ITR 1 vs ITR 2: Which One You Should File?

Filing Income Tax Returns (ITR) in India is a mandatory requirement for all entities and individuals (with taxable income) to comply with the tax regulations. Eligible taxpayers are required to report their income accurately by using the appropriate ITR forms.

There are different types of ITR (Income Tax Returns) forms applicable to taxpayers. Picking the right one is important as each form caters to specific income sources and financial situations. ITR 1 and ITR 2 are the two important forms used by individuals. In this article, we will explore the difference between ITR 1 and ITR 2.

What is ITR 1 Form?

ITR 1 (Sahaj) is used by individual taxpayers who have income from salary, one house property, and income from other sources. Their total income should not exceed ₹50 lakh. This is applicable to both salaried individuals and Non-Resident Individuals (NRI). 

ITR 1 is applicable to you if you meet the following criteria:

• Income source is salary or pension.
• Income is from a single property.
• There can be other sources of income, except activities like horse racing, lotteries, gambling, etc.
• The individual does not own a property outside India and also doesn’t receive revenue from outside India.
• The exempt income (e.g. agricultural income) is less than ₹5,000.  

ITR 1 is not applicable for individuals in the following cases:

• If you are not an individual taxpayer
• If your income source is from more than one property or you receive income from other sources like gambling, horse racing, lotteries, etc. 
• If you earn income through a business or profession
• If you have incurred losses under income from other sources
• If you have incurred non-tax-exempted short-term and long-term capital gains
• If you have exempt income that is more than ₹5,000

What is ITR 2?

ITR 2 is used by individual taxpayers who have income from salary, more than one house property, capital gains, and income from other sources. It is applicable to individuals and Hindu Undivided Families (HUFs) with total income exceeding ₹50 lakh.

ITR 2 is applicable for individuals who meet the following criteria:

• If the individual has an income from salary or pension.
• If the individual gets income from more than one property. 
• If the individual receives income from other sources, which includes card games, gambling, horse racing, etc.
• If the individual has earnings through capital gains. 
• If the individual wants to claim losses from the previous financial year under income from other sources. 
• If the exempt income of the individual is more than ₹5,000. 
• If the individual holds property or assets outside India.

ITR 2 is not applicable for individuals of the following cases:

• If the individual is applicable to file ITR 1. 
• If the individual is an entrepreneur or a HUF where the income source is via a business or job.

ITR 1 vs ITR 2

Here are a few points that clearly describe the difference between ITR 1 and ITR 2.

How to File ITR Online?

You can file ITR online by following the steps below: 

• Visit the official website of the Income Tax Department.
• Login using your user ID.
• Go to ‘File’ and select ‘File Income Tax Return’.
• Select the assessment year and go to the ‘Personal’ section.
• Select the right ITR form from the list of forms provided.
• You’ll get your income details pre-entered. Verify the income and tax details available and edit them if needed.
• Confirm the details entered are correct and submit the form for verification.

Know more about Suggestions for Filling up Your IT Returns

Conclusion 

Selecting the correct ITR form is crucial for accurate and timely income tax filing. By understanding which form suits your income sources, you can avoid unnecessary complexities and ensure compliance with tax regulations.

Ensure you have all the income proofs in hand to make the filing process hassle-free. Be well-prepared and file your income tax returns confidently, knowing that you have chosen the right form and gathered all the necessary documents.

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