easier.
Income Limit Flexibility: Ideal for individuals with income up to ₹50 lakh.
Covers Common Income Types: Includes salary, one house property, interest income, and small agricultural income (up to ₹5,000).

ITR-2 – A Brief Overview

ITR-2 is a detailed income tax return form meant for individuals and Hindu Undivided Families (HUFs) who do not earn income from business or profession. It is specifically designed for taxpayers with more complex financial profiles, including income from multiple house properties, capital gains, foreign income or assets, and agricultural income exceeding ₹5,000.

The form ensures comprehensive and accurate reporting of diversified income sources and financial activities. Unlike simpler forms, ITR-2 is tailored for taxpayers whose income extends beyond “Profits and Gains from Business or Profession,” making it suitable for a wider range of income scenarios.

Who Should File ITR-2?

You should file ITR-2 if you are an individual or HUF who:

Is not eligible to file ITR-1 (Sahaj)
This includes taxpayers whose income profile does not fit the simplified criteria of ITR-1.
Does not have income from business or profession
Does not receive interest, salary, bonus, commission, or remuneration from a partnership firm
Has income of another person to be clubbed
(e.g., income of a minor child or spouse), provided such income falls into the categories permitted under ITR-2.

Key Sections and Components of the ITR-2 Form

ITR-2 consists of several structured parts and schedules to capture different types of income, deductions, and disclosures:

Part A – General Information

Personal Information: Name, address, PAN, date of birth, marital status, and other basic details
Assessment Year: Indicates the financial year for which the return is filed
Declaration: Confirmation of the accuracy and completeness of the information provided

Schedules in ITR-2

Schedule Salary: Details of salary or pension income, exempt allowances, and deductions under Section 16
Schedule House Property: Income from one or more house properties, including rental income and deductions
Schedule Capital Gains: Comprehensive reporting of capital gains or losses from assets such as property, shares, or securities
Schedules 112A & 115AD(1)(iii) Proviso: Capital gains for specific asset categories
Schedule Other Sources: Income from interest, dividends, royalties, and other miscellaneous sources
Schedule CYLA: Current year loss adjustment
Schedule BFLA: Set-off of brought-forward losses
Schedule CFL: Losses to be carried forward
Schedule VI-A: Deductions under Section 80
Schedules 80G & 80GGA: Donations eligible for deductions
Schedule AMT & AMTC: Alternative Minimum Tax and related credit
Schedule SPI: Income of specified persons
Schedule SI: Special rate income
Schedule EI: Exempt income
Schedule PTI: Income from business trusts or investment funds
Schedule FSI: Foreign source income
Schedule TR: Tax relief under Sections 90/90A/91
Schedule FA: Details of foreign assets and financial interests
Schedule 5A: Portuguese Civil Code income apportionment
Schedule AL: Asset and liability details for high-income taxpayers

Part B – Total Income, Tax Paid & Tax Liability

Total Income (TI): Income after deductions and exemptions
Tax Paid: Details of TDS, TCS, advance tax, and self-assessment tax
Total Tax Liability (TTI): Net tax payable after applying all credits and deductions

Benefits of Filing with the ITR-2 Form

Comprehensive Income Reporting: Ideal for those with capital gains, foreign assets, multiple properties, or agricultural income above ₹5,000
Accurate Financial Disclosure: Ensures that all complex income streams are properly documented
Perfect for Non-Business Income: Tailored for individuals and HUFs without business or professional earnings
Maximizes Tax Benefits: Allows claiming various deductions and exemptions
Higher Accuracy and Compliance: Detailed structure minimises errors and enhances the quality of tax reporting

ITR-1 vs ITR-2: What Are the Key Differences?

The table below highlights the major differences between ITR-1 (Sahaj) and ITR-2, helping taxpayers choose the correct form based on their income structure and eligibility:

Criteria	ITR-1 (Sahaj)	ITR-2
Eligibility	Resident individuals (other than not ordinarily resident) with total income up to ₹50 lakh	Individuals and HUFs without income from business or profession
Income Sources	– Salary/Pension – One House Property – Other Sources (Interest, etc.) – Agricultural income up to ₹5,000	– Salary/Pension – Multiple House Properties – Capital Gains – Other Sources – Agricultural income above ₹5,000
Income Limit	Total income up to ₹50 lakh	No upper limit; typically used when taxable income exceeds ₹50 lakh
Residential Status	Only for Residents and Not Ordinarily Residents (NRIs cannot file)	For Residents, Not Ordinarily Residents, and Non-Residents
Capital Gains Reporting	Not permitted	Required for all types of capital gains
Foreign Income/Assets	Not allowed	Mandatory for individuals with foreign assets or foreign income
Director in a Company / Holding Unlisted Shares	Cannot file ITR-1	Must file ITR-2
Clubbing of Income	Allowed for limited categories (e.g., minor’s interest income)	Broader clubbing allowed, including salary, house property, capital gains, etc.
TDS/TCS Schedules	Basic disclosure	Detailed schedules required
Tax Deduction Reporting	Basic reporting under Chapter VI-A	Comprehensive, detailed reporting under Chapter VI-A

Should I File ITR-1 or ITR-2?

Choosing between ITR-1 and ITR-2 depends entirely on the nature and complexity of your income.

ITR-1 is ideal for individuals with a simple income profile—typically those earning from salary, one house property, interest income, and agricultural income up to ₹5,000. It can be filed only by resident individuals who do not have foreign assets or foreign income.

ITR-2, on the other hand, is meant for taxpayers with more complex financial situations. This includes having income from multiple properties, capital gains, foreign assets or income, winnings from lotteries or horse races, or agricultural income above ₹5,000.

To choose the right form, assess all your income sources and financial activities carefully:

If your earnings are primarily from salary, one property, and basic interest income, ITR-1 is usually appropriate.
If you have income from multiple sources, especially capital gains, foreign income, or other complex scenarios, ITR-2 is the more suitable option.

Your residential status and the amount of agricultural income also play an important role in determining which form to file.

How to File ITR-1 or ITR-2 Online

Follow the steps below to file your ITR-1 or ITR-2 on the Income Tax e-Filing Portal:

Log in to the Income Tax e-Filing Portal
Visit the official portal and sign in using your PAN (as User ID) and password.
Select “File Income Tax Return”
Choose this option from the dashboard or main menu.
Choose the Assessment Year
Select the relevant assessment year (e.g., AY 2024–25 for FY 2023–24).
Select User Type & ITR Form
Choose “Individual” and then select either ITR-1 or ITR-2 based on your income profile.
Enter Basic Details
Provide your personal information, PAN, contact details, and bank account information.
Fill in Income Details
Enter salary details, income from house property, capital gains (for ITR-2), and other income sources.
Claim Deductions
Add eligible deductions such as Section 80C, 80D, 80G, and others to reduce your taxable income.
Review Tax Calculation
The portal will automatically compute your tax liability.
Pay Tax (if applicable)
If there is outstanding tax, pay it using the available online payment methods.
E-Verify the Return
Complete the process by e-verifying via Aadhaar OTP, Net Banking, EVC, or by sending the signed ITR-V to CPC.

ITR-1 vs ITR-2: Common Mistakes to Avoid

Choosing the correct ITR form and filing accurately is crucial to avoid penalties or delays. Here are common mistakes taxpayers should watch out for:

Using the Wrong Form
Selecting an incorrect ITR form is one of the most common errors.
- ITR-1 is for simple income structures.
- ITR-2 is for more complex income profiles.
  Review your income sources carefully before choosing.
Incomplete or Incorrect Information
Missing or inaccurate details—especially regarding income, deductions, and exemptions—can delay processing or trigger scrutiny.
Incorrect Deduction Claims
Claim only valid deductions backed by proper documentation. Overstating deductions can lead to notices or penalties.
PAN–Aadhaar Mismatch
Ensure your PAN and Aadhaar are correctly linked and details match. Mismatches may cause filing or verification issues.
Late Filing
Filing your return after the deadline results in late fees and potential penalties. Always plan ahead and submit your ITR on time.

About the Author

Vinod

Vinod is an experienced legal writer who transforms complex legal concepts into clear, practical insights. He empowers entrepreneurs to understand their legal obligations and build confident, compliant, and sustainable businesses.

January 8, 2026