Understanding ITR Forms — Overview
The Income Tax Department prescribes different types of income tax return forms based on the type of income, the nature of the taxpayer, and the quantum of income. Filing the wrong form can result in a defective return notice. This guide helps you pick the right one for AY 2026-27.
The most common comparison taxpayers search for is ITR-1 vs ITR-4 — ITR-1 is for salaried individuals with simple income, while ITR-4 is for those with presumptive business income (Section 44AD/44ADA). Similarly, ITR-1 vs ITR-2 vs ITR-3 vs ITR-4 vs ITR-5 vs ITR-6 vs ITR-7 each apply to different taxpayer categories. Use the comparison below to identify yours.
Key rule for AY 2026-27: The New Tax Regime is the default. If you want to opt for the Old Regime, you must explicitly select it in your ITR — the choice applies to the form you file as well as the tax computation.
ITR-1 (Sahaj) — Who Can File?
ITR-1 is the simplest form, designed for resident individuals with straightforward income:
✓ Salary or pension income
✓ Income from one house property (excluding brought forward losses)
✓ Other sources: interest, dividends (up to ₹5,000 from co-operative society)
✗ Total income must NOT exceed ₹50 lakh
✗ Cannot be used by NRIs, HUFs, or those with capital gains
✗ Cannot be used if you are a director in a company or hold unlisted shares
ITR-2 — Who Should File?
ITR-2 is for individuals and HUFs who cannot file ITR-1:
✓ Capital gains — from shares, mutual funds, property, bonds
✓ Income from more than one house property
✓ Foreign income or assets (NRIs, foreign assets)
✓ Total income exceeding ₹50 lakh
✓ Director of a company or holder of unlisted equity shares
✗ Cannot be used if you have income from business or profession
ITR-3 — For Business & Profession
ITR-3 is for individuals and HUFs with income from business or profession:
✓ Proprietorship business income
✓ Professional income (doctors, lawyers, consultants, CAs)
✓ Income from a partnership firm (as a partner)
✓ Also includes salary, capital gains, house property income
✗ If business income is under ₹2 crore and you opt for presumptive taxation, use ITR-4 instead
| Feature | ITR-1 | ITR-2 | ITR-3 |
|---|
| Salaried income | ✓ | ✓ | ✓ |
| Capital gains | ✗ | ✓ | ✓ |
| Business income | ✗ | ✗ | ✓ |
| NRI | ✗ | ✓ | ✓ |
| Income > ₹50L | ✗ | ✓ | ✓ |
| Foreign assets | ✗ | ✓ | ✓ |
What is AIS (Annual Information Statement) — How to Check
The Annual Information Statement (AIS) is a comprehensive tax document introduced by the Income Tax Department in November 2021. It shows all financial transactions reported to the department against your PAN — including salary, interest, dividends, mutual fund transactions, property purchases, and foreign remittances.
Step 1 Login to incometax.gov.in → go to Services → Annual Information Statement (AIS)
Step 2 Click Proceed → AIS and TIS (Taxpayer Information Summary) open in a new tab
Step 3 Review all reported transactions → if any information is incorrect, click Optional → Submit Feedback to dispute the entry
Step 4 Use the TIS (Taxpayer Information Summary) tab to see the final figures after your feedback — these values auto-populate in your ITR
Why AIS matters: The Income Tax Department uses AIS to cross-check your ITR. Any income in AIS not reported in your ITR triggers an automated notice. Always reconcile your AIS before filing.
Income Tax Demand Notice — How to Respond
A demand notice under Section 156 is issued when the Assessing Officer determines that tax, interest, or penalty is payable. An automated intimation under Section 143(1) is the most common — generated when there is a mismatch between your ITR and the department’s records.
Mismatch Income in AIS not reported in ITR, or TDS credit claimed differs from Form 26AS
Mathematical error Incorrect deduction claims or arithmetical errors in the ITR computation
Disallowance Deductions (80C, HRA, etc.) not matching supporting evidence
Step 1 Login to incometax.gov.in → e-Proceedings → Response to Outstanding Demand
Step 2 Select the assessment year → click Submit Response
Step 3 Choose “Demand is correct” (pay via Challan 280) or “Demand is partially correct” / “Demand is not correct” (provide explanation and upload documents)
Important Respond within 30 days of notice. Non-response leads to recovery action including attachment of bank accounts
Tip: If the demand is due to a genuine error in your ITR (e.g., forgot to report interest income), file a
Revised Return under Section 139(5) rather than just responding to the notice. TaxGyani’s CA team handles all demand notices —
contact us.
Frequently Asked Questions
Can a salaried person with stock market gains file ITR-1?
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No. If you have capital gains from shares or mutual funds (STCG/LTCG), you must file ITR-2, not ITR-1, regardless of the amount.
I am a freelancer — which ITR form should I use?
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Freelancers and consultants with professional income must file ITR-3 (or ITR-4 if opting for presumptive taxation under Section 44ADA with income below ₹75 lakh).
What is the due date for ITR filing for AY 2026-27?
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For individuals not subject to audit, the due date is 31st July 2026. For taxpayers under audit, it is 31st October 2026. Late filing attracts a penalty of ₹5,000 (₹1,000 if income is below ₹5 lakh).
Can I switch ITR forms after filing?
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You can file a revised return if you discover you filed the wrong form, provided the original return was filed before the due date. The revised return must be filed before 31st December 2026.