ITR forms: which one to file · Tax Year 2025-26
Can a salaried person with capital gains file ITR-1?
Only in one case: long-term gains on listed shares or equity funds up to ₹1,25,000, and no other capital gain. Any other gain, or a larger one, means ITR-2. Here is how to check your own position.
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A salaried person can file ITR-1 with capital gains in one case only: long-term gain on listed equity shares or equity mutual funds (taxed under section 112A) of ₹1,25,000 or less, with no other capital gain. A short-term gain, a larger long-term gain, a property sale or a capital loss means ITR-2.
These are the conditions TaxCare applies for the tax year 2025-26. The department has not yet published the forms for the tax year 2026-27, so the conditions for that year may change.
The simple rule
Look at each sale you made in the tax year and ask three questions.
- Was it listed equity or an equity-oriented mutual fund? If not (property, gold, debt fund, unlisted shares, foreign shares), ITR-1 is out.
- Was it long-term? For listed shares and equity-oriented funds, long-term means held for more than 12 months. A sale within 12 months is short-term, and ITR-1 is out.
- Is your total long-term gain on listed equity for the year ₹1,25,000 or less? If it is above, ITR-1 is out.
If the answers are yes, yes and yes, ITR-1 still works for the capital gains part.
The "listed equity" rule here refers to long-term gains taxed under section 112A of the 1961 Act, which is the section the ITR-1 for the tax year 2025-26 names.
A table of common cases
What you sold | Form (salaried, no other triggers) |
|---|---|
Listed shares held for 12 months or more, total gain ₹1,00,000 | ITR-1 |
Listed shares held for 12 months or more, total gain ₹1,25,000 | ITR-1 |
Listed shares held for 12 months or more, total gain ₹1,25,001 or more | ITR-2 |
Listed shares held for less than 12 months (any gain) | ITR-2 |
Equity mutual fund, held for 12 months or more, gain under ₹1,25,000 | ITR-1 |
Debt mutual fund, bonds, gold | ITR-2 |
House, flat or plot | ITR-2 |
Unlisted or foreign shares | ITR-2 |
Any capital loss to carry forward | ITR-2 |
If you sold at a loss, a loss to set off or carry forward also rules out ITR-1.
Why the limit is ₹1,25,000
The first ₹1,25,000 of long-term gain on listed equity in a year is exempt. Above it, the gain is taxed at 12.5%. The ITR-1 allowance matches that exemption, so someone under it owes no tax on the gain and ITR-1 can carry it.
Example: you sell equity shares held for two years and gain ₹1,10,000. The gain is under the exemption, so tax on it is nil. You can use ITR-1.
Example: you gain ₹2,00,000. The first ₹1,25,000 is exempt and ₹75,000 is taxed at 12.5%, so ₹9,375 before cess. Because the gain is above ₹1,25,000, you file ITR-2.
Gains from many sales: add them up
The ₹1,25,000 test is on the total long-term equity gain for the year, not on each sale. If you made three sales with gains of ₹50,000 each, the total is ₹1,50,000 and you need ITR-2. Losses on other long-term equity sales in the same year reduce the total, but do check them with a Tax Expert if you also have a loss to carry forward.
ITR-1 reports these gains as one figure for the year: the total sale value less the total cost of your section 112A sales. That figure must be between nil and ₹1,25,000 for ITR-1.
Where to find your capital gains
- Your broker's capital gains statement, for the exact cost and sale values.
- Your mutual fund statement from the AMC or the registrar.
- Your AIS, which lists share and fund transactions reported to the department. Our guide on the AIS explains how to read it.
What if I file ITR-1 by mistake?
The department can treat the return as defective and ask you to file the right form. See our guide on which ITR form to file.
Old purchases: the 31-Jan-2018 rule
If you bought listed equity before 1-Feb-2018, a special cost rule (grandfathering to the market price on 31-Jan-2018) can reduce the gain. This affects your gain figure, not the form.
How TaxCare helps
TaxCare reads your sales from the portal data, works out the gain, and moves you from ITR-1 to ITR-2 the moment one condition fails, telling you which one. You do not choose the form blind. If the gains are complex, a Tax Expert can take over the return with your documents. The tax is computed under both regimes before you decide.
This guide gives general information and is not professional tax advice.
Questions on this topic
Can I file ITR-1 if I sold shares?
Only if the sale gave a long-term gain on listed equity of ₹1,25,000 or less and you have no other capital gain. A short-term gain on shares means ITR-2.
What if my long-term gain is exactly ₹1,25,000?
The ITR-1 limit is ₹1,25,000 or less, so a gain of exactly ₹1,25,000 can still use ITR-1 on TaxCare's rules.
I sold a mutual fund that is not an equity fund. Which form?
A gain on a debt fund or other non-equity fund is not a long-term equity gain. It needs ITR-2.
Do I pay tax on a long-term gain of ₹1,00,000?
No, not on that gain. The first ₹1,25,000 of long-term gain on listed equity in a year is exempt.
Does a capital loss matter for the form?
Yes. A loss to set off or carry forward rules out ITR-1, so a salaried person with a capital loss files ITR-2.
Ready to file your ITR?
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