For Assessment Year (AY) 2025-26 corresponding to Financial Year (FY) 2024-25, the Income Tax Department has released the Income Tax Return (ITR) forms, ITR-1 and ITR-4. However, it is important to understand that these two forms are meant exclusively for resident individuals and cannot be used by Non-Resident Indians (NRIs) or Resident but Not Ordinarily Residents (RNORs).
This article explains in detail why non-residents are ineligible to file ITR-1 and ITR-4, who can file these forms, and the applicable alternatives for non-residents, particularly the ITR-2 form. We also cover due dates and updates regarding the utility release for AY 2025-26.
Understanding Residential Status for Income Tax Purposes
The residential status of a taxpayer determines their tax filing obligations and the forms they are eligible to use. Under the Income Tax Act, individuals are categorized into three groups:
- Resident
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR)
Only individuals classified as “Residents” (other than RNORs) can use ITR-1 and ITR-4.
Eligibility Criteria for ITR-1 (Sahaj)
ITR-1 is applicable for individuals who meet all the following conditions:
- The taxpayer is a resident individual (not RNOR or NR).
- Total income is up to Rs. 50 lakh.
- Sources of income include:
- Income from salary or pension
- Income from one house property
- Income from other sources such as interest, dividends, etc.
- Long-term capital gains under section 112A up to Rs. 1.25 lakh
- Agricultural income up to Rs. 5,000
- The taxpayer does not:
- Have income from more than one house property
- Have income from capital gains other than section 112A within the specified limit
- Hold any unlisted equity shares
- Serve as a director in any company
- Have foreign assets or income
- Have income taxable under section 115BBDA or 115BCD
- Have deferred income tax on ESOPs
- Have TDS deducted under section 194N
Individuals failing any of the above conditions are not eligible to file ITR-1.
Eligibility Criteria for ITR-4 (Sugam)
ITR-4 is applicable for individuals, Hindu Undivided Families (HUFs), and firms (excluding Limited Liability Partnerships) who meet all the following criteria:
- The taxpayer is a resident individual, HUF, or firm.
- Total income is up to Rs. 50 lakh.
- Income is computed under the presumptive taxation scheme under:
- Section 44AD: Presumptive taxation for businesses
- Section 44ADA: Presumptive taxation for specified professionals
- Section 44AE: Presumptive taxation for transporters
- Income may also include:
- Income from salary or pension
- Income from one house property
- Income from other sources
- Long-term capital gains under section 112A up to Rs. 1.25 lakh
However, ITR-4 cannot be used by individuals who:
- Are RNOR or non-residents
- Have income from more than one house property
- Have foreign assets or income
- Are directors in companies or hold unlisted shares
- Have deferred tax on ESOPs
- Have income exceeding Rs. 50 lakh
Why Non-Residents Cannot Use ITR-1 or ITR-4
Both ITR-1 and ITR-4 are explicitly designed for resident individuals. Non-residents and RNORs are excluded from filing using these forms regardless of their income sources or limits. The Income Tax Department has embedded restrictions in the ITR form utilities that prevent non-residents from proceeding with these forms.
This rule exists because the income profile and tax obligations of non-residents differ significantly. Non-residents often have:
- Foreign assets and bank accounts
- Income from outside India
- Eligibility for treaty benefits under the Double Taxation Avoidance Agreement (DTAA)
Such complexities necessitate the use of more comprehensive return forms like ITR-2 or ITR-3.
Which Form Should Non-Residents Use?
Non-residents must file their returns using ITR-2 or ITR-3, depending on the nature of their income:
- ITR-2: For individuals and HUFs not having income from business or profession
- ITR-3: For individuals and HUFs having income from business or profession
Typically, most NRIs will be required to file ITR-2 unless they are engaged in business or professional activities in India.
Current Status of ITR-2 Utility
As of the latest update till the time of writing this blog, the Income Tax Department has not yet released the ITR-2 utility for AY 2025-26. Taxpayers, especially non-residents, will need to wait until the online or offline utility becomes available to proceed with filing.
Extended Due Date for ITR Filing for AY 2025-26
The original due date for filing ITR-1 and ITR-4 for AY 2025-26 was July 31, 2025. However, due to delays in the release of the filing utilities, the Central Board of Direct Taxes (CBDT) has extended the due date to September 15, 2025 via Circular No. 06/2025.
Tax Planning and Professional Help
Filing the correct ITR form is crucial to ensure compliance and avoid penalties. Incorrect filing, such as using ITR-1 or ITR-4 as a non-resident, may result in return rejection or scrutiny.
Given the evolving tax norms and complexities involved, especially for non-residents, it is advisable to consult a qualified tax professional or chartered accountant. A tax expert can:
- Verify your residential status
- Help determine the correct ITR form
- Guide on tax deductions and exemptions available
- Assist with foreign income disclosure and DTAA benefits
Final Words
For AY 2025-26, ITR-1 and ITR-4 can be filed only by resident individuals, and non-residents are expressly barred from using these forms. NRIs and RNORs should use ITR-2 or ITR-3 based on their income sources. The utility for ITR-2 is currently awaited, and non-residents must remain updated via the official e-filing portal.
Always ensure correct form selection to avoid penalties and legal hassles. Consulting a tax professional is highly recommended, especially if your income profile includes foreign components or complex deductions.
Stay compliant and file your income tax return on time to enjoy a smooth and hassle-free tax experience.
