ITR-1 Sahaj AY 2026-27: New Two-House Rule & Easy Filing Guide

The ITR-1 Sahaj AY 2026-27 is the simplest return form in the Indian tax system, and as of this year, it covers a meaningfully wider slice of salaried taxpayers than ever before. CBDT Notification 45/2026 expanded ITR-1 in two ways that genuinely matter: a second house property is now allowed, and small equity long-term capital gains up to ₹1.25 lakh no longer push you to ITR-2.

If you are a salaried employee or pensioner with a clean income profile, this is the form for you. Here is exactly who qualifies, what changed, and how to file without triggering a Section 139(9) defective return notice.

Who Can File ITR-1 Sahaj for AY 2026-27

You can use ITR-1 Sahaj AY 2026-27 only if you tick every one of these boxes:

• Residential status: Resident individual (Ordinarily Resident only – RNOR and NRI are excluded).
• Total income: Up to ₹50 lakh in FY 2025-26.
• Income sources: Limited to salary or pension, income from up to two house properties, other sources (interest, dividends, family pension), agricultural income up to ₹5,000, and long-term capital gains under Section 112A up to ₹1.25 lakh.
• Capital gains: Only Section 112A LTCG (listed equity shares and equity mutual funds) up to ₹1.25 lakh – no STCG, no other LTCG, no carry-forward losses.

If any single condition fails, you must file ITR-2 (or ITR-3 / ITR-4, depending on your income profile).

The Two Big Changes in ITR-1 AY 2026-27

Change 1: Two House Properties Now Allowed

Previously, ITR-1 capped you at one house property. Owning a second flat, even a vacant inherited home or a parents’ apartment, automatically disqualified you and pushed you into ITR-2.

From AY 2026-27, the expanded ITR-1 covers up to two house properties. One can be self-occupied (notional rent nil) and the other let-out, both self-occupied, or both let-out. The combined income from both properties (after standard deduction and home loan interest under Section 24) flows into your Income from House Property head.

This change alone makes ITR-1 the right form for an estimated additional 8 to 12 lakh salaried filers annually who were previously stuck on ITR-2.

Change 2: LTCG Under Section 112A Up to ₹1.25 Lakh

The second relief targets retail equity investors. Section 112A, covering long-term gains on listed equity shares and equity-oriented mutual funds, has a basic exemption of ₹1.25 lakh per financial year. For AY 2026-27, you can now report Section 112A LTCG within this exemption directly in ITR-1, provided:

• You have no short-term capital gains (Section 111A or otherwise).
• You have no other long-term capital gains (debt funds, real estate, gold, listed bonds).
• You have no brought-forward losses or carry-forward losses.
• You are not offsetting LTCG against any other head.

If even one of these conditions fails, say, you sold an ELSS unit with ₹40,000 gain and also have a ₹15,000 STCG from a single equity trade, you must file ITR-2.

Who Cannot File ITR-1 (Even If You Earn Salary)

ITR-1 disqualifications are absolute. If any of these apply, you must escalate to ITR-2 or ITR-3:

• You are an NRI, an RNOR, or a Hindu Undivided Family (HUF).
• Total income exceeds ₹50 lakh.
• You are a director in any company (listed or unlisted, public or private).
• You hold any unlisted equity shares during the financial year – including shares received under ESOPs of an unlisted parent.
• You have deferred tax on ESOPs of an eligible startup (Section 17(2)(vi)).
• You own more than two house properties.
• You have business or professional income of any kind, including freelance gigs and side consulting.
• You have foreign income or foreign assets (a single foreign bank account, foreign mutual fund, or vested foreign RSU pushes you to ITR-2).
• You have agricultural income above ₹5,000.
• You have any capital gain that does not fit within the Section 112A ₹1.25 lakh exemption.
• You are claiming relief under Section 90, 90A, or 91 (DTAA relief on foreign tax).

ITR-1 Income Sources: What You Can and Cannot Report

Filing ITR-1 Sahaj AY 2026-27: Step-by-Step

Step 1: Gather Your Documents (Before Opening the Portal)

You need: Form 16 from your employer, AIS and TIS from the e-filing portal, bank interest certificates and FD statements, Form 26AS, capital gains report from your broker (if you have 112A LTCG), home loan interest certificate (if you have a housing loan), and rent receipts plus the landlord’s PAN (if claiming HRA in old regime).

Step 2: Reconcile AIS Against Your Records

Pull your AIS from the official e-filing portal and reconcile every entry: salary TDS, interest income, dividend, capital gains, large deposits, credit card spends. Mismatches are the single biggest trigger for post-filing notices.

Step 3: Choose Your Tax Regime

The new regime under Section 115BAC is the default for AY 2026-27. If your old-regime tax (with 80C, 80D, HRA, LTA, 24(b) home loan interest) is lower, you must explicitly opt out at the start of the form. Re-run the math both ways before deciding. For two-property owners with home loan interest above ₹2 lakh, the old regime often still wins.

Step 4: Enter Income Heads Carefully

For two house properties, classify each as self-occupied or let-out. For self-occupied, the income is nil but you can claim interest on borrowed capital up to ₹2 lakh (capped, old regime). For let-out, declare gross rent, deduct municipal taxes paid, take the 30% standard deduction, and deduct full interest.

For LTCG under Section 112A, enter the scrip-wise or fund-wise details exactly as shown in your broker’s capital gains report. Grandfathering value (closing price on January 31, 2018) applies to acquisitions before that date.

Step 5: Verify TDS and Tax Credits

Schedule TDS auto-populates from Form 26AS / AIS. Double-check that every TDS entry matches your records, especially for interest, dividend, and rent TDS deducted by your employer.

Step 6: Validate, Submit, and E-Verify Within 30 Days

Run the in-utility validation, fix every error and warning, then submit. E-verify within 30 days using Aadhaar OTP, net banking, or bank account validation. An unverified return is treated as not filed.

Common ITR-1 Mistakes That Trigger Notices

1. Filing ITR-1 with a single ESOP grant from an unlisted parent. This disqualifies you even if you never sold a share. Use ITR-2.
2. Missing a second savings account in interest income. AIS sees every bank’s TDS, so your ITR must match.
3. Claiming HRA without rent receipts above ₹1 lakh annual. You must report the landlord’s PAN. Missing PAN means your HRA will be disallowed.
4. Reporting LTCG of ₹1.30 lakh and assuming the ₹1.25 lakh exemption keeps you on ITR-1. No, once total 112A LTCG exceeds ₹1.25 lakh, you must file ITR-2.
5. Forgetting to opt out of the new regime when old regime is more beneficial. Once filed, you cannot switch for that AY.
6. Mismatching Form 16 salary with Section 17 breakup. The AIS shows your employer’s TDS return, while Part B of Form 16 is the supporting detail. Both must perfectly agree.

ITR-1 Sahaj vs ITR-2: When to Upgrade

The decision tree is brutal in its simplicity:

When in doubt, file ITR-2. It accepts everything ITR-1 accepts plus more, and there is absolutely no penalty for using a heavier form. The reverse (using ITR-1 when you needed ITR-2) is what gets you a defective return notice.

ITR-1 Filing Deadline and Late Fees

Late fee under Section 234F is ₹1,000 if total income is up to ₹5 lakh, and ₹5,000 if above ₹5 lakh. Interest under Section 234A applies at 1% per month on any unpaid tax, calculated from August 1 onwards.

How Reconscribe Cuts ITR-1 Filing Time in Half

Even ITR-1, the supposedly simple form, collapses into hours of typing when you have two property statements, a five-broker AIS, multiple bank interest certificates, and a Form 26AS that doesn’t quite match. Reconscribe ingests all of it: PDFs, CSV exports, AIS downloads, and broker reports. It outputs a clean, pre-reconciled sheet you can paste straight into the ITR-1 offline utility. Every figure is already securely matched against your AIS.

→ Start your ITR-1 reconciliation with Reconscribe

Frequently Asked Questions

Can I file ITR-1 if I have a single foreign mutual fund?

No. A single foreign asset, even one US-listed ETF, forces you to ITR-2.

Does dividend income disqualify me from ITR-1?

No. Dividend income is reported under “Income from Other Sources” and is fully compatible with ITR-1.

What if my LTCG is exactly ₹1.25 lakh?

You can still file ITR-1. The ₹1.25 lakh figure is inclusive, meaning gains up to and including ₹1.25 lakh qualify. Gains of ₹1.25 lakh and ₹1 (₹1,25,001) trigger ITR-2.

I switched jobs mid-year and have two Form 16s. Can I still file ITR-1?

Yes, multiple Form 16s do not disqualify you. Simply combine both salaries under the Income from Salary head and ensure that the total TDS matches Form 26AS.

Is e-verification mandatory?

Yes. You have 30 days from filing to e-verify. Beyond 30 days, the return is treated as not filed and you must file a belated return with the applicable late fees.

Related guides:

• 🏠 Master index: ITR Forms AY 2026-27 – Pick the Right Return
• 🔵 ITR-2 Guide: For Capital Gains, Multiple Properties, and Foreign Income
• 🟣 ITR-4 Sugam: If You Have Side Freelance Income

Author: Aman · Last reviewed: May 26, 2026 · CBDT Notification: 45/2026

Official reference: Income-tax Act, 2025 (as amended by the Finance Act, 2026), Income Tax Department.