Income Tax Filing Season Starts With A Big Tweak For Taxpayers With 2 Homes. Details Inside

The Centre has formally kicked off the ITR filing season for AY 2026-27, with all seven income-tax return forms notified along with the verification and updated-return forms. 

What has been notified? 

ITR-1 to ITR-7 for Assessment Year (AY) 2026-27 (income earned in FY 2025-26). ITR-V (acknowledgement/verification) and ITR-U (updated return) have also been notified for this year's filing cycle.

Individuals, pensioners, professionals and other taxpayers can start filing their returns using the relevant form, with the due date for non-audit cases remaining July 31, 2026 (unless extended later).

Big change for salaried taxpayers: ITR-1 can now cover two houses

Experts point to a key relaxation in ITR-1 (Sahaj): Taxpayers can now use ITR-1 even if they have income from two house properties. Earlier, ITR-1 allowed you to report income from only one house property; a second house automatically pushed you into using ITR-2 or ITR-3.

With the new rule, many salaried or pensioner taxpayers with, say, one self-occupied home and one let-out flat can continue in ITR-1, instead of shifting to a more detailed form.

ITR-1 (Sahaj): Who can use it, and when it is out of bounds

ITR-1 is designed for resident individuals with simple income profiles. Based on the notified forms and CBDT's general framework, it can broadly be used where: The taxpayer with total income within the monetary limit prescribed in the form instructions (historically Rs 50 lakh).

Income comes from the following heads:

• Salary or pension, including allowances and perquisites as per Form 16.
• Income from up to two house properties (self-occupied or let-out), without complicated loss set-off or carry-forward needs.
• Income from other sources such as bank interest, family pension, and small miscellaneous receipts that are not covered by special tax regimes.

ITR-1 cannot be used by HUFs, non-residents, or those with foreign assets/income and other complex disclosure requirements, who must migrate to more detailed forms like ITR-2 or above.

Income that cannot be reported in ITR-1 

• Profits and gains from business or profession
• Any regular business, freelance or professional income is outside ITR-1 and must go to ITR-3 or ITR-4 depending on the scheme.

Capital gains beyond the restricted window

• Short-term capital gains from sale of any asset (shares, mutual funds, property, gold, etc.) cannot be reported in ITR-1.
• Long-term capital gains under section 112A (equity/equity mutual funds) exceeding Rs 1.25 lakh in the year are not allowed in ITR-1.
• Other long-term capital gains or cases involving set-off/carry-forward of capital losses need detailed schedules and therefore require ITR-2 or higher.

Complex house property situations

• Income from more than two house properties cannot be covered in ITR-1, even after the latest relaxation.
• Cases with house-property losses that are being carried forward from earlier years generally push the taxpayer into ITR-2.
• Certain 'other sources' incomes taxed at special rates

The following "other sources" items are explicitly excluded from ITR-1:

• Winnings from lottery or game shows.
• Income from owning and maintaining race horses.
• Incomes taxable at special rates under section 115BBDA (certain dividend income) or section 115BBE (unexplained cash credits and similar).
• Income to be apportioned under section 5A
• Taxpayers governed by the Portuguese Civil Code (such as certain residents of Goa and specific union territories) whose income is to be apportioned between spouses under section 5A cannot use ITR-1.
• Foreign and high-disclosure cases (by design out of ITR-1)
• Those with foreign income or foreign assets, signing authority in foreign bank accounts, or holdings in unlisted shares must move to ITR-2 or higher due to the detailed disclosure schedules required.

ITR-2: For complex but non-business income
ITR-2 is available to individuals and Hindu Undivided Families (HUFs) who:

• Are not eligible to file ITR-1 (Sahaj), and
• Do not have income from profits and gains of business or profession.
• You will typically fall into the ITR-2 bucket if you have:
• Salary or pension income, but your overall situation is more complex (for example, multiple houses, capital gains, foreign assets).
• Income from more than two house properties, or house-property losses to be carried forward.

Short-term capital gains from any asset, or any long-term capital gains where:

• Gains under section 112A exceed Rs 1.25 lakh, or
• There is a need to set off or carry forward losses.
• Income from other sources including lottery winnings and race-horse income, which are excluded from ITR-1.
• Agricultural income above Rs 5,000, which normally forces a move out of ITR-1.
• NRI or RNOR status, with income taxable in India (such as rent, interest, capital gains) and/or foreign assets or signing authority in overseas accounts that have to be disclosed in the relevant schedules.
• ITR-2 also accommodates clubbed income of spouses or minor children if what is being clubbed would have itself fallen into the same eligible categories (for example, minor's interest income or capital gains).

Who cannot file ITR-2 

• Any individual or HUF whose total income includes profits and gains from business or profession.
• Taxpayers having income in the nature of:
• Interest, salary, bonus, commission or other remuneration received from a partnership firm, which the law treats as business income.
• Such taxpayers must use ITR-3 (for normal business/professional income) or ITR-4 (for presumptive income under sections 44AD/44ADA/44AE), depending on their scheme and entity type.

Where do the other ITR forms fit?
ITR-1 (Sahaj): Resident individuals with income mainly from salary/pension, up to two house properties, and simple "other sources" income; no business, no complex capital gains    
Use case: Salaried/pensioners with one or two homes and interest income

ITR-2:    Individuals/HUFs with no business/profession income but with multiple houses, capital gains, foreign assets/income, higher agricultural income, lottery/race-horse income, or NRI/RNOR status    

Use case: Higher-complexity non-business cases, including NRIs and those with capital gains

ITR-3:    Individuals/HUFs having income from business or profession, including partners in firms receiving interest, salary, bonus or commission    

Use case: Proprietors, professionals, and partners with non-presumptive business income

ITR-4 (Sugam):    Resident individuals, HUFs and firms (other than LLPs) opting for presumptive taxation under sections 44AD, 44ADA or 44AE, within turnover limits    

Use case: Small businesses and professionals on presumptive schemes

ITR-5:    Firms, LLPs, AOPs, BOIs and other entities not filing ITR-7    

Use case: Non-company, non-individual entities with business or investment income

ITR-6:    Companies not claiming exemption under section 11    

Use case: Regular domestic and foreign companies

ITR-7:    Persons including trusts, political parties, funds and institutions required to file returns under sections 139(4A), 139(4B), 139(4C) or 139(4D)
Use case: Charitable/religious trusts, political parties, specified funds and institutions

Additionally: 

• ITR-V continues to serve as the verification/acknowledgement form for returns that are not e-verified using Aadhaar OTP, net-banking or other electronic methods.
• ITR-U allows taxpayers to file an updated return within 48 months from the end of the relevant assessment year to correct omissions or mistakes, on payment of additional tax as per section 139(8A).