ITR Form Selection AY 2026-27: Which to File

Which ITR Form for AY 2026-27? Key Changes Explained

Picking the wrong ITR form means your return gets processed as defective under Section 139(9), triggering a notice from the CPC. With three significant changes for AY 2026-27 — ITR-1 now covers two house properties, ITR-3 gets an extended deadline for non-audit cases, and both ITR-1 and ITR-4 carry a new unrealised rent field — form selection errors are more likely than in prior years.

This guide covers every ITR form, who qualifies, and the changes that affect AY 2026-27 filing.

ITR Form Quick Reference

Comparison

ITR Form Selection — Who Uses Which Form

Parameter	Taxpayer Type	Correct ITR Form
Salary + one/two house properties + interest income (total < ₹50L)	Salaried individual, pensioner	ITR-1 (Sahaj)
Capital gains, multiple house properties, foreign assets/income	Salaried + investments	ITR-2
Business or professional income (non-audit)	Freelancer, consultant, small business	ITR-3
Presumptive business income (Section 44AD/44ADA/44AE)	Contractor, transporter, professional	ITR-4 (Sugam)
Partnership firm, LLP	Firm or LLP	ITR-5
Domestic company (Pvt Ltd, Ltd)	Company	ITR-6
Trust, charity, political party, research institution	Trust, section 8 company	ITR-7

Takeaway: When in doubt between ITR-2 and ITR-3: if you have business/professional income (even partial), use ITR-3.

ITR-1 (Sahaj) — AY 2026-27 Changes

Who Can File ITR-1

ITR-1 applies to a resident individual with:

Salary or pension income
One or two house properties (key change — see below)
Interest income (savings, FD, etc.)
Other sources income
Total income does not exceed ₹50 lakh

Change 1: ITR-1 Now Covers Two House Properties

Prior to AY 2026-27, ITR-1 was restricted to taxpayers with one house property. Owners of a second house — even if self-occupied or let out — were forced to move to ITR-2.

What changed: From AY 2026-27, ITR-1 accommodates up to two house properties. You can stay on ITR-1 if:

You own two houses (any combination of self-occupied and let-out)
Neither house has a home loan with interest exceeding ₹2 lakh (standard loss set-off limit)
Total income remains below ₹50 lakh

Who still needs ITR-2: If you own three or more properties, have foreign assets, or have capital gains — you cannot use ITR-1 regardless of this change.

Change 2: New Unrealised Rent Field in ITR-1

A new mandatory field for unrealised rent (rent the tenant did not pay) has been added to the house property section of ITR-1. This aligns with Section 25A of the Income Tax Act, which allows deduction of unrealised rent from Annual Letting Value.

Where to enter: In the house property section, after entering actual rent received, a new row asks for "Unrealised Rent" (rent legally due but not collected). Enter the amount here — the system automatically adjusts your Annual Letting Value (ALV) downward.

Condition to claim unrealised rent deduction:

Steps taken to recover rent (legal notice or court filing preferred)
Vacancy was not voluntary (tenant absconded or defaulted)

Who CANNOT Use ITR-1

Agricultural income exceeds ₹5,000
Director of a company
Holds unlisted equity shares
Has assets or signing authority outside India
Has brought-forward losses
TDS deducted under Section 194N (cash withdrawal above ₹1 crore)

ITR-2 — No Major Changes for AY 2026-27

ITR-2 remains the form for resident and non-resident individuals and HUFs with:

Capital gains (short-term or long-term)
More than two house properties
Foreign assets or foreign income
Director of a company
Unlisted equity shares

Step-by-Step Guide

When to Move from ITR-1 to ITR-2

Third House Property

Own a third house? ITR-2 is mandatory regardless of income level

Capital Gains

Any equity, mutual fund, property sale, or bond redemption in FY 2025-26 — use ITR-2

Foreign Assets

Bank account abroad, foreign shares, or RNOR/NRI status — ITR-2 only

Company Director

If you hold directorship in any company — cannot use ITR-1

Unlisted Shares

ESOP shares not listed on stock exchange — ITR-2 required

Source: Income Tax Act 1961 — ITR Applicability Rules

ITR-3 — Extended Deadline for AY 2026-27

Who Files ITR-3

ITR-3 applies to:

Individuals and HUFs with business or professional income not covered under presumptive taxation
Partners in a firm (on their personal return, reporting firm income)
Freelancers with multiple clients under Section 44AA books maintenance
Business owners whose turnover does not require tax audit (below ₹1 crore for business, ₹50 lakh for professionals)

Change 3: August 31, 2026 Extended Deadline for Non-Audit ITR-3

The Central Board of Direct Taxes has extended the ITR-3 filing deadline for non-tax-audit cases to August 31, 2026 (from July 31, 2026).

Who benefits:

Professionals (doctors, lawyers, architects, CAs, consultants) with gross receipts below ₹50 lakh
Small business owners with turnover below ₹1 crore who are not required to get accounts audited

Who does NOT get this extension:

Taxpayers liable for tax audit under Section 44AB — their deadline remains September 30, 2026 (subject to CBDT notification)
Taxpayers with international transactions (Transfer Pricing cases) — October 31, 2026

Deadline Timeline

ITR Filing Deadlines AY 2026-27

July 31, 2026
ITR-1, ITR-2, ITR-4
Salaried individuals, presumptive income taxpayers — standard deadline
August 31, 2026
ITR-3 (Non-Audit)
Business/professional income not requiring tax audit — extended deadline
September 30, 2026
ITR-3 (Tax Audit)
Cases requiring audit under Section 44AB — audit report (Form 3CA/3CB) also due
October 31, 2026
ITR-3 (Transfer Pricing)
International transactions with associated enterprises — Form 3CEB also due
December 31, 2026
Belated Return
Last date to file late return with ₹5,000 penalty (₹1,000 if income < ₹5 lakh)

New Unrealised Rent Field in ITR-3

Like ITR-1, ITR-3 also carries the new unrealised rent field in the house property schedule. If you own let-out property and a tenant has defaulted, enter the uncollected rent in the designated field. The same Section 25A conditions apply.

ITR-4 (Sugam) — Presumptive Income with Unrealised Rent Change

Who Files ITR-4

ITR-4 is for resident individuals, HUFs, and firms (excluding LLPs) opting for presumptive taxation under:

Section 44AD: Business turnover up to ₹3 crore (cash receipts ≤ 5%)
Section 44ADA: Professional receipts up to ₹75 lakh (cash receipts ≤ 5%)
Section 44AE: Goods carriage vehicles (up to 10 trucks)

Unrealised Rent Field — Also in ITR-4

The new unrealised rent field has been added to ITR-4 as well. Presumptive taxpayers who also own let-out property can now record and deduct unrealised rent without switching to ITR-3.

ITR-4 Restrictions

Cannot use ITR-4 if:

Turnover exceeds ₹3 crore (business) or ₹75 lakh (profession)
Capital gains arise during the year
Foreign income or assets exist
Director of a company or holds unlisted shares
Losses to be carried forward

ITR-5 — Firms, LLPs, AOPs

No changes for AY 2026-27. ITR-5 covers:

Partnership firms
LLPs
Association of Persons (AOP)
Body of Individuals (BOI)
Artificial Juridical Persons

Filing deadline: July 31, 2026 (non-audit); September 30, 2026 (audit cases).

Common ITR Form Selection Mistakes

Step-by-Step Guide

ITR Form Selection Errors That Trigger Defective Return Notice

Using ITR-1 with capital gains

Any equity or mutual fund redemption in FY 2025-26 makes ITR-1 invalid — use ITR-2

Using ITR-4 with foreign income

If you received payments from a foreign client directly, ITR-4 is not applicable — use ITR-3

Filing ITR-1 as company director

Directors must file ITR-2 minimum, even if directorship is nominal with no remuneration

Using ITR-2 when professional income exists

Any professional income (freelance, consulting) triggers ITR-3 — ITR-2 is for investment income only

ITR-4 when turnover exceeds ₹3 crore

Exceed the presumptive limit and ITR-3 with proper books becomes mandatory

Source: Section 139(9) — Defective Return; CPC Processing Guidelines

AY 2026-27 Changes Summary

Change	Form Affected	What Changed
Two house properties now allowed	ITR-1	Was limited to one house property; now covers up to two
New unrealised rent field	ITR-1, ITR-3, ITR-4	Section 25A deduction now explicitly captured in form
Extended deadline for non-audit cases	ITR-3	August 31, 2026 instead of July 31, 2026

Sources: Income Tax Act 1961 (Sections 10, 25A, 44AD, 44ADA, 44AE, 139); CBDT Notification on ITR Forms AY 2026-27; Income Tax Department Instructions for each ITR form. Verified against forms notified by CBDT. For taxpayer-specific advice, consult a Chartered Accountant.