Which ITR Form for Salaried Employees 2026: ITR-1 or ITR-2?

March 13, 2026 8 min read Guide

March. Form 16 has landed. Your only real question: which ITR form do I file? For most salaried people it is ITR-1 or ITR-2. Here is how to know which in plain English, with real numbers.

This guide is for financial year 2025-26 (AY 2026-27) — the return you file in 2026 for income earned from April 2025 to March 2026.

Which ITR Form Do Salaried Employees File?

Most salaried employees file ITR-1 (Sahaj) or ITR-2. Use ITR-1 if your total income is up to Rs 50 lakh and comes only from salary, one house property, and other sources (interest, family pension). Use ITR-2 if you have capital gains (stocks, mutual funds, property sale), income above Rs 50 lakh, more than one house property, foreign income, or you are a director in a company.

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Quick check (3 questions)

1. Is your total income above Rs 50 lakh? No Yes

2. Do you have capital gains (stocks, mutual funds, property sale) or are you a director in a company? No Yes

3. More than one house property or foreign income? No Yes

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Or pick your situation

Ramesh

Rs 12 L salary, FD interest, one house property.

You file ITR-1 (Sahaj).

Priya

Salary plus sold some mutual funds this year.

You file ITR-2 (capital gains).

Amit

Rs 55 L salary, no capital gains.

You file ITR-2 (income above Rs 50 L).

Sneha

Director in a startup plus salary.

You file ITR-2 (director).

Who Files ITR-1 (Sahaj)?

ITR-1 is the simplest form. In FY 2024-25, 3.29 crore taxpayers (42% of all returns) filed ITR-1. Most of them are salaried individuals with straightforward income.

42%

of 7.78 Cr returns

27%

ITR-2 growth YoY

You can use ITR-1 if all of the following are true:

You are a resident individual (not NRI/RNOR).
Total income does not exceed Rs 50 lakh.
Income is only from: salary/pension, one house property, other sources (interest, family pension), and agricultural income up to Rs 5,000.
From FY 2025-26: LTCG under Section 112A from listed shares or equity mutual funds up to Rs 1.25 lakh is allowed in ITR-1 (see section below).
You are not a director in a company; you have no unlisted equity shares; no foreign income or assets; no losses to carry forward.

If any of these conditions fail, you need ITR-2 (or ITR-3/4 if you have business income).

Who Files ITR-2?

ITR-2 is for individuals and HUFs who do not have business or profession income but have more complex situations. ITR-2 filings grew 27% year-on-year in FY 2024-25. More salaried Indians than ever now have capital gains, second properties, or director roles. We wrote about this shift in ITR-1 Is Declining for the First Time.

You must use ITR-2 if you have any of the following:

Capital gains (from stocks, mutual funds, property, crypto, or any other asset) except the small LTCG window allowed in ITR-1.
Total income above Rs 50 lakh.
More than one house property.
Foreign income or foreign assets.
You are a director in a company (even if inactive).
Unlisted equity share investments.
Agricultural income above Rs 5,000.
Losses to carry forward under capital gains or house property.

Rule of thumb: If you sold stocks or redeemed mutual fund units during the year (even at a loss), you almost always need ITR-2. The only exception is LTCG under Section 112A up to Rs 1.25 lakh with no other capital gains and no carry-forward losses.

Four Salaried Scenarios

Real situations, clear answers:

Ramesh: Rs 12 lakh salary, FD interest, one house. No capital gains, no directorship. ITR-1.
Priya: Salary plus sold some mutual funds this year. She has capital gains to report. ITR-2.
Amit: Rs 55 lakh salary, interest income only. Total income is above Rs 50 lakh. ITR-2.
Sneha: Director in a startup and draws salary. Director status alone disqualifies ITR-1. ITR-2.

The One Rule That Changed in 2025-26

From FY 2025-26 (AY 2026-27), long-term capital gains under Section 112A from listed company shares or equity-oriented mutual funds up to Rs 1.25 lakh can be reported in ITR-1. You must have no other capital gains and no brought-forward or carry-forward losses under that head.

So if you are salaried and only have a small amount of LTCG from equity (within Rs 1.25 lakh), you can still use ITR-1. If your LTCG exceeds that limit, or you have any other capital gains (short-term, property, unlisted shares), you need ITR-2.

What If I File the Wrong Form?

The Income Tax Department may treat your return as defective and issue a notice. You will need to file a revised return using the correct form. Filing the wrong form can also delay refunds. Confirm your form before you file. Use our ITR form selector for a definitive answer in five questions.

Frequently Asked Questions

Which ITR form do salaried employees file?

Most salaried employees file either ITR-1 (Sahaj) or ITR-2. ITR-1 is for those with income up to Rs 50 lakh from salary, one house property, and other sources like interest. ITR-2 is for those with capital gains, income above Rs 50 lakh, multiple house properties, foreign income, or director status.

Can I file ITR-1 if I have capital gains?

From FY 2025-26 (AY 2026-27), you can file ITR-1 if you have only long-term capital gains under Section 112A from listed shares or equity mutual funds up to Rs 1.25 lakh, with no other capital gains and no carry-forward losses. Any other capital gains require ITR-2.

Which ITR form if my salary is above Rs 50 lakh?

If your total income exceeds Rs 50 lakh, you must file ITR-2. ITR-1 has a hard ceiling of Rs 50 lakh total income. This applies even if your only source is salary and interest.

Which ITR for a salaried person who is a director?

If you are a director in a company, you cannot file ITR-1. You must file ITR-2 (or ITR-3 if you have business income). This applies even if the company is inactive or you draw only salary.

What happens if I file the wrong ITR form?

The Income Tax Department may treat your return as defective and send a notice. You will need to file a revised return using the correct form. Filing the wrong form can also delay refunds. It is best to confirm your form before filing.

Disclaimer: This article is for informational purposes only. Tax rules can change. Consult a qualified CA or tax professional for advice specific to your situation.