When a salaried taxpayer must file ITR-2 instead of ITR-1 for AY 2026-27

Taxpayers having income from one or two sources are usually confident about the correct ITR form applicable to them. However, most taxpayers have income from multiple sources, and they often get confused about which form to file.

Even as the first due date of Income Tax Return (ITR) filing for AY 2026-27 on July 31 is approaching fast, many salaried taxpayers are not sure about which form to file.

The income tax rules prescribe different ITR forms for different taxpayers based on their sources of income. As such, taxpayers having income from salary can file up to four ITR forms based on their income from multiple sources. This article explains when a salaried taxpayer must file the ITR-2 instead of the ITR-1 form, based on inputs from Taxmann.

First, take a look at when the ITR-1 form can be filed.

A resident salaried taxpayer can file ITR-1 when they have the following incomes and expenses:

• Income from salary

• Income or loss from two house properties, excluding brought forward losses and losses to be carried forward

• Long-term capital gains taxable under Section 112A of the Income-tax Act, 1961 and not exceeding ₹1.25 lakh

• Family pension

• Income from other sources, including income chargeable to tax at special rates. These include winnings from the lottery and race horses or losses under this head

• If you have spent over ₹2 lakh on foreign travel

• If you have paid over ₹1 lakh in electricity bills

• If you have paid ₹25,000 or more as TDS. The limit for senior citizens is ₹50,000.

• You have kept ₹50 lakh or more in a savings bank account.

When is ITR-2 filing mandatory?

ITR-1 is required to be filed by salaried taxpayers having straightforward income profiles. However, once a salaried taxpayer starts having income sources, assets, capital gains, foreign holdings, loss set-offs, or other tax reporting requirements that fall outside the purview of ITR-1, s/he must switch to ITR-2.

To say it differently, filing ITR-2 becomes mandatory when a salaried person's income and disclosures are more complex than what can be reported in ITR-1. Some common examples include capital gains from shares or property, foreign assets or income, agricultural income above the prescribed limit, income exceeding ₹50 lakh, or carried-forward losses.

Generally, a salaried taxpayer must file ITR-2 in the following situations:

• When your total income over ₹50 lakh

• When you are a director in any company

• When tax payment on ESOPs allotted by an eligible start-up has been deferred

• When you have income or loss from more than two house properties, or when you have brought forward loss or losses to be carried forward under the head House Property

• When you have long-term capital gains taxable under the following provisions: 1) Section 112A, and it exceeds ₹1.25 lakh. 2) Short-term capital gains taxable under any provision

• If you held unlisted equity shares at any time during the previous year

• If you have capital gains/loss on the sale of investments/property

• If you have dividend income exceeding ₹10 lakh taxable under Section 115BBDA

• If you have an unexplained income, such as cash credit, unexplained investment, etc. taxable at 60% under Section 115BBE

• If you are claiming a deduction under Section 57 from income taxable under the head 'Other Sources', excluding the deduction allowed from family pension.

• If you are claiming a deduction under Section 80QQB or 80RRB in respect of royalty from patent or books

• If you are claiming a deduction under section 10AA or Part-C of Chapter VI-A

• If you have an agricultural income over ₹5,000

• If you have any brought forward losses or losses to be carried forward under any head of income

• When you are taxable in respect of an income, but TDS of such income has been deducted in the hands of any other person. For example, in cases where clubbing of income, Portuguese Civil Code, etc. apply

• If you are claiming tax relief under sections 90, 90A or 91

• When you have income from foreign sources, or when s/he has foreign Assets including financial interest in any foreign entity. ITR-2 can also apply when an individual is signing authority in any account outside India

• When an income has to be apportioned in accordance with Section 5A

• If the tax has been deducted on cash withdrawal under Section 194N

• If you have deposited more than ₹1 crore in one or more current accounts

• If you have spent over ₹2 lakh on foreign travel

• If you have spent over ₹1 lakh on the electricity bill

• If you have paid ₹25,000 or more as TDS.

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The due date to file ITR-1 and ITR-2 is July 31, 2026.