Overview
ITR 1 Filing, also referred to as Sahaj, is the most straightforward and widely used income tax return form for the majority of salaried individuals in India. It is intended especially for residents whose only sources of income are a salary, one home, and additional income such as interest. But not everyone who receives a wage is eligible to submit an ITR 1. Salaried people must refrain from utilising this form in certain situations in order to comply with income tax laws. Here is a thorough analysis of who, even those with salaries, should not file an ITR 1.
Total Revenue Is Over ₹50 Lakhs
You cannot utilise the ITR 1 form if your yearly income is more than ₹50 lakhs. The Income Tax Department has imposed this restriction as a rigors condition. Depending on their income sources, anyone who make more than this must choose between filing an ITR-2 or an ITR-3.
Several Residential Properties
People who own more than one home property—even if the second is not rented out—are not permitted to use ITR 1, even if it permits the disclosure of income from just one. Instead, they have to utilise ITR 2.
Income from Capital Gains
You are not qualified to file an ITR 1 if you have even a tiny financial gain, such as gains from selling stocks, mutual funds, or real estate. Depending on your other sources of income, you must choose between ITR 2 and ITR 3 if you have experienced short-term or long-term capital gains.
International Earnings or Foreign Property
You are not required to submit ITR 1 if you are a resident salaried person with any overseas income or if you own foreign assets (such as foreign equities, bank accounts, or real estate abroad). Only ITR 2 and ITR 3 provide the comprehensive disclosures needed in these situations.
Agricultural Earnings Over ₹5,000
Agricultural income is tax-exempt, although you cannot use ITR 1 if it exceeds ₹5,000. Instead, appropriately disclose such income using ITR 2.
A company’s director
ITR 1 filing is not appropriate if you are a salaried person who also serves as a director of any business, even a private one. When necessary, use ITR 2 or ITR 3.
Keeping Shares of Unlisted Equity
ITR 1 cannot be filed by salaried individuals who own unlisted shares, or shares that are not traded on stock exchanges. For complete disclosure and reporting of such interests, the government requires the use of ITR 2.
Postponement of ESOP taxes
You shouldn’t file ITR 1 if you work for a startup and have chosen to postpone taxes on ESOPs. Different forms are needed for such tax agreements, usually ITR 2 or ITR 3.
In conclusion
Although most salaried people find ITR 1 Filing to be a simple and easy alternative, it’s important to be aware of its limits. If you file an ITR 1 even if you are not eligible, the Income Tax Department may issue a faulty return, penalties, or even legal action. Selecting the appropriate ITR form that appropriately depicts your financial condition is important if your income situation is complicated by factors like capital gains, numerous home properties, or overseas assets. Visit Karsaathi’s ITR 1 Filing guide for comprehensive help and a seamless filing process so you can make wise choices.
