Understanding the difference between ITR-1 (Sahaj) and ITR-2 forms is crucial for accurate and hassle-free filing. It can enable you to choose the appropriate one based on their circumstances.
| ITR -1 | ITR -2 | |
| Complexity | Simpler with fewer reporting requirements | More comprehensive catering to complex financial situations |
| Income Sources | For those with limited income sources such as salary, pension, one house property, or interest income | For those with diverse income sources, including income from multiple house properties, capital gains, and income from business or profession |
| Foreign Assets and Income | Does not cater to taxpayers with foreign assets or income from outside India | Mandatory for RNORs, NRIs, and individuals with foreign financial activities |
ITR-1 (Sahaj) Form
It is the simplest and most commonly used form. It applies to residents who get income from a job, a pension, a single-family home, or other similar sources. Taxpayers with an income of up to Rs. 50 lakh can file ITR-1.
Limitations
- ITR-1 cannot be used if:
- Total income exceeds Rs. 50 lakh.
- Income is derived from more than one house property.
- Income includes capital gains.
- Income includes income from business or profession.
- Agricultural income exceeds Rs. 5,000.
- You are a director in a company or hold unlisted equity shares.
- You have assets located outside India or have income from outside India.
ITR-2 Form
It is a more comprehensive form suitable for individuals and Hindu Undivided Families (HUFs) with income from various sources, including salary, house property, capital gains, business/profession, and more.
ITR-2 allows taxpayers to report income from multiple house properties, capital gains from the sale of assets, and income from business or profession. It is also applicable to individuals with foreign assets or income from outside India, making it suitable for those with a wider scope of financial activities.
ITR-2 is mandatory for taxpayers who qualify as a Resident but Not Ordinarily Resident (RNOR) or Non-Resident (NRI). These individuals are required to disclose their foreign income and assets, if any, in the form.
Look up more articles here for a smooth first time tax-filing process. All the best!
