ITR 1 vs ITR 2 for FY 2024–25: Which Form Should You Use as a Salaried Taxpayer?

Filing the correct ITR form is the foundation of a smooth income tax filing process. For the financial year 2024–25 (assessment year 2025–26), salaried individuals must choose between ITR 1 (Sahaj) and ITR 2 based on income sources, property ownership, capital gains, and other financial activities. The Income Tax Department has also introduced significant changes this year—particularly around capital gains reporting and Aadhaar-based verification. Choosing the wrong form can lead to return rejection or notices. Understanding the eligibility and key differences between these forms is essential for a stress-free filing experience.

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Table of Contents

• Key Differences Between ITR 1 vs ITR 2

• Eligibility Rules for Salaried Individuals

• Capital Gains Reporting in ITR 1 and ITR 2

• Is Foreign Income Allowed in ITR 1?

• ITR Form Based on Residential Status

• Income from Multiple House Properties: Which ITR to Use?

• New Changes for FY 2024–25

• Top Errors Salaried Taxpayers Make While Filing ITR

• How to Choose Between ITR 1 and ITR 2 Easily

• Why Using TaxBuddy Helps You File the Right ITR Form

• Conclusion

• Frequently Asked Questions (FAQs)

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Key Differences Between ITR 1 vs ITR 2

Feature	ITR 1 (Sahaj)	ITR 2
Who can file	Resident individuals with income up to ₹50 lakh	Individuals & HUFs, including NRIs/RNORs
Income sources allowed	Salary, 1 house property, interest, agricultural income ≤ ₹5,000	Salary, multiple house properties, capital gains, foreign income
Capital gains	LTCG ≤ ₹1.25 lakh under Section 112A	All types and amounts of capital gains
Foreign income/assets	Not allowed	Allowed
Director/unlisted shares	Not allowed	Allowed
Business/professional income	Not allowed	Not allowed (file ITR 3 instead)

This table helps identify which form matches your income profile instantly. Always refer to the updated eligibility before filing.

Eligibility Rules for Salaried Individuals

ITR 1 Eligibility Criteria:

ITR 1, also known as the Sahaj form, is designed for salaried individuals with simple income sources. If you fit the following criteria, this form would be suitable for you:

• Resident Individual: ITR 1 is only applicable to resident individuals (those living in India during the year). It is not available for Hindu Undivided Families (HUFs), Non-Residents (NRIs), or Resident but Not Ordinarily Resident (RNOR) individuals.
  

• Total Income Up to ₹50 Lakh: To qualify for ITR 1, your total income during the financial year should not exceed ₹50 lakh. If your total income exceeds this amount, you are required to file ITR 2.
  

• Income Sources: ITR 1 is intended for individuals whose income comes from:
  

• Salary or Pension: This includes regular salaries or pensions, either from a job or a government pension scheme.
  

• Interest Income: Income generated from savings accounts, fixed deposits, or other interest-bearing financial instruments.
  

• One House Property: If you have rental income or are receiving income from a self-occupied house property, you can report it in ITR 1.
  

• Agricultural Income: Agricultural income up to ₹5,000 can be declared in ITR 1 without any complications.
  

ITR 2 Eligibility Criteria:

If your salary is clubbed with income from other sources or if you have more complex income sources, you must use ITR 2. Here’s when you must file ITR 2:

• Capital Gains: If you have earned any form of capital gains, whether short-term or long-term, ITR 2 is necessary.
  

• Foreign Assets or Income: Individuals earning income from foreign sources, or holding assets such as foreign bank accounts, shares, or properties, need to file ITR 2.
  

• More Than One House Property: If you own more than one house property, you must report your income using ITR 2, regardless of whether the second property is self-occupied or vacant.
  

• Agricultural Income Exceeding ₹5,000: If your agricultural income surpasses ₹5,000, you must file ITR 2. This is crucial as agricultural income exceeding this amount must be reported on your tax returns.
  

• Unlisted Shares or Company Directorship: If you are a director in a company or hold shares in an unlisted company, ITR 2 must be filed.
  

Capital Gains Reporting in ITR 1 and ITR 2

Capital gains are one of the most critical factors determining which ITR form you should file. For FY 2024–25, significant updates have been made regarding the reporting of capital gains.

Capital Gains Reporting in ITR 1:

• LTCG Up to ₹1.25 Lakh: Starting from FY 2024–25, ITR 1 now allows reporting of Long-Term Capital Gains (LTCG) up to ₹1.25 lakh from listed equity shares and equity mutual funds under Section 112A, provided Securities Transaction Tax (STT) has been paid. This is a significant change, as previously only ITR 2 allowed for reporting capital gains.
  

• Conditions for Using ITR 1: To report capital gains in ITR 1, the following conditions must be met:
  

• The capital gain should only be from listed equity shares or mutual funds where STT has been paid.

• The total LTCG should not exceed ₹1.25 lakh.

• No set-off or carry forward of capital losses is allowed in ITR 1. If you have losses from previous years or short-term capital gains (STCG), you must use ITR 2.

Capital Gains in ITR 2:

• Other Capital Gains: If your capital gains exceed the ₹1.25 lakh limit or arise from the sale of unlisted shares, real estate, bonds, or gold, you must file ITR 2.

• Updated Reporting Requirement for FY 2024–25: A major update is the bifurcation of capital gains based on the transaction date. You must report:
  

• Gains before July 23, 2024

• Gains on or after July 23, 2024

This bifurcation is due to changes in tax rates and indexation rules that apply differently to sales occurring before and after July 23, 2024. Failing to segregate these properly may result in incorrect tax liability.

Is Foreign Income Allowed in ITR 1?

ITR 1 does not permit the reporting of foreign income or foreign assets. If you earn income from sources outside India or hold foreign financial assets, you must file ITR 2. Here’s when you need to file ITR 2:

• Foreign Income: If you earn any income outside India, such as salary, rent, or capital gains from foreign investments, you must file ITR 2.

• Foreign Assets: If you hold foreign assets such as bank accounts, shares, or properties outside India, you are required to report them in ITR 2. This includes NRIs and residents holding foreign assets or earning foreign income.

• Compliance: Non-reporting of foreign income or assets could lead to severe penalties under the Black Money Act, making it crucial for residents, NRIs, and RNORs to file ITR 2.

ITR Form Based on Residential Status

Your residential status under Indian tax law plays a crucial role in determining which ITR form you should file. Here are the guidelines:

• ITR 1: This form is exclusively for Resident Individuals. It is not applicable to NRIs or RNORs.

• ITR 2: This form is required for:
  

• Non-Resident Indians (NRIs): NRIs must file ITR 2 regardless of whether they have income from India or abroad.

• Resident but Not Ordinarily Resident (RNOR): RNORs, who are residents but not ordinarily residents, must use ITR 2.

• Residents with Foreign Income or Assets: If you earn income outside India or hold foreign assets, you must file ITR 2.

Incorrectly declaring your residential status can lead to severe tax scrutiny and legal penalties, so it is crucial to select the right form based on your status.

Income from Multiple House Properties: Which ITR to Use?

If you own multiple properties, whether they are rented out, self-occupied, or vacant, you cannot use ITR 1. ITR 1 allows the reporting of income from only one house property. If you own more than one property, you must file ITR 2. Here's why:

• Reporting Multiple Properties: ITR 2 allows you to declare the income or loss from multiple properties. Whether your properties are rented, self-occupied, or vacant, all must be reported accurately.

• Claiming Home Loan Interest: If you have home loans for multiple properties, you can claim interest on home loans in ITR 2.

• Rental Income: If you earn rental income from any property, it must be declared properly in ITR 2.

Many salaried individuals mistakenly file ITR 1 despite owning multiple properties, leading to incorrect returns and notices under Section 139(9) of the Income Tax Act.

New Changes for FY 2024–25

Several important changes have been introduced in FY 2024–25 that will impact your ITR filing process:

• LTCG Limit in ITR 1: Taxpayers can now report LTCG up to ₹1.25 lakh from listed securities (such as equity shares and mutual funds) in ITR 1.

• Capital Gains Segregation: From FY 2024–25, taxpayers are required to split capital gains into two categories:

• Transactions before July 23, 2024

• Transactions on or after July 23, 2024

This new rule reflects updated tax laws and indexation provisions.

• Buyback Tax: From FY 2024–25, individuals will now bear the tax on share buybacks, instead of companies. This means that individuals must account for tax liabilities arising from share buybacks.

• Aadhaar Only: Only the Aadhaar number will be accepted for filing ITR; the Aadhaar enrollment ID is no longer valid.

These updates signal a move towards more comprehensive and transparent tax reporting, even for taxpayers with simple income profiles.

Top Errors Salaried Taxpayers Make While Filing ITR

Even salaried individuals, who typically have simpler income sources, often make common mistakes while filing their ITR. Below are the most frequent errors that can lead to delays, penalties, or audits:

• Filing ITR 1 Despite Owning Multiple Properties: ITR 1 permits only one house property declaration. If you own more than one property, you must file ITR 2.
  

• Reporting Capital Gains Beyond Limits in ITR 1: ITR 1 only allows reporting of LTCG up to ₹1.25 lakh from listed equity shares or mutual funds. If your capital gains exceed this limit, or are from other assets, you must file ITR 2.
  

• Missing Foreign Income or Asset Disclosures: Failing to declare foreign income or assets (if applicable) is a major mistake. If you have foreign income or assets, you must file ITR 2.
  

• Incorrect Residential Status: Misclassifying your residential status can affect your taxable income. NRIs and RNORs must file ITR 2, even if they are salaried.
  

• Not Using the Updated Capital Gains Schedule: For FY 2024–25, taxpayers must bifurcate their capital gains based on transaction dates. Failure to follow this can result in incorrect tax computations.
  

• Ignoring Clubbing of Income Rules: Income that must be clubbed with your own, such as that of a minor or spouse, should be reported in the correct ITR form. Overlooking this can lead to penalties.
  

• Misreporting HRA or Standard Deductions: Incorrect claims for House Rent Allowance (HRA) or misunderstanding the standard deduction rules can result in errors. Ensure that HRA claims comply with the correct requirements.

To avoid these errors, ensure you follow the latest guidelines and use platforms like TaxBuddy to double-check your return and avoid misreporting.

How to Choose Between ITR 1 and ITR 2 Easily

Choosing the right ITR form doesn’t have to be complicated. Here’s a quick guide:

• Use ITR 1 if:
  

• Your total income is up to ₹50 lakh.

• You own only one house property.

• Your salary income and capital gains are within the ₹1.25 lakh limit.
  

• Use ITR 2 if:
  

• You own multiple properties.

• Your capital gains exceed ₹1.25 lakh or come from non-listed assets.

• You are a director in a company or hold unlisted shares.

• You have foreign income or assets.

• Your agricultural income exceeds ₹5,000.

If you are unsure, it’s safer to file ITR 2, or you can consult reliable tax platforms like TaxBuddy for automatic form recommendations based on your income profile.

Why Using TaxBuddy Helps You File the Right ITR Form

Navigating ITR forms can feel overwhelming, especially when rules shift every financial year. Small errors—like picking the wrong form—can cause major issues, including delayed refunds, notices from the tax department, or outright rejection of your return. This is where TaxBuddy steps in, making tax filing smarter and easier.

TaxBuddy’s platform is designed to automatically determine the correct ITR form based on your income sources, residential status, and financial activities. Whether you're salaried with one house or have capital gains, multiple properties, or foreign income, the system evaluates your inputs and selects the right form, eliminating the guesswork entirely.

What sets TaxBuddy apart is its AI-driven tax filing engine. It doesn’t just stop at form selection—it runs real-time, intelligent checks to catch inconsistencies, missing disclosures, or section-wise errors. The platform adapts to tax updates every year, ensuring your filing stays compliant with the latest Income Tax rules.

Users can choose between self-filing, which is guided and beginner-friendly, or expert-assisted plans, where seasoned professionals handle everything for you. In both modes, TaxBuddy ensures that your return is filed accurately, with maximum deductions claimed and all required disclosures made.

By preventing common mistakes—like misreporting capital gains or missing foreign income—TaxBuddy helps you avoid unnecessary scrutiny. Its secure infrastructure and intuitive interface provide peace of mind, particularly for salaried individuals dealing with evolving tax laws.

For anyone tired of the confusion that comes with choosing the right ITR form, TaxBuddy offers clarity, confidence, and compliance in one seamless experience.

Conclusion

Choosing between ITR 1 and ITR 2 depends entirely on your income profile, capital gains, asset holdings, and residential status. For most salaried individuals, ITR 1 suffices. But the moment complexities like capital gains, multiple houses, or foreign income come into play, ITR 2 is the better fit. Filing the right form ensures faster processing and fewer errors. For anyone unsure about form selection or looking for assistance in tax filing, I highly recommend youdownload the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

Frequently Asked Questions (FAQs)

Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?

TaxBuddy offers both options. Users can choose self-filing for a guided experience or opt for expert-assisted plans where tax professionals review and file the return on their behalf. The platform is designed to suit all types of taxpayers—from beginners to experienced filers.

Q2. Which is the best site to file ITR?

Trusted platforms like TaxBuddy are considered among the best for income tax return filing in India. It combines AI-driven checks with expert review, ensuring error-free filing and timely refund processing. The site also supports both individual taxpayers and business professionals.

Q3. Where to file an income tax return?

You can file your return either on the official government portal (www.incometax.gov.in) or via authorized e-filing intermediaries like TaxBuddy. The latter offers additional features like document management, form selection assistance, and personalized tax-saving tips.

Q4. Can a salaried taxpayer with capital gains use ITR 1 for FY 2024–25?

Yes, but only under strict conditions. ITR 1 now allows long-term capital gains (LTCG) up to ₹1.25 lakh under Section 112A, provided the gains are from listed equity shares or equity mutual funds. For other types of capital gains or higher amounts, ITR 2 is mandatory.

Q5. Can NRIs file their income tax return using ITR 1?

No. ITR 1 is available only for resident individuals. Non-resident Indians (NRIs) and RNORs must file ITR 2 or other applicable forms, depending on their income sources and financial activities in India.

Q6. I earn a salary and rent from two house properties. Which ITR form should I use?

In this case, ITR 2 is the correct form. ITR 1 allows income from only one house property. Owning multiple properties, even if one is vacant or self-occupied, disqualifies you from using ITR 1.

Q7. I am a salaried individual with directorship in a private company. Can I file ITR 1?

No. Directors of any company, or individuals holding unlisted equity shares, are not eligible to file ITR 1. You are required to use ITR 2 for FY 2024–25.

Q8. What is the last date for filing ITR for FY 2024–25?

The revised due date for filing ITR for individuals (not subject to audit) is September 15, 2025. Filing before the deadline avoids late fees, ensures timely refunds, and keeps your compliance record clean.

Q9. Can I switch from ITR 1 to ITR 2 after filing if I realize I used the wrong form?

Yes, but only before the deadline by filing a revised return. If the wrong form was used initially, submit a revised return using the correct ITR form to avoid legal issues or refund delays.

Q10. What happens if I wrongly file ITR 1 instead of ITR 2?

Filing the incorrect form may result in the return being treated as defective under Section 139(9) or even rejected. This could lead to non-compliance notices, penalties, or loss of refund eligibility.

Q11. Can I use ITR 1 if I’ve earned foreign dividends or held overseas bank accounts?

No. Any income from foreign sources or ownership of foreign assets (including bank accounts or shares) makes you ineligible for ITR 1. ITR 2 must be used to disclose such information under Indian tax rules.

Q12. How does TaxBuddy help reduce errors in ITR selection and filing?

TaxBuddy uses intelligent algorithms to detect the correct ITR form based on user inputs. It also flags red flags like foreign income, directorship, or multiple properties. Combined with expert verification, this minimizes filing errors and ensures smooth processing.