Tax Updates

Which ITR Form Should You File for AY 2026–27? Complete Selector Guide

Published on May 2, 2026

8 min read

Choosing the wrong Income Tax Return form is not just an administrative error — it makes your return legally defective, requiring you to refile and potentially exposing you to a notice under Section 139(9). For AY 2026–27 (FY 2025–26), the Income Tax Department has notified eight ITR forms — including the newly introduced ITR-B for search and seizure cases. With individual ITR filing season opening in May 2026 and the deadline of July 31, 2026 approaching fast, selecting the correct form from the start is the single most important step before you file ITR online. This complete selector guide by KC Shah & Associates — a CA in Mumbai firm managing tax filings for individuals, HUFs, startups, and businesses — walks you through every form, who it is for, and who it is not for.

All ITR Forms at a Glance — AY 2026–27

Here is a quick-reference overview of all notified ITR forms for AY 2026–27:

Form	Who Should File	Key Condition
ITR-1 Sahaj	Resident Individual (not HUF)	Salary/pension + 1 house property + other sources. Total income ≤ ₹50 lakh. No capital gains, no foreign assets.
ITR-2	Individual / HUF	Capital gains, more than 1 house property, foreign assets/income, or income > ₹50 lakh. No business income.
ITR-3	Individual / HUF	Income from business or profession (not under presumptive taxation). Also used by those who do not qualify for ITR-4.
ITR-4 Sugam	Individual / HUF / Firm (not LLP)	Presumptive income under Section 44AD (business), 44ADA (profession), or 44AE (transport). Total income ≤ ₹50 lakh.
ITR-5	Firms, LLPs, AOPs, BOIs, co-operative societies	Not companies or individuals.
ITR-6	Companies	All companies except those claiming exemption under Section 11 (religious/charitable trust).
ITR-7	Trusts, political parties, research institutions	Entities filing under Sections 139(4A) to 139(4F) — charitable trusts, electoral trusts, universities, etc.
ITR-B NEW	Individuals / entities subject to search or seizure	Filed where IT Department conducted search under Section 132 or survey under Section 133A. Block period return.

"The most common individual ITR filing error we see is a salaried person with mutual fund redemptions using ITR-1. The moment you have capital gains — even from a single SIP switch — you must move to ITR-2."

ITR Form Deep-Dives — Who Files What

ITR-1

Sahaj — The Simplest Form for Salaried Individuals

You CAN file ITR-1 if you are:

Salaried employee (Form 16) Pensioner One house property owner Interest income from savings / FD Family pension recipient Total income ≤ ₹50 lakh

You CANNOT file ITR-1 if you have:

Capital gains (any asset — equity, MF, property) More than one house property Foreign income or foreign assets Income from business or profession Agricultural income > ₹5,000 Income > ₹50 lakh Director in a company Unlisted equity shares held

AY 2026–27 note: The ITR-1 form now requires mandatory disclosure of PAN of each employer if you changed jobs during FY 2025–26, and a separate row for salary received after job change. The new standard deduction of ₹75,000 for salaried employees under the new regime is auto-populated from Form 16 data.

ITR-2

For Individuals & HUFs with Capital Gains or Complex Income

You SHOULD file ITR-2 if you have:

Capital gains (equity, MF, property, gold) More than one house property Foreign bank accounts / overseas assets Income from foreign sources (salary, dividends) ESOPs / RSUs from a foreign company Crypto / VDA income (Schedule VDA) Total income > ₹50 lakh Director in a company Unlisted equity shares held Agricultural income > ₹5,000

You CANNOT file ITR-2 if you have:

Income from business or profession

AY 2026–27 note: The Schedule CG in ITR-2 has been expanded to capture post-Budget 2024 capital gains rates: STCG on listed equity at 20% (Section 111A), LTCG on listed equity above ₹1.25 lakh at 12.5% (Section 112A), and LTCG on other assets at 12.5% without indexation. ITR-2 is now mandatory for anyone who received dividends and the aggregate TDS on dividend (Section 194) appears in their Form 26AS — even if the dividend itself was small.

ITR-3

For Business Owners, Professionals, and Freelancers with Actual P&L

You SHOULD file ITR-3 if you are:

Self-employed professional (lawyer, doctor, consultant, architect) Business owner maintaining books of accounts Freelancer with gross receipts > ₹75 lakh Trader / investor with speculative income (intraday equity trading) Partner in a firm (income via partnership) Business owner not opting for presumptive taxation

When ITR-3 vs ITR-4 is a decision:

If your business turnover is under ₹3 crore (for business under Section 44AD) or professional receipts are under ₹75 lakh (Section 44ADA), you can choose ITR-4 (presumptive) instead. But if you want to declare actual profit lower than the presumptive rate, or if you were previously under presumptive taxation and opted out, you must file ITR-3 and maintain books for 5 years.

AY 2026–27 note: Intraday equity trading (speculative business income) compulsorily requires ITR-3 — not ITR-2. Many active traders make the mistake of filing ITR-2 treating intraday as capital gains. Intraday profit is speculative business income and can only be set off against other speculative income, not against delivery-based STCG or LTCG.

ITR-4

Sugam — Presumptive Taxation for Small Business & Professionals

You CAN file ITR-4 (Sugam) if:

Business turnover ≤ ₹3 crore (Section 44AD) — with ≥ 95% digital receipts Professional receipts ≤ ₹75 lakh (Section 44ADA) Goods transport operator under Section 44AE Resident individual, HUF, or non-LLP firm Total income ≤ ₹50 lakh

You CANNOT file ITR-4 if you:

Have capital gains Are an LLP Are a director in a company or hold unlisted shares Have foreign assets or income Opted out of Section 44AD in any of the previous 5 years (5-year lock-in applies)

AY 2026–27 note: The Section 44AD turnover limit was enhanced in Budget 2023 to ₹3 crore (from ₹2 crore) for taxpayers with at least 95% digital receipts. If you crossed the old ₹2 crore limit but stayed under ₹3 crore, check whether your cash receipts are within the 5% threshold before filing ITR-4. Breaching this makes you ineligible for Section 44AD and mandates ITR-3 with a tax audit.

ITR-5

Firms, LLPs, AOPs, BOIs, and Co-operative Societies

Partnership firms (registered or unregistered)
Limited Liability Partnerships (LLPs)
Association of Persons (AOP) and Body of Individuals (BOI)
Co-operative societies
Local authorities
Artificial juridical persons (excluding companies and trusts)

Note: Partners file their individual returns in ITR-3 or ITR-2. The firm itself files ITR-5. The firm's income, losses, and capital accounts are disclosed in ITR-5 and interest/remuneration paid to partners is computed within it.

ITR-6

All Companies (Except Section 11 Exemption Entities)

All companies incorporated under the Companies Act (Private Limited, Public Limited, One-Person Companies, Section 8 companies that do not claim Section 11 exemption) must file ITR-6. This is the most detailed ITR form, requiring profit and loss statements, balance sheet, Schedule BP (business income computation), Schedule CG, Schedule FA (foreign assets), and ICDS (Income Computation and Disclosure Standards) adjustments. All companies are mandatorily required to e-file and e-verify through DSC (Digital Signature Certificate).

ITR-B

New for AY 2026–27 — Search and Seizure Cases Only

ITR-B is a brand new form introduced for the first time in AY 2026–27. It is applicable exclusively when the Income Tax Department has conducted a search or seizure under Section 132 or requisition under Section 132A, or a survey under Section 133A.

Covers a block period — up to 6 previous assessment years plus the year of search
Taxpayer must disclose undisclosed income, assets found during search, source of unexplained cash
Tax on undisclosed income: flat 60% + 25% surcharge = effective 75% under Section 113
Must be filed within 60 days of receiving the notice under Section 153C
Normal ITR (ITR-1 to ITR-7) is still filed separately for the regular assessment year

Important: If your business or residence was subject to a survey or search, do not file ITR-B without engaging a CA experienced in search and seizure tax matters. The legal and financial consequences are significant and time-bound.

Step-by-Step Decision Guide: Which Form Is Right for You?

Use this sequential decision flow to identify your correct ITR form for AY 2026–27:

Were you subject to an IT Department search or survey under Sections 132 or 133A? → Yes: File ITR-B. No: Continue to Step 2.

Are you a company incorporated under the Companies Act? → Yes: File ITR-6. No: Continue to Step 3.

Are you a firm, LLP, AOP, BOI, or co-operative society? → Yes: File ITR-5. No: Continue to Step 4.

Are you a trust, political party, research institution, or charitable organization filing under Sections 139(4A)–(4F)? → Yes: File ITR-7. No: Continue to Step 5.

Do you have income from a business or profession? → Yes: Go to Step 6. No: Go to Step 8.

Do you qualify for presumptive taxation (Section 44AD/44ADA/44AE) AND have no capital gains, no foreign assets, no directorship, and total income ≤ ₹50 lakh? → Yes: File ITR-4 (Sugam). No: Continue to Step 7.

You have business/professional income that does not qualify for presumptive taxation, or you have both business income and capital gains/foreign assets. → File ITR-3.

No business income. Do you have capital gains, more than one house property, foreign assets/income, directorship in a company, unlisted shares, or total income above ₹50 lakh? → Yes: File ITR-2. No: Continue to Step 9.

You have only salary/pension, one house property, and other income (interest, family pension, etc.) with total income ≤ ₹50 lakh. → File ITR-1 (Sahaj).

Special Scenarios: Which Form Applies?

Salaried Employee Who Sold Mutual Funds or Stocks

Even a single redemption of mutual funds or sale of listed equity shares generates capital gains (STCG or LTCG) and makes you ineligible for ITR-1. You must file ITR-2. This is one of the most frequently missed scenarios — particularly for salaried employees who did an SIP switch or redeemed a debt fund during FY 2025–26.

Freelancer with Multiple Clients (Moonlighter)

If you are employed full-time but also earn freelance income (graphic design, content writing, software consulting), your freelance income is professional income from business. You cannot file ITR-1 or ITR-2. You must file ITR-3 (if total receipts > ₹75 lakh or you maintain books) or ITR-4 (if receipts ≤ ₹75 lakh and you opt for presumptive at 50% of gross receipts under Section 44ADA). This is particularly relevant for AY 2026–27 given the growth of gig work and moonlighting.

NRI (Non-Resident Indian)

NRIs cannot use ITR-1 at all — ITR-1 is restricted to resident individuals. NRIs with only Indian salary/interest income use ITR-2. NRIs with business income in India use ITR-3. The residential status (resident, NRI, or RNOR) must be correctly determined using the 182-day and 60-day tests under Section 6 of the Income Tax Act before selecting the form.

HUF (Hindu Undivided Family)

HUFs cannot use ITR-1 (restricted to individuals only). An HUF with no business income files ITR-2. An HUF with business or professional income files ITR-3. An HUF qualifying for presumptive taxation files ITR-4.

Director in a Private Limited Company

Being a director — even if you hold no shares — makes you ineligible for ITR-1 and ITR-4. A company director must file at minimum ITR-2 (if no business income beyond the directorship salary) or ITR-3 (if you also have business income). Directors must disclose their directorship details in Schedule DI (Directorship Information).

Not Sure Which Form Applies to You?

Our CA team in Mumbai identifies the correct ITR form for your exact income profile — salary, capital gains, business, freelance, NRI — and files your ITR online accurately, on time, and with full AIS reconciliation.

Get Expert Help — Free Consultation

New Regime vs Old Regime — Does the ITR Form Change?

No — the ITR form you file is determined by your income sources, not your chosen tax regime. The same ITR-2 is used whether you opt for the new or old regime. However, the regime choice does affect which schedules you fill:

Under the new regime (default): Schedules for 80C, 80D, HRA, LTA, and home loan interest (Section 24b) are left blank or show zero. Standard deduction of ₹75,000 for salaried taxpayers is auto-applied.
Under the old regime: You fill Schedule VI-A for 80C/80D/80E deductions, Schedule HP for house property loss (home loan interest), and Schedule S for salary with full HRA computation.
Business owners and professionals (ITR-3 and ITR-4 filers) must note that once they opt out of the new regime to the old regime and then switch back to new, they cannot return to the old regime. This one-way restriction makes the initial regime choice extremely consequential for ITR-3 filers.

Consequences of Filing the Wrong ITR Form

Filing an incorrect ITR form does not automatically void your filing — but the IT Department issues a defective return notice under Section 139(9), giving you 15 days to file a revised return in the correct form. If you do not respond within 15 days, the return is treated as if never filed, triggering all late-filing consequences. Additionally, a defective return delays your refund processing significantly, as the CPC flags it for manual review.

How a CA in Mumbai Selects the Right Form for Every Client

At KC Shah & Associates, our individual ITR filing process begins with a structured income questionnaire that captures every possible income source — salary, capital gains from all asset classes, business income, freelance work, foreign assets, crypto transactions, rental income, and director interests. Based on this, we determine the correct form, the correct regime, and all applicable schedules before a single entry is made on the portal.

Our outsourced accounting services clients benefit from year-round transaction tracking, which means by May 2026, their capital gain statements, profit and loss accounts, and AIS reconciliations are already complete. If you file ITR online yourself, use this guide as your starting point — but if your income has any complexity, a CA in Mumbai is the fastest route to a notice-free filing.

Conclusion

For AY 2026–27, eight ITR forms are available — but the correct one for most individuals comes down to a clear decision: ITR-1 for simple salaried cases with no capital gains or foreign assets; ITR-2 for investors, directors, and NRIs; ITR-3 for business owners and freelancers maintaining books; ITR-4 for small businesses and professionals opting for presumptive taxation; and the new ITR-B for search cases. Getting this decision right before you file ITR online saves you from notices, refund delays, and the hassle of refiling. If you are unsure, reach out to KC Shah & Associates for a free consultation — we will identify your correct form in minutes and ensure your AY 2026–27 ITR is filed accurately and on time before July 31, 2026.

Written by CA Karan Shah

Founder of KC Shah & Associates. With over 5 years of experience in income tax, GST, and virtual CFO services, Karan helps startups and SMEs across India achieve financial clarity and stay audit-ready.

Back to Insights