Confused between ITR-1 and ITR-4? Know who should file ITR using Sugam and Sahaj forms for FY25?

Before filing the income tax return, selecting the appropriate ITR form is important for accuracy and compliance. More so because furnishing details in an incorrect ITR form may render the return invalid and attract consequences of non-filing of return.

This article explains the differences between these two forms and who should opt for them.

ITR-1 (Sahaj) is for resident individuals (Resident and Ordinarily Resident) whose total income does not exceed ₹50 lakh and is derived from salary or pension, one house property (excluding cases with brought-forward losses), and other income such as interest.

ITR-1 form cannot be used if the individual has capital gains (except long-term capital gains exempt under Section 112A), income from business or profession, agricultural income exceeding ₹5,000, more than one house property, or any foreign income or assets.

ITR-4 (Sugam) is for taxpayers, Hindu Undivided Families (HUFs), and firms (other than LLPs) whose total income does not exceed ₹50 lakhs and who opt to declare income under the presumptive taxation scheme under sections 44AD, 44ADA, 44AE of the Income Tax Act, 1961.

The presumptive taxation scheme is designed for small businesses, professionals, and transporters who prefer to declare income at a prescribed rate rather than maintain detailed books of account.

However, ITR-4 is not suitable for those with foreign income/assets, more than one house property, capital gains (except long-term capital gains exempt u/s 112A), or those who maintain regular books of account instead of opting for presumptive taxation.

Who should opt for these forms?

CA Dr Suresh Surana says ITR-1 is suited for salaried individuals with simple income profiles, while ITR-4 is for taxpayers engaged in small businesses or professions opting for presumptive taxation.

He further says that choosing the correct form is essential to ensure smooth processing of the return and avoid potential notices or rejections from the tax department.