ITR filing AY 2026–27: Difference between ITR-1 and ITR-4 — who should file which form?

ITR-1 and ITR-4 both apply to taxpayers with income of up to ₹50 lakh in a financial year and share several similar income sources. However, the main difference between the two is that ITR-1 is generally filed by salaried individuals or pensioners, while ITR-4 is meant for individuals earning income from business or profession.

Let’s take a closer look at the eligibility criteria for ITR-1 and ITR-4 for AY 2026-27, including who can file and who cannot.

What are the eligibility criteria for the ITR-1 form?

ITR-1, also known as Sahaj, is an income tax return form meant for resident individuals if their total income is up to ₹50 lakh in a financial year. The individuals should have income sources such as:

• Salary or pension
• Income from up to two house properties
• Family pension
• Agricultural income up to ₹5,000
• Long-term capital gains under Section 112A up to ₹1.25 lakh
• Other sources of income include interest from savings accounts, interest on bank, post office, or cooperative society deposits, interest received on income tax refunds, and interest on enhanced compensation.
• Other interest income

The form can also be used if the income of a spouse or minor child is clubbed with the taxpayer's income, provided the income falls within the above-mentioned categories.

Who cannot file the ITR-1 form?

ITR-1 cannot be filed by individuals who:

• Have income from lottery winnings, horse racing, or other forms of gambling
• Short-term capital gains or taxable long-term capital gains
• Hold unlisted equity shares
• Earn income from a business or profession
• Serve as a director in a company
• Are subject to TDS under Section 194N
• Have deferred tax liability on ESOPs received from an eligible start-up employer
• Have brought forward losses or losses to be carried forward under any head of income
• Owns any asset (including financial interest in any entity) outside India, has signing authority in any foreign account, or earns income from any source outside India
• Do not meet the eligibility conditions mentioned for filing ITR-1

What are the eligibility criteria for the ITR-4 form?

ITR-4, also known as Sugam, is an income tax return form meant for resident individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) that opt for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act.

The form can be filed if the taxpayer's total income does not exceed ₹50 lakh in a financial year and includes:

• Income from business or profession computed under the presumptive taxation scheme
• Salary or pension income
• Income from up to two house properties
• Agricultural income up to ₹5,000
• Long-term capital gains under Section 112A up to ₹1.25 lakh
• Income from other sources, including interest from savings accounts, interest on bank, post office, or cooperative society deposits, interest on income tax refunds, family pension, and interest received on enhanced compensation
• Other interest income

Who cannot file the ITR-4 form?

ITR-4 cannot be filed by taxpayers who:

• Have short-term capital gains
• Have long-term capital gains under Section 112A exceeding ₹1.25 lakh
• Earn income from lottery winnings or horse racing activities
• Have income taxable at special rates under Sections 115BBDA or 115BBE
• Hold unlisted equity shares
• Serve as a director in a company
• Have deferred tax liability on ESOPs received from an eligible start-up employer
• Have brought forward losses or losses to be carried forward under any head of income
• Owns any asset (including financial interest in any entity) outside India, has signing authority in any foreign account, or earns income from any source outside India
• Do not meet the eligibility conditions prescribed for filing ITR-4

ITR-1 is for resident individuals earning income from salary or pension, two house properties, and specified other sources, along with long-term capital gains under Section 112A up to ₹1.25 lakh, but it does not allow any business or professional income.

In contrast, ITR-4 includes the same income sources as ITR-1 but additionally covers income from business or profession taxed under the presumptive taxation scheme, making it suitable for taxpayers with business or professional earnings.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.