Which ITR Form Should Salaried File for AY 2026-27?
Pick the wrong ITR form and the portal tags your return as defective, then hands you 15 days to refile before you count as a non-filer. For AY 2026-27 (FY 2025-26) the line moved: ITR-1, the short form, now covers people it used to lock out. Own a second house? Booked a small profit on shares? You may finally skip the longer ITR-2. Here is the exact split, for a salaried earner making ₹15 lakh or more.
Summary
| Your situation | AY 2025-26 form | AY 2026-27 form |
|---|---|---|
| One house, salary only | ITR-1 | ITR-1 |
| Second house (rented out) | ITR-2 | ITR-1 |
| Equity LTCG up to ₹1.25 lakh | ITR-2 | ITR-1 |
| Any short-term capital gain | ITR-2 | ITR-2 |
| Total income above ₹50 lakh | ITR-2 | ITR-2 |
| Foreign RSUs or unlisted shares | ITR-2 | ITR-2 |
What changed in ITR-1 this year
Two expansions, both live from AY 2026-27.
Two house properties now allowed
Earlier, a second house, even one you rent out, pushed you straight to ITR-2. From AY 2026-27, ITR-1 accepts income from up to two house properties. You report the rent, take the 30% standard deduction under Section 24(a), and deduct home-loan interest under Section 24(b), capped at ₹2 lakh for a self-occupied home. Two houses, still the simple form, as long as you carry no house-property loss forward.
Small equity gains now allowed
Long-term capital gains on listed shares or equity mutual funds under Section 112A can now sit inside ITR-1, provided the gain is ₹1.25 lakh or less and you have no capital losses to carry forward. ₹1.25 lakh is exactly the amount that is tax-free under 112A, so an SIP investor who trims a modest profit no longer needs ITR-2.
The five gates: can you use ITR-1?
Answer yes to all five and ITR-1 (Sahaj) is yours. A single no sends you to ITR-2.
- Is your total income ₹50 lakh or less?
- Is your income only salary, house property (up to two), interest, and LTCG u/s 112A up to ₹1.25 lakh?
- Zero short-term capital gains, and zero LTCG above ₹1.25 lakh?
- No foreign assets, foreign income, unlisted shares, or company directorship?
- No losses to carry forward, and no deferred ESOP tax?
For a ₹15L+ earner, gate 1 (the ₹50 lakh ceiling) and gate 3 (share sales) are the two that most often force ITR-2.
The ₹1 traps that quietly force ITR-2
- Any short-term gain. Sell one stock held under a year for a ₹500 profit and ITR-1 is gone. There is no small-STCG allowance like the one for LTCG.
- LTCG one rupee over the cap. ₹1,25,001 in long-term gains disqualifies you. It is a cliff, not a slope.
- Foreign RSUs. If your employer stock vests in a US account, that is a foreign asset: Schedule FA, ITR-2. Common on ₹15L+ tech pay.
- Unlisted shares. An angel cheque or pre-IPO ESOP in a private company forces ITR-2 even if you never sold a share.
Real example: Salaried, ₹32L CTC, Bengaluru, second home rented
Priya earns ₹32 lakh, lives in her own flat, and rents out a second flat in her home town for ₹22,000 a month. Last year that second house alone forced her into ITR-2. This year she also booked ₹90,000 of long-term gains on equity funds, under the ₹1.25 lakh line.
| Item | Before (AY 2025-26) | After (AY 2026-27) |
|---|---|---|
| Form required | ITR-2 | ITR-1 (Sahaj) |
| Net second-house income | ₹64,800 | ₹64,800 |
| Equity LTCG ₹90,000 | ITR-2 schedule | ITR-1, no extra schedule |
| Schedules to fill | 6+ | 1 |
| Typical filing time | ~40 min | ~15 min |
Her net house income is positive (₹2.64 lakh rent, less the 30% deduction and ₹1.20 lakh loan interest), so nothing carries forward. All five gates pass. Same tax, same refund, one short form.
Have a side income? You are in ITR-3 or ITR-4
Consulting on the side, ad revenue, or freelance retainers count as business or professional income, which rules out both ITR-1 and ITR-2. You file ITR-3, or ITR-4 (Sugam) if you opt for presumptive taxation under Section 44ADA. The upside for AY 2026-27: these non-audit filers get until 31 August 2026, a month past the salaried 31 July deadline.
One more choice: the regime is new by default
Right form, wrong regime still costs you. The new tax regime is the automatic option for AY 2026-27. If the old regime saves more (heavy 80C, home-loan interest, or HRA), you must opt out on purpose. A salaried filer with no business income does that inside the ITR each year, tick by tick. Anyone with business or professional income needs Form 10-IEA to switch, and the same form to switch back later. Decide the regime before you open the form, because the wrong default can cost more than the wrong form.
What to do this week
- Pull your AIS and TIS from the income-tax portal; they now pre-fill most of ITR-1.
- Count your house properties and list every share or fund sale during FY 2025-26.
- If you sold, split LTCG (the ₹1.25 lakh test) from any STCG; one STCG entry means ITR-2.
- File before 31 July 2026. Miss it and Section 234F charges ₹5,000 (₹1,000 if income is ₹5 lakh or less), plus 1% a month under Section 234A.
Simpler form, same refund
The form you file does not change your tax. It changes how long filing takes and how many schedules you touch. For most ₹15L+ salaried earners with a second home or a small equity gain, AY 2026-27 finally means the short form. Check the five gates, keep the proof, and file early.
Ready for a personalised plan? Start your free diagnosis — 6 questions, 5 minutes.
