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Income Tax Return 2025: ITR-1 is for an salaried individual earning up to Rs 50 lakh and have no capital gains or business income, while ITR-3 is for those earning capital gains from stocks, mutual funds, property, or have business/professional income.
As more and more people have entered stock market after the COVID-19 pandemic, it is necessary to know which ITR form to fill for correct ITR filing.
Income Tax Return 2025: Even as the financial year 2024-25 has already ended, the ITR filing is set to kickstart soon with the income tax department enabling both online and offline options in a few days. The salaried individuals might have to wait for their Form 16 till June 15 to file their income tax return (ITR) for the assessment year 2025-26. Though salaried individuals generally file ITR-1 (Sahaj), they need to file ITR-3 to report their stock market earnings or losses.
As more and more people have entered the stock market after the COVID-19 pandemic, it is necessary to know which ITR form should be filled for correct ITR filing.
What is ITR-1 (Sahaj)?
ITR-1, also known as Sahaj, is the simplest income tax return form. It is designed for salaried individuals and pensioners with basic income sources.
Eligibility for ITR-1:
An individual can file ITR-1 if they meet the following conditions:
– Total income does not exceed Rs 50 lakh in a financial year.
– Sources of income include:
– Salary or pension.
– Income from one house property (excluding brought forward losses or carried forward losses).
– Income from other sources such as interest income (excluding lottery winnings or horse racing earnings).
– Agricultural income (if any) is up to Rs 5,000.
Who Cannot File ITR-1?
You cannot use ITR-1 if:
– Your total income exceeds Rs 50 lakh.
– You have capital gains income.
– You have business or professional income.
– You have income from more than one house property.
– You are a director in a company or hold unlisted equity shares.
What is ITR-3?
ITR-3 is a more detailed tax return form applicable to individuals and Hindu Undivided Families (HUFs) who have business or professional income, capital gains, or other complex income sources.
Eligibility for ITR-3:
You should file ITR-3 if:
– You have income from salary and capital gains.
– You earn from business or profession (including freelancing, consulting, and trading).
– You are a partner in a firm.
– You have income from multiple house properties.
– You have income from speculative business or cryptocurrency trading.
– You are a director in a company.
– You hold unlisted equity shares.
– Your total income exceeds Rs 50 lakh.
ITR-1 Vs ITR-3: Key Differences
Which ITR Form Should You Choose?
– Choose ITR-1 if you are a salaried individual earning up to Rs 50 lakh and have no capital gains or business income.
– Choose ITR-3 if you earn capital gains from stocks, mutual funds, property, or have business/professional income.
Example Scenarios:
1. Ravi, a salaried employee with Rs 45 lakh annual income and bank interest: Ravi should file ITR-1 as his income is within Rs 50 lakh and does not include capital gains or business income.
2. Suman, a software engineer earning Rs 30 lakh salary and Rs 5 lakh from stock market capital gains: Suman should file ITR-3 as she has capital gains.
3. Amit, a freelancer earning Rs 15 lakh from consultancy and Rs 10 lakh from capital gains: Amit should file ITR-3 since he has both professional income and capital gains.
Selecting the correct ITR form is crucial to ensure compliance with tax laws and avoid notices from the Income Tax Department. If you are a salaried individual without capital gains, ITR-1 is the ideal choice. However, if you earn from capital gains, business, or multiple sources, ITR-3 is the appropriate form.
