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What ITR-1 Actually Is and Who It Is For
Before getting into what changed, a quick recap for anyone who files once a year and doesn’t think about this in between.
ITR-1, also called Sahaj, is the simplest income tax return form available. It is designed for resident individuals with straightforward income profiles. For AY 2026-27, ITR-1 can be used if all of the following apply.
Total income for the year does not exceed Rs. 50 lakh. Income comes from salary or pension, up to two house properties, interest income, agricultural income not exceeding Rs. 5,000, and, from this year, limited long-term capital gains. The taxpayer is a resident and ordinarily resident individual. No business or professional income is involved.
If any of these conditions are not met, ITR-1 is the wrong form and filing it anyway leads to a defective return notice.
Change One: Two House Properties Now Allowed
This is the big one for this filing season.
- Until last year, owning more than one house property immediately pushed a taxpayer out of ITR-1 eligibility, regardless of how simple everything else in the return was. A salaried person with one self-occupied home and one flat rented out to a tenant had to file ITR-2. No exceptions.
- From AY 2026-27, ITR-1 accommodates income from up to two house properties. This means a salaried individual earning Rs. 50 lakh or less, who owns two properties, can now stay on the simpler form provided all other eligibility conditions are met.
- What this looks like in practice: a salaried employee in Chennai with a self-occupied apartment and a second flat in the suburbs who earns Rs. 18,000 per month in rent can now file ITR-1 directly. Previously, that second property forced them to ITR-2. Now it does not.
- The form has also added a new dedicated field for unrealised rent, meaning rent that a landlord was legally entitled to but could not collect from a tenant during the year. Earlier, there was no separate disclosure for this. The new field helps landlords report this accurately without creating a mismatch in rental income figures.
- One important point to note: the two-property limit is firm. If you own three or more house properties, including a third property where you have deemed a notional rent calculation, ITR-2 is still required. The change is specifically an expansion from one property to two, not an unlimited allowance.
Change Two: Small Capital Gains Now Allowed in ITR-1
This is the second meaningful change for this year, and it affects a much larger number of taxpayers than people realise.
- Until AY 2025-26, any capital gains at all pushed a taxpayer out of ITR-1. Sold some equity mutual funds and made Rs. 30,000 in profit? File ITR-2. Redeemed some equity shares with Rs. 80,000 in long-term gains? File ITR-2. Even small, routine investment profits from the kind of SIPs and equity portfolios tens of millions of salaried Indians hold were enough to disqualify ITR-1.
- From AY 2026-27, long-term capital gains under Section 112A, which covers listed equity shares and equity mutual funds, can be reported directly in ITR-1, provided the gains do not exceed Rs. 1.25 lakh, and there are no capital losses to carry forward.
- This is genuinely useful for the vast majority of retail equity investors. Someone who redeemed a few mutual fund units and made Rs. 90,000 in LTCG over the year no longer needs to navigate the capital gains schedule in ITR-2. They can stay on ITR-1, report the gain there, and be done with it.
- The limit to understand: this only applies to LTCG under Section 112A. Any short-term capital gains, any LTCG above Rs. 1.25 lakh, any gains from property, gold, or other assets, and any situation where capital losses need to be carried forward to future years, all of these still require ITR-2.
Change Three: Aadhaar Enrolment ID No Longer Accepted
This is a compliance tightening rather than a benefit, but it catches people who have not updated their Aadhaar details in a while.
From AY 2026-27, the 28-digit Aadhaar Enrolment ID is no longer accepted on the ITR filing portal. The form now only accepts a valid 12-digit Aadhaar number. If you have been using an enrolment ID in previous years because your Aadhaar number was not yet available, that workaround no longer works. A valid 12-digit Aadhaar must be linked and available before filing.
Change Four: Deduction Claims Now Require Specific Sub-Section Details
For taxpayers claiming deductions under Sections 80C to 80U, the portal now requires selection from a drop-down menu specifying the exact clause and sub-section being claimed rather than entering a lump sum figure.
This matters practically because it forces more accurate reporting. Previously, someone claiming Rs. 1.5 lakh under 80C might just enter the total. Now the system asks you to specify how much went into PPF, how much into ELSS, how much into life insurance premiums, and so on. It takes a few extra minutes but produces a cleaner, more accurate return that is less likely to attract a deduction disallowance query later.
What Still Disqualifies You From ITR-1
The expansion to two house properties and small capital gains removes two of the most common reasons salaried taxpayers had to move to ITR-2. But several disqualifying conditions remain unchanged.
You cannot file an ITR-1 if you have business or professional income of any kind. If you are a director in any company, even one where you earn only a salary, ITR-2 is mandatory with no exceptions. If you are an NRI or not ordinarily resident, ITR-1 is not available regardless of income level. If your capital gains exceed Rs. 1.25 lakh, include short-term gains, or require carry-forward of losses, ITR-2 applies. If you own more than two house properties, including deemed let-out properties beyond the two-property limit, ITR-2 is required. Foreign assets of any kind, or claims under Section 89A for foreign retirement accounts, also disqualify ITR-1 for this year.
A Quick Eligibility Check Before Filing
Run through this before opening the filing portal.
Is total income below Rs. 50 lakh? Salary, pension, rent, and interest combined? Check. Are there two or fewer house properties? Check. Any capital gains? If yes, are they LTCG under Section 112A only, below Rs. 1.25 lakh, with no carry-forward losses? If no to any part of this, ITR-2 is needed. Any business income, directorship, NRI status, or foreign assets? If yes, ITR-2.
If all checks pass, ITR-1 is the correct form for AY 2026-27.
Scenarios That Help Clarify the New Rules
Salaried person, salary Rs. 18 lakh, one self-occupied flat, one rented flat at Rs. 15,000 per month, no capital gains.
This year: ITR-1. Previously: ITR-2 because of the second property.
Salaried person, salary Rs. 22 lakh, one house, equity mutual fund LTCG of Rs. 95,000, no losses to carry forward.
This year: ITR-1. Previously: ITR-2 because of any capital gains at all.
Salaried person, salary Rs. 30 lakh, two houses, LTCG Rs. 80,000 from mutual funds.
This year: ITR-1. Both the two-property expansion and the LTCG allowance apply together.
Salaried person, salary Rs. 25 lakh, one house, sold property with LTCG Rs. 12 lakh.
This year: ITR-2. Capital gains from property cannot be reported in ITR-1 regardless of the amount.
A salaried person who is also a director in a startup.
This year: ITR-2. Directorship disqualifies ITR-1 regardless of everything else.
Can I file ITR-1 if I own two house properties for AY 2026-27?
Yes. From AY 2026-27, ITR-1 allows income from up to two house properties. Previously, owning more than one property required filing an ITR-2, regardless of how simple the remaining income was. This change applies to both self-occupied and let-out properties. If you own three or more properties, you are still required to file ITR-2. All other ITR-1 eligibility conditions, including the Rs. 50 lakh total income limit and the restriction on business income continue to apply alongside the expanded property rule.
Can I report capital gains in ITR-1 for AY 2026-27?
Yes, but only long-term capital gains under Section 112A from listed equity shares or equity mutual funds, provided the gains do not exceed Rs. 1.25 lakh, and there are no capital losses to be carried forward to future years. Any short-term capital gains, LTCG above Rs. 1.25 lakh, gains from property or gold, or situations involving capital loss carry-forward require ITR-2. This is a new allowance for AY 2026-27 and was not available in earlier years when any capital gains at all disqualified a taxpayer from ITR-1.
Does owning two house properties and having small capital gains both qualify for ITR-1 together?
Yes. A taxpayer with salary income, two house properties, and LTCG under Rs. 1.25 lakh from equity mutual funds can file ITR-1 for AY 2026-27, provided all other eligibility conditions are met. The two new allowances apply together, not alternatively. This means a significant number of salaried individuals with a second flat and a small equity investment portfolio can now use the simpler Sahaj form instead of navigating ITR-2
What is the deadline for filing ITR-1 for AY 2026-27?
The deadline for filing ITR-1 for AY 2026-27 is July 31, 2026 for salaried individuals and pensioners not subject to tax audit. A belated return can be filed until December 31, 2026, with a late fee of Rs. 1,000 for income up to Rs. 5 lakh and Rs. 5,000 for income above Rs. 5 lakh, along with 1% monthly interest under Section 234A on any outstanding tax. A revised return to correct mistakes in the original filing can be submitted until March 31, 2027, for AY 2026-27, with a fee applicable for revisions made after December 31.