ITR forms for FY 2021-22

ITR Forms for FY 2021-22

Updated for FY 2025-26 / AY 2026-27 and FY 2026-27 / AY 2027-28 — reflecting CBDT notified forms, the new tax regime default, and AIS-driven prefill.

For FY 2025-26 (returns filed in AY 2026-27), CBDT has notified ITR-1 through ITR-7, each tightly mapped to a specific taxpayer profile. ITR-1 (Sahaj) suits salaried residents with income up to ₹50 lakh and zero capital gains. ITR-2 covers capital gains, foreign assets, and directorships. ITR-3 is mandatory the moment business or professional income exists. ITR-4 (Sugam) handles presumptive taxation within the ₹50 lakh ceiling. From AY 2024-25, the new tax regime under Section 115BAC is the automatic default. Filing the wrong form is not a minor slip — it draws a defective-return notice under Section 139(9) with a 15-day rectification window and delays every rupee of your refund.

Why FY 2025-26 ITR Selection Differs from Earlier Years

The form framework you used for AY 2022-23 has been materially revised. If you are filing on memory or habit, stop and re-check. Here is what has changed since FY 2021-22:

• New tax regime is now the default. Section 115BAC applies automatically from AY 2024-25 unless you affirmatively opt out. This is not an election you make by ignoring the question — silence means the new regime.
• Virtual digital assets have a dedicated schedule. From AY 2026-27, ITR-2 and ITR-3 carry a separate Schedule VDA requiring date-wise transaction disclosure. Income from crypto, NFTs, and other VDAs is taxed at 30% under Section 115BBH with no loss set-off against any other head.
• AIS and TIS prefill capital gains, dividends, and interest. The Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS) pull STT-paid equity transactions, AMFI-reported mutual fund redemptions, and bank-reported interest data directly into the e-filing portal. Prefill is a useful starting point — it is not infallible, and accepting it without reconciliation is one of the most common mistakes in AY 2026-27 ITR filing.
• Budget 2025 revised new regime slabs and the Section 87A rebate. The effective tax on income up to ₹12 lakh under the new regime is nil after rebate; salaried individuals with income up to ₹12,75,000 pay nil tax after the ₹75,000 standard deduction. These changes did not exist in FY 2021-22.
• Section 194P and Form 12BBA allow eligible senior citizens (above 75) with only pension and interest from a specified bank to avoid filing a return altogether — a material relief for that category.

ITR-1 (Sahaj): The Form That Looks Easy But Catches People Out

ITR-1 Sahaj eligibility is narrower than most salaried taxpayers assume. Its simplicity is the very reason it creates problems — people reach for it by default and discover their disqualification only when the CPC sends a notice.

Who qualifies for ITR-1

You can use ITR-1 only if you are:

• A resident individual (not a Not Ordinarily Resident, not a Non-Resident) for the entire financial year
• With total income not exceeding ₹50 lakh
• Where that income comes exclusively from:
• Salary or pension
• One house property (rental income or deemed rent; home loan interest deduction under Section 24 is available)
• Family pension (taxable under Section 57)
• Agricultural income not exceeding ₹5,000
• Other sources — interest on savings accounts, fixed deposits, recurring deposits — but not lottery winnings, income from racehorses, or income taxable at special rates under Chapter XII

The disqualifiers — every one of these knocks you out of ITR-1

• Any capital gains — even a ₹500 LTCG on equity mutual funds redeemed during the year
• More than one house property — owned, rented out, or deemed let out
• Foreign assets or foreign income of any amount
• Directorship in any company — including dormant companies where you are a nominal director
• Investment in unlisted equity shares at any point during the year
• Brought-forward losses from any previous assessment year
• Agricultural income exceeding ₹5,000
• Total income exceeding ₹50 lakh

The AIS-driven prefill has made the capital gains disqualifier almost impossible to miss at the CPC's end. If your AIS shows mutual fund redemption proceeds reported by AMFI and you file ITR-1, the system flags a schedule mismatch and the 139(9) notice follows within weeks.

ITR-2: Capital Gains, Foreign Assets, and Schedule VDA

ITR-2 is the correct form for individuals and HUFs who have complexity beyond a single salary stream — but no business or professional income. It is the form that covers most of the ITR-1 disqualifiers.

When you must use ITR-2

• Capital gains of any type — LTCG on equity (Section 112A), STCG on debt mutual funds (taxable at slab rates from April 2023), LTCG on property, STCG on listed equity
• More than one house property
• Foreign income, foreign bank accounts, ESOPs from a foreign parent company
• Directorship in any company
• Unlisted equity share holdings
• Total income exceeding ₹50 lakh
• Income from virtual digital assets
• Section 89A relief on retirement funds held in notified countries (UAE, USA, Canada, UK, and others notified by CBDT)

Schedule VDA in AY 2026-27

Schedule VDA requires you to list each VDA transfer with: date of acquisition, date of transfer, cost of acquisition, sale consideration, and gain. Key points:

• VDA losses cannot be set off against any other income — not even against gains from a different VDA
• The 1% TDS deducted by exchanges under Section 194S appears in your Form 26AS; confirm this matches the exchange-issued TDS certificate
• Any shortfall between TDS credit and the 30% tax on net VDA gains will appear as outstanding demand after processing

Reconciling capital gains in AIS before filing

Equity capital gains are the most error-prone part of prefill. Before accepting AIS values:

1. Download your broker's capital gains statement covering April 1, 2025 to March 31, 2026
2. Match it ISIN by ISIN against the AIS capital gains data
3. Verify that pre-January 31, 2018 equity acquisitions use the grandfathered Fair Market Value (FMV as on January 31, 2018) as cost of acquisition for computing LTCG under Section 112A
4. Submit an AIS feedback response for any incorrect entry before filing — this creates a documented record

ITR-3: Business Income, F&O, and Professional Returns

ITR-3 is mandatory for any individual or HUF with proprietary business income, professional income on an actual basis, or certain trading income. There is no turnover threshold below which you can avoid ITR-3 if business income is present.

Who must file ITR-3

• Proprietors carrying on any business or profession and reporting income on an actual basis (books of accounts, not presumptive)
• Partners in a firm receiving salary, bonus, commission, or interest from the firm under Section 40(b) — even if the firm itself is separately assessed and even if the partner has no other business
• Futures and Options (F&O) traders — derivatives income is always treated as non-speculative business income under Section 43(5), making ITR-3 unavoidable regardless of how infrequently you trade
• Intraday equity traders — speculative business income under Section 43(5)
• Taxpayers who elected presumptive taxation (44AD or 44ADA) in any year from AY 2017-18 to AY 2021-22 but declared income below the deemed percentage — they are barred from re-entering 44AD for five consecutive years and must use ITR-3 during that period

What ITR-3 contains that other forms do not

• Part A-BS (Balance Sheet) and Part A-P&L (Profit and Loss Account) — mandatory where total income exceeds ₹2.5 lakh or turnover exceeds ₹25 lakh
• Schedule DEP — depreciation under Section 32, asset-block-wise
• Section 44AB audit details — if your turnover exceeds ₹1 crore (actual-basis business) or ₹50 lakh (actual-basis profession); higher thresholds of ₹10 crore (business) or ₹50 lakh (profession) apply where cash receipts and payments are within specified limits
• GST turnover cross-reference — ITR-3 now asks for GSTIN-wise turnover, which the department reconciles against GSTR-1 and GSTR-9 data

ITR-4 (Sugam): Presumptive Taxation in AY 2026-27

ITR-4 Sugam is the simplest form for eligible self-employed taxpayers — it replaces actual books with a deemed income rate. But ITR-4 Sugam presumptive eligibility has several cumulative conditions, all of which must be satisfied simultaneously.

Eligibility — all conditions must be met

1. Eligible taxpayer type: Resident individual, resident HUF, or resident firm — but not a Limited Liability Partnership (LLP)
2. Nature of income: Presumptive business income under Section 44AD, presumptive professional income under Section 44ADA, or presumptive freight income for goods carriage under Section 44AE; income from salary, one house property, and other sources may also be included subject to the total income ceiling
3. Total income ceiling: ₹50 lakh — across all income heads combined
4. Turnover ceilings (Budget 2023 enhanced limits, continuing in FY 2025-26):
5. Section 44AD: ₹3 crore if 95% or more of receipts and payments are through banking channels; ₹2 crore otherwise
6. Section 44ADA: ₹75 lakh if 95% or more of gross receipts are via banking channels; ₹50 lakh otherwise
7. No virtual digital asset (VDA/crypto) income of any kind
8. No foreign assets or foreign income
9. Not a director in any company
10. No holdings in unlisted equity shares

Deemed income rates under presumptive taxation

You may declare income higher than the deemed percentage — you simply cannot declare lower without triggering an audit obligation under Section 44AB and losing the right to re-enter 44AD for five years (Section 44AD(4)).

ITR-5, ITR-6, and ITR-7: Entity Returns at a Glance

These forms cover non-individual taxpayers. Picking the wrong one results in an invalid return — not merely a defective one.

A recurring error: a Section 8 company (not-for-profit registered under Companies Act 2013) that obtained 12A registration files ITR-6 because it is technically a "company." The 12A registration moves the filing obligation to ITR-7. Filing ITR-6 in this situation results in denial of Section 11 exemption.

New Tax Regime as Default: Two Decisions Before You Start Data Entry

The new tax regime as default position requires you to make two separate decisions — and confusing them is expensive.

Decision 1: Which regime produces lower tax?

Under Finance Act 2025 (effective FY 2025-26 / AY 2026-27), the new regime slabs are revised and the Section 87A rebate is enhanced: for income up to ₹12 lakh, the rebate eliminates tax entirely. Salaried individuals with gross income up to ₹12,75,000 — after deducting the ₹75,000 standard deduction — pay nil tax under the new regime. For income above ₹12 lakh, the applicable rates and surcharge apply as notified under Finance Act 2025; verify the current income-tax rate notification on incometax.gov.in before filing.

Deductions forfeited under the new regime include:

• Section 80C (LIC premiums, PPF, ELSS, principal repayment): up to ₹1,50,000
• Section 80D (health insurance premium): up to ₹25,000 self / ₹50,000 senior citizen parents
• Section 24(b) interest on home loan for self-occupied property: up to ₹2,00,000
• HRA exemption and LTA exemption
• All other Chapter VI-A deductions

If your total of these deductions exceeds approximately ₹3.75 lakh, run both calculations explicitly before choosing — the old regime may yield lower total tax despite its higher headline rates.

Decision 2: How do you exercise or reverse the choice?

• Salaried individuals with no business income: Select the regime directly in the ITR form. You can switch between regimes every year — there is no lock-in, no separate form, no time limit beyond the return due date.
• Business income holders: If you want the old regime, file Form 10-IEA on or before the ITR due date. Once you opt out, you cannot re-enter the new regime in any subsequent year in which you continue to have business income. This is a near-permanent election — treat it accordingly.
• New to business income this year: If FY 2025-26 is the first year you have business income (for example, you started freelancing), you have the same Form 10-IEA requirement for the old regime from this year itself.

Worked Examples: Form Selection and the Real Cost of Getting It Wrong

Example 1: Arjun's mutual fund oversight — ITR-1 vs. ITR-2

Arjun is a salaried software engineer. FY 2025-26 details:

• Gross salary: ₹10,00,000; standard deduction ₹75,000; net salary ₹9,25,000
• Debt mutual fund redeemed in November 2025: proceeds ₹92,000, cost ₹76,000, STCG ₹16,000
• No foreign assets, no business income, no directorship, one house property

What Arjun does: Files ITR-1, ignoring the mutual fund redemption. What happens: AIS shows AMFI-reported redemption proceeds of ₹92,000. The CPC's validation engine flags a discrepancy: capital gains income is present in AIS but not reported in ITR-1. A Section 139(9) defective-return notice arrives within 4 weeks, asking Arjun to refile using the correct form. Cost of the error: Refund is frozen during the notice-response period; if Arjun misses the 15-day response window, the return is treated as not filed and Section 234F late-filing fees apply from July 31, 2026. Correct action: File ITR-2, report ₹16,000 STCG in Schedule CG under the "Other than securities" category (debt funds), taxable at slab rate.

Example 2: Dr. Meena — capital gains that disqualify ITR-4

Dr. Meena is a consultant physician. FY 2025-26:

• Professional receipts: ₹68,00,000, all via NEFT/RTGS (100% digital)
• Presumptive income under 44ADA: 50% × ₹68,00,000 = ₹34,00,000
• LTCG on equity mutual funds: ₹2,30,000
• Total income: ₹36,30,000 — within ₹50 lakh ceiling

Looks eligible for ITR-4? No. The ₹2,30,000 LTCG is a categorical disqualifier from Sugam, regardless of amount. Correct form: ITR-3, electing 44ADA in Schedule BP for the professional income and reporting LTCG under Section 112A in Schedule CG. Dr. Meena must also confirm she has not opted out of 44ADA in any of the preceding five years below the deemed rate.

Example 3: Prakash's late filing — Section 234F in rupees

Prakash is a graphic designer with presumptive income of ₹8,00,000 under 44ADA. Due date for AY 2026-27: July 31, 2026.

If Prakash's total income had been ₹4,80,000 (below ₹5 lakh), the late fee caps at ₹1,000 regardless of how late he files. For most self-employed professionals, the ₹5,000 / ₹10,000 structure applies.

Common Mistakes That Trigger Section 139(9) Defective-Return Notices

These are the mistakes most frequently flagged by the CPC in ay 2026-27 itr filing:

1. Filing ITR-1 when any capital gains exist. Even a ₹100 STCG from a liquid fund triggers this. There is no de-minimis threshold.

1. Filing ITR-4 with foreign assets or crypto income. Both are absolute disqualifiers. A foreign savings account opened years ago and now dormant still counts.

1. Filing ITR-2 when F&O or intraday income is present. Derivatives and intraday equity are business income by statute — ITR-3 is the only valid form, no exceptions.

1. Not filing Form 10-IEA when opting out of the new regime with business income. Without the form, the old regime election is invalid. The CPC treats you as being in the new regime and disallows every Chapter VI-A deduction you claimed, creating an outstanding demand.

1. Accepting AIS prefill without verifying. AIS can double-count dividends (once from the company's TDS return, once from broker reporting), reflect wrong cost of acquisition, or include a transaction in the wrong financial year. Always reconcile before accepting.

1. Bank account not pre-validated for refund. The return processes normally but the refund is held. Pre-validate your bank account at the incometax.gov.in portal before filing, not after.

1. Schedule CG total not matching total income. The CPC's validation engine checks arithmetic consistency across every schedule. A ₹1 rounding difference between Schedule CG and the total income computation triggers an error flag.

1. Missing audit details where Section 44AB applies. If your turnover exceeds the applicable threshold and the CA's membership number, registration number, and audit report date are absent, the return is automatically classified defective.

From AIS Reconciliation to Verified Return: A Step-by-Step Sequence

Here is a practical sequence you can follow today for your FY 2025-26 return:

1. Download your AIS and TIS from the incometax.gov.in portal (under the AIS tab). These cover all financial transactions reported about you for FY 2025-26.
2. Download Form 26AS from TRACES via the e-filing portal. Cross-check every TDS entry, TCS credit, advance tax payment, and self-assessment tax against your own records.
3. Submit AIS feedback for any incorrect or duplicated entry before filing. Feedback creates a documented trail; it does not delay filing.
4. Determine your form using this decision path:
5. Business or professional income → ITR-3 (or ITR-4 if presumptive and all conditions met)
6. Capital gains, foreign assets, directorship, or income > ₹50 lakh → ITR-2 (if no business income) or ITR-3 (if business income also present)
7. Only salary, single property, no capital gains, resident, income ≤ ₹50 lakh → ITR-1
8. Elect your tax regime. Run the tax calculation under both regimes. If you have business income and are choosing the old regime, prepare and file Form 10-IEA.
9. Use the offline JSON utility for complex cases — multiple capital gains transactions, foreign assets, depreciation schedules, business income. For simple salaried returns, the online portal form is adequate.
10. Validate the JSON using the offline utility's built-in validator. Resolve every error (red flags) and review every warning (yellow flags) before generating the final JSON.
11. Upload the JSON and complete e-verification: Aadhaar OTP (fastest), net-banking EVC, demat account EVC, or DSC (mandatory for companies, LLPs, and audit cases). If you use none of these, print and sign the ITR-V in blue ink and send it by ordinary or speed post to CPC Bengaluru within 30 days of filing.
12. Track processing status at incometax.gov.in. CPC typically processes verified returns within 20–45 days; refunds are credited to the pre-validated bank account linked to your PAN.

For FY 2026-27 (AY 2027-28) returns, check for any revised CBDT notified forms and amended slabs following Union Budget 2026, as forms are re-notified annually and may carry additional schedules or modified disclosure requirements.

Key Takeaways

• Form selection is the first task, not an afterthought. The wrong form triggers a 139(9) defective-return notice and freezes your refund until corrected.
• ITR-1 Sahaj eligibility is narrower than it appears. Any capital gains, foreign asset, directorship, unlisted share holding, multiple house property, or income above ₹50 lakh disqualifies you — with no de-minimis exception.
• F&O and intraday trading always require ITR-3, regardless of whether your trading is occasional or large-scale. These are business income by statute.
• The new tax regime is the default from AY 2024-25. Salaried individuals can switch annually via the ITR form; business income holders must file Form 10-IEA to opt out, and reversing that decision is very difficult once made.
• AIS prefill is a cross-check tool, not a replacement for your own records. Verify every capital gain, dividend, and interest figure against broker statements and bank certificates before accepting.
• Late filing under Section 234F costs ₹5,000 for income above ₹5 lakh if filed after the due date but before December 31 of the assessment year, rising to ₹10,000 thereafter — avoidable costs that accrue purely from delayed action.
• For FY 2026-27 / AY 2027-28: Monitor the CBDT notification for ITR forms post-Union Budget 2026; the slab rates, rebate thresholds, and any schedule-level changes announced for that year will govern those returns.