The Income Tax Department has enabled online filing of ITR-2 for assessment year 2026-27, allowing individuals with capital gains, multiple properties, foreign assets and other complex income sources to begin filing returns for income earned in FY26. According to reports from Business Standard, ITR-2 is specifically designed for individuals and Hindu Undivided Families (HUFs) who do not have business or professional income but earn through capital gains, multiple house properties, foreign assets, or overseas income. As explained by Avinash Rawani, member of the law and representation committee at Chamber of Tax Consultants, ITR-1 is meant only for resident individuals whose total income is up to ₹50 lakh and comes from salary, up to two house properties, specified other sources, and limited long-term capital gains. ITR-2 applies to individuals and Hindu Undivided Families who do not earn income from a business or profession, covering those with more complex income profiles including people drawing salary or pension, those who have made capital gains from shares, mutual funds, property, or other assets, individuals owning more than one house property, taxpayers with foreign assets or foreign income, those with agricultural income above ₹5,000, and anyone serving as a company director or holding unlisted equity shares.
For senior citizens filing ITR for AY 2026-27, the form selection depends entirely on income sources rather than age alone. As explained by CA Gaurav Singh Parmar, Associate Director at Fincorpit Consulting, ITR-1 (Sahaj) is for people having a pension, up to two house properties, and interest income below ₹50 lakh. ITR-2 is used when capital gains are involved or when you hold more than two house properties. ITR-3 comes into play if you have business income or professional income in a more direct way. ITR-4 (Sugam) is meant for presumptive taxation cases. Notably, super senior citizens aged 75 years and above with only pension and interest from specified banks may not need to file ITR at all, requiring only Form 125 submission to their bank for tax compliance. According to Mint, Form 125 (formerly Form 12BBA) is a mandatory declaration under the Income-tax Act, 2025, for 'Specified Senior Citizens' to exempt them from filing Income Tax Returns, available only to individuals aged 75 years or above who are residents of India with pension or interest income from specified banks.
Tax experts warn that filing the wrong return form can trigger defective return notices, delay refunds, and even lead to loss of tax benefits such as carry-forward of capital losses. According to reports from Business Standard, a common error is salaried individuals continuing to use ITR-1 despite having stock market transactions. Rawani explained that in the event of selection of incorrect ITR, the return will not be processed and a notice under Section 139(9) will be issued. If the taxpayer fails to rectify the defect within the prescribed timeline, the return may be treated as invalid, exposing the filer to penalties, interest, and consequences applicable to non-filers.
Taxpayers must shift to ITR-2 if they have short-term capital gains, long-term capital gains exceeding ₹1.25 lakh under Section 112A, foreign assets, foreign income, more than two house properties, or if they are non-residents, company directors, or holders of unlisted equity shares. As reported by Business Standard, Mrinal Mehta, joint secretary at Bombay Chartered Accountants' Society, noted that many taxpayers wrongly assume that small equity gains can still be reported through ITR-1. He cited the example of a salaried software engineer earning ₹2.8 lakh in long-term capital gains from mutual funds, since the gains exceed ₹1.25 lakh, the engineer must file ITR-2 and disclose details through Schedule 112A. The comprehensive eligibility criteria for ITR-2 includes individuals with agricultural income above ₹5,000, those with foreign assets or foreign income, and anyone serving as a company director or holding unlisted equity shares.
Tax professionals say AY2026-27 will see tighter scrutiny around reconciliation of data reported in AIS (Annual Information Statement), broker statements, foreign assets and capital gains schedules. According to reports from Business Standard, Rawani explained that taxpayers no longer need to split gains based on dates linked to the July 2024 capital gains tax rate changes, but reconciliation requirements have become stricter. Every broker contract note must broadly match AIS reporting, with mismatches now being a leading trigger for notices. Foreign asset disclosures remain another major compliance area, with Schedule FA requiring resident taxpayers to disclose overseas bank accounts, RSUs, ESOPs and foreign investments on a calendar-year basis.
The Income Tax Department has made online filing and Excel utilities for ITR-1, ITR-2 and ITR-4 available on the e-filing portal, allowing taxpayers to start preparing returns without waiting for deadlines to approach. The filing options for ITR-1 and ITR-4 were made available on May 15, following which the online filing facility for ITR-2 was activated on May 27. The due date for filing ITR-1 and ITR-2 for individual taxpayers is July 31, while taxpayers filing ITR-4 without audit requirements can file until August 31. Experts strongly advise taxpayers, particularly investors, not to wait until the July-end deadline rush, as early filing preserves rights to carry forward capital losses and provides more time to reconcile AIS mismatches.
