Which ITR Form is Right for You in FY 2024–25? A Complete Comparison Guide
- Bhavika Rajput
- Jun 20
- 12 min read
Choosing the correct ITR form is the first step to ensuring your tax filing is accurate, valid, and hassle-free under the Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) has released ITR forms for FY 2024–25 (AY 2025–26), each tailored for different income sources and taxpayer categories. Filing the wrong form can lead to defective returns, delays in processing, or tax notices. Let us break down each ITR form, helping you identify the one that best fits your income profile while also avoiding common filing mistakes.
Table of Contents
ITR Forms and Their Purpose: Complete Overview for FY 2024–25
There are seven notified Income Tax Return (ITR) forms applicable for FY 2024–25:
ITR-1 (Sahaj): For resident individuals with total income up to ₹50 lakh from salary, one house property, and other sources (like interest), with agricultural income not exceeding ₹5,000.
ITR-2: For individuals and HUFs with income from capital gains, multiple house properties, foreign income/assets, or agricultural income over ₹5,000.
ITR-3: For individuals and HUFs having income from business or profession, including partners in firms.
ITR-4 (Sugam): For residents, HUFs, and firms (except LLPs) under presumptive taxation scheme (Sec 44AD/44ADA/44AE) with income up to ₹50 lakh.
ITR-5: For firms, LLPs, AOPs, BOIs not filing ITR-7.
ITR-6: For companies not claiming exemption under Section 11.
ITR-7: For trusts and entities filing under Sections 139(4A) to 139(4D).
Each form is designed to accommodate specific income patterns and legal structures, ensuring the Income Tax Department receives accurate disclosures.
Key Differences Between ITR-1, ITR-2, ITR-3, and ITR-4
These four forms are the most commonly used by individual taxpayers:
Feature | ITR-2 | ITR-3 | ITR-4 | |
Residential Status | Resident (Ordinary) | All Individuals, HUFs | All Individuals, HUFs | Resident Individuals, HUFs, Firms (not LLP) |
Income Cap | ≤ ₹50 lakh | No limit | No limit | ≤ ₹50 lakh |
Business/Profession Income | Not allowed | Not allowed | Allowed (non-presumptive) | Allowed (presumptive only) |
Capital Gains | Not allowed | Allowed | Allowed | Not allowed |
Foreign Assets/Income | Not allowed | Allowed | Allowed | Not allowed |
Suitable For | Salaried with simple income | Capital gains or foreign assets | Business/profession | Small traders/freelancers under presumptive scheme |
Understanding these distinctions is crucial to avoid selecting an inapplicable form.
ITR Forms for Businesses, LLPs, and Trusts
For non-individual taxpayers, businesses, LLPs, trusts, and other entities, selecting the correct ITR form is crucial to ensure compliance with income tax regulations. These entities must file one of the following forms depending on their structure and income types:
ITR-5: This form is designed for partnerships, including Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Body of Individuals (BOIs), and other similar entities not covered by ITR-7. ITR-5 allows reporting for income from various sources, including business or professional income, capital gains, and rental income. It is typically used by firms or groups that do not have a corporate structure but still need to report income from multiple sources.
ITR-6: This form is applicable to companies that are not claiming exemptions under Section 11, which relates to charitable or religious organizations. It is used by companies to report income from business operations, and like ITR-5, it allows reporting of various income sources such as capital gains and other profits. It’s an important form for corporate taxpayers, ensuring that their business income is reported in accordance with tax laws.
ITR-7: This form must be filed by specific entities like charitable trusts, political parties, and research institutions. It applies to entities governed by Sections 139(4A) to 139(4D), which generally deal with non-profit organizations, political bodies, and certain government entities. These organizations may be exempt from paying tax but still need to report income and expenses for transparency and compliance.
The selection of the correct ITR form depends entirely on the legal structure of the entity, as well as its tax obligations and income sources. Incorrect form selection can lead to rejection of the return or legal repercussions for non-compliance.
ITR Form Selection Guide for Salaried Individuals
Choosing the right ITR form as a salaried individual is essential for accurate and hassle-free tax filing. Here’s a guide to help salaried individuals understand which form they need:
ITR-1: The simplest and most commonly used form for salaried individuals. It is suitable if:
Your total income is up to ₹50 lakh.
Your income comes from salary, one house property, and other sources like interest.
You don’t have any capital gains, foreign income/assets, or directorships in companies.
ITR-1 (also known as Sahaj) is a straightforward option, with less information required for filing, making it ideal for individuals with simple income sources and no additional complexities.
ITR-2: If you meet any of the following conditions, ITR-2 is the better option:
You earn capital gains (from stocks, mutual funds, property sales, etc.).
You own multiple properties (rental income from two or more properties).
You have foreign assets or foreign income (e.g., income from foreign investments or assets abroad).
You earn agricultural income over ₹5,000.
This form is suited for individuals with more complex income structures who need to report capital gains, multiple property incomes, or foreign assets.
ITR-3: If you also earn income from a business or profession, ITR-3 is required. This form is necessary for individuals who have income from business or professional practice, in addition to salary or other sources. The key is to match your income sources and personal financial structure with the right form. Misclassification or using the wrong form may lead to rejections or penalties.
Which ITR Form Should Freelancers Use?
Freelancers have different tax filing requirements depending on their income type and tax regime. Here’s a breakdown:
ITR-4: This is the form for freelancers who opt for the presumptive taxation scheme under Section 44ADA. It is suitable for freelancers with income up to ₹50 lakh from their profession. This scheme assumes 50% of the income as the deemed profit, which simplifies the reporting process. ITR-4 is also for those who:
Have income under ₹50 lakh.
Do not have foreign income, capital gains, or shareholding in unlisted companies.
Freelancers who are using the presumptive scheme don’t need to maintain detailed books of accounts, making ITR-4 a simpler option.
ITR-3: If you maintain actual books of accounts and have business expenses to claim, then ITR-3 is the correct form. This form is for freelancers who:
Maintain detailed accounts of income and expenses.
Wish to claim expenses based on actual calculations rather than the presumptive scheme.
Have income over ₹50 lakh or include foreign earnings.
ITR-3 allows a more detailed approach, enabling freelancers to claim actual expenses, but it requires more thorough record-keeping.
The choice between ITR-4 and ITR-3 depends on the freelancer's accounting method and the nature of their income. Misclassification can result in under-reporting of income or unclaimed deductions.
Choosing the Right ITR Form for NRIs and Foreign Income
Non-Resident Indians (NRIs) must carefully select the right ITR form based on their income sources and residency status. NRIs are not eligible to file ITR-1 or ITR-4. Here’s what they should consider:
ITR-2: This form is suitable for NRIs who have income from salary, rental income, or capital gains but do not have business activities in India. If an NRI earns only income from sources like property rent or capital gains from the sale of Indian assets, they should use ITR-2.
ITR-3: This is applicable to NRIs engaged in business or professional activities in India. It is the form of choice if the NRI has business income in addition to other income sources like salary, capital gains, or foreign income. ITR-3 is more detailed and covers business income, which may require maintenance of books and a separate reporting of expenses.
In cases involving foreign income, assets, or bank accounts, ITR-2 or ITR-3 must be used, regardless of the income amount. Using the wrong form can result in notices or scrutiny by tax authorities.
ITR Forms and the New Tax Regime: What to Know
The introduction of the new tax regime under Section 115BAC provides taxpayers with the option to pay tax at lower rates but without claiming deductions or exemptions. Here’s how it impacts ITR filing:
Applicable to All Individual ITR Forms (1-4): The new tax regime is available for salaried individuals, freelancers, business owners, and others. The tax rates are lower, but taxpayers cannot claim deductions under sections like 80C (for EPF, PPF), HRA (House Rent Allowance), and others.
Form 10IEA Declaration: Taxpayers opting for the new regime must declare this during filing by submitting Form 10IEA. This ensures that the tax benefits under the new regime are applied, and no deductions or exemptions are claimed.
Deductions Disallowed Under the New Regime: If you choose the new tax regime, most deductions like 80C, HRA, and the standard deduction for salaried individuals (except for the standard deduction from AY 2024-25 onwards) are disallowed. However, you can still claim the basic deduction for salaried employees.
Form Choice Doesn’t Change: The selection of ITR form remains the same irrespective of whether the taxpayer chooses the new or old tax regime. The form selection depends on income sources, not the tax regime, but it's essential to accurately report income and deductions based on your chosen regime.
Understanding the new tax regime’s implications on deductions and tax rates is essential for taxpayers to make the right decision on their filing choice.
Common Mistakes in ITR Form Selection and How to Avoid Them
Selecting the wrong ITR form is one of the most common errors during tax filing and can lead to defective returns, notices, or delayed refunds. Many taxpayers unknowingly choose a form that doesn’t match their income type, residential status, or tax regime declaration. Here’s a closer look at the most frequent mistakes and how to avoid them:
1. Choosing ITR-1 While Having Capital Gains or Foreign Assets
ITR-1 (Sahaj) is designed for resident individuals earning up to ₹50 lakh from salary, one house property, and other sources (like interest income). However, taxpayers often overlook its restrictions and end up using it despite:
Having income from sale of shares, mutual funds, or property
Owning foreign assets or foreign bank accounts
Earning foreign income or receiving dividends from foreign stocks
Using ITR-1 in such cases is incorrect. Instead:
Use ITR-2 for capital gains or foreign assets/income
Use ITR-3 if capital gains exist alongside business or professional income
2. Using ITR-4 for Professional Income Without Opting for Presumptive Taxation
ITR-4 is meant for taxpayers opting for thepresumptive income scheme under Sections 44AD, 44ADA, or 44AE. It simplifies taxation by allowing a fixed percentage of income to be declared as profit without detailed books of accounts.
The mistake occurs when:
Professionals (like freelancers or consultants) file ITR-4 without officially opting for presumptive taxation
They claim actual expenses instead of declaring presumptive profit
In such cases, ITR-4 is not valid. The correct approach is to use:
ITR-3 when income is computed on actual profit and loss basis
Ensure you meet the criteria before using ITR-4 under Section 44ADA
3. Filing ITR-2 While Earning from Business or Freelance Work
ITR-2 is not meant for anyone earning income from business or profession. Yet, some freelancers or small business owners mistakenly file it due to:
Lack of clarity on how freelance income is classified
Confusing freelance work with ‘other sources’ income
Freelance income, consultancy, or any profession—whether under presumptive scheme or actuals—qualifies as business income, not other sources. Therefore:
Use ITR-3 for actual business income with expenses
Use ITR-4 if filing under presumptive taxation
4. NRIs Using Resident-Only Forms (Like ITR-1 or ITR-4)
Many NRIs are unaware that ITR-1 and ITR-4 are only for resident individuals. Filing these as an NRI is a major compliance error. If an NRI:
Earns rental income or capital gains in India
Holds NRE/NRO accounts
Has investments in Indian mutual funds or shares
Then ITR-2 or ITR-3 should be used depending on the nature of income. Always assess residential status first before choosing a form.
5. Missing New Regime Declaration Under Form 10IEA
Starting from FY 2023–24, individuals opting for the new tax regime must file Form 10IEA to officially declare their choice. Failing to submit this:
May lead to automatic assignment of the old regime
Could result in discrepancies if your ITR and deductions don’t match
This form must be submitted before filing the return, especially for:
Business or professional income (if opting in or out)
Ensuring correct tax calculation under the chosen regime
How to Avoid These Mistakes
Carefully review all sources of income (salary, capital gains, business, interest, rent, etc.)
Confirm your residential status for the year
Check for foreign assets, shareholdings, or director positions
Decide if you're choosing the old or new regime, and submit 10IEA where applicable
Use platforms like TaxBuddy, which automatically selects the correct ITR form based on your profile, minimizing these errors entirely
How TaxBuddy Helps You Choose and File the Right ITR Form
TaxBuddy simplifies income tax filing with smart algorithms and expert assistance. Based on your PAN and income details, it auto-selects the correct ITR form, eliminating guesswork and errors. Their expert-assisted plans also help in choosing between old vs new regime, minimizing tax liability, and ensuring timely filing.
Their app also sends reminders, offers document checklists, and tracks your refund status. Whether salaried, freelance, or running a business—TaxBuddy ensures your filing is precise, secure, and seamless.
Conclusion
Choosing the right ITR form is not just about compliance—it's about avoiding future complications. Every income stream, asset class, and taxpayer category has a designated form, and selecting the wrong one can lead to delays or scrutiny. For a streamlined experience that guarantees accuracy and peace of mind, download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
Frequently Asked Questions (FAQs)
Q1. Can I file ITR-1 if I have income from two house properties?
No, ITR-1 (Sahaj) is applicable only if your income includes a maximum of one self-occupied or let-out house property. If you own or earn from two or more house properties, you must file ITR-2 instead. This ensures all rental income and associated deductions are correctly reported.
Q2. Is it mandatory to file ITR if my income is below the taxable limit?
Filing ITR is not compulsory if your gross total income is below the basic exemption limit (₹2.5 lakh for individuals below 60). However, it is advisable to file if:
You wish to claim a refund of TDS
You're applying for a loan or visa
You want to maintain a financial record or carry forward losses
Q3. What happens if I choose the wrong ITR form?
If you file using an incorrect ITR form:
Your return may be marked as defective under Section 139(9)
You’ll get a notice to revise your return using the correct form
Failure to respond may result in your ITR being treated as invalid
Choosing the correct form is critical to avoid such disruptions.
Q4. Can I switch from ITR-4 to ITR-3 next year?
Yes. Switching ITR forms is allowed based on changes in income type or tax structure. For example:
If you move from presumptive taxation (under Sec 44ADA) to regular business income, you should switch from ITR-4 to ITR-3.
Form selection is year-specific and must match your income structure for that financial year.
Q5. How can TaxBuddy help with ITR filing?
TaxBuddy offers an intelligent platform that:
Auto-detects the appropriate ITR form based on your income profile
Offers expert-assisted plans to clarify doubts and reduce errors
Helps you claim all eligible deductions and exemptions
Simplifies filing through an intuitive app interface
It ensures timely, accurate, and compliant tax filing.
Q6. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides both options:
Self-filing for users comfortable filing on their own, with automated tools and checks
Expert-assisted plans for those who want personalized guidance, tax planning, or have complex cases
This flexibility makes it suitable for beginners and experienced taxpayers alike.
Q7. Which is the best site to file ITR?
While the official portal (incometax.gov.in) is functional, TaxBuddy is one of the best platforms to file your ITR because it combines:
Simplified UI
Automated checks for accuracy
Form guidance and expert support
Secure data handling
It is especially helpful if you're unsure about the process or want professional support.
Q8. Where to file an income tax return?
You can file your income tax return through:
The official government portal at incometax.gov.in
Authorized e-return intermediaries like TaxBuddy, which is trusted by over a million users for accurate and hassle-free filing.
Q9. Can freelancers with foreign clients use ITR-4?
No. ITR-4 is only for residents with income under the presumptive taxation scheme, and it excludes foreign income. If a freelancer earns in foreign currency or holds foreign assets, ITR-3 must be used.
Q10. Do salaried employees under the new tax regime need to file different forms?
Not at all. The same ITR form applies whether you choose the old or new tax regime. What changes is your eligibility for deductions. Under the new regime, most exemptions and deductions are not available.
Q11. What form should I use if I sold shares during the year?
If you earned capital gains from share sales:
Use ITR-2 if you have no business income
Use ITR-3 if you have business or professional income as well
Reporting capital gains correctly is crucial, especially under STT and LTCG provisions.
Q12. Does the regime (old vs new) affect the choice of ITR form?
No. The tax regime selection does not impact the ITR form. But it determines whether you can:
Claim deductions (old regime)
Opt for lower tax rates without deductions (new regime)
Be sure to declare your choice via Form 10IEA where applicable.
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