Income tax filing 2024-25: Here's how salaried employees can choose between ITR-1 and 2

ITR-1 (Sahaj) is a simple form that salaried tax-payers or pensioners without any complex financial dealings can use.

The income-tax department kicked off the tax-return filing season 2025-26 by notifying all ITR forms earlier this month.

While salaried individuals will have to wait until their Forms 16s are released in June, they can still commence the exercise, generally considered tedious and time-consuming, by taking note of the modifications in ITR forms. Many of the changes stem from a raft of announcements around tax slabs and capital gains tax rationalisation announced in July 2024 Budget.

For instance, until last year (assessment year 2024-25), ordinarily resident Indian tax-payers could use ITR-1 (Sahaj) only when their income sources were limited to salary/pension, one house property, interest from savings/fixed deposits, dividends and agricultural income of less than Rs 5,000.

This year, even taxpayers with long-term capital gains (LTCG) on sale of listed equity shares or equity mutual fund units (taxed at 12.5 percent) can use this form, provided these do not exceed Rs 1.25 lakh during the FY25.

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Here’s how salaried individuals can choose between ITR-1 and ITR-2, which is meant for more complex financial dealings:

ITR-1 (Sahaj) — Sahaj loosely translates to simple or uncomplicated — is a simple form that salaried tax-payers or pensioners without any complex financial dealings can use.

The form is pre-filled with personal information, income details and financial transactions data to enable quick and easy filing of returns. Individuals can verify the ITR data with their Form-16 and bank account statements, besides checking Form 26AS and the Annual Information Statement (AIS) and complete the process online.

It can be used only by resident (and ordinarily resident) individuals with income of not more than Rs 50 lakh. This includes salary/ pension, one house property (excluding cases where loss is brought forward), agriculture (up to Rs 5,000), and income from savings or fixed deposits, dividends, and family pension.

Taxpayers with LTCG of up to Rs 1.25 lakh under Section 112A from listed equity shares or equity mutual funds can also use this form this year.

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However, not everyone can file returns using this simple form. The income-tax department has put in place several conditions which will make you ineligible for ITR-1.

You cannot use ITR-1 if…

• Your total income exceeds Rs 50 lakh

• Your capital gains under section 112A exceed Rs 1.25 lakh

• You are a director in a company

• You own unlisted equity shares

• Have drawn foreign income during the financial year

• Own any foreign accounts or assets (including financial interest in any entity)

• If payment or deduction of tax has been deferred on ESOP

• If you have brought forward loss or loss to be carried forward under any head of income

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In such cases, you have to use ITR-2. This form for individuals who do not have any income under the head "profits and gains from business or profession". Put simply, this form is for salaried individuals or pensioners who can't file returns using ITR-1.