ITR Filing for Salaried Employees FY 2025-26: Form Choice, Deadline & Deduction Guide

A 32-year-old IT engineer in Bangalore filed her income tax return for FY 2025-26 on July 22 using ITR-1 (Sahaj). Her salary was ₹45 lakhs, she paid ₹8,000 in professional tax, invested ₹1.5 lakhs in her EPF under Section 80C, claimed ₹50,000 as standard deduction (new tax regime), and paid ₹10,000 in HRA to her parents and all well-documented. However, she forgot one critical detail: she had received ₹2 lakhs in capital gains from selling listed equity shares held for 18 months. The capital gain fell under Section 112A (LTCG on equity). Because her LTCG was ₹2 lakhs (exceeding the ₹1.25 lakh threshold), she had filed under the wrong form. ITR-1 allows LTCG only up to ₹1.25 lakhs. Within 3 months, the Income Tax Department issued a notice under Section 139(9) for filing a defective return, directing her to resubmit under ITR-2. This mistake cost her time, complexity, and stress and all because the wrong form was chosen at the start.

This comprehensive guide covers ITR filing for salaried employees in FY 2025-26 (AY 2026-27) and including which ITR form to choose (ITR-1 vs ITR-2 vs ITR-3), eligibility criteria, the July 31, 2026 deadline, how to use Form 16, claiming deductions under Sections 80C to 80U, the critical shift from Form 16 to Form 130 (April 2026), the new Income Tax Act 2025 changes, standard deduction rules, step-by-step filing instructions, and common mistakes that trigger defective return notices.

ITR Deadline for Salaried Employees FY 2025-26: July 31, 2026

The deadline to file ITR for salaried employees for FY 2025-26 (Assessment Year 2026-27) is July 31, 2026. This applies to all individual taxpayers without audit obligations (non-audit cases). Furthermore, this deadline applies to salaries, pensions, and most typical income sources. However, different deadlines apply to other categories: business owners and professionals not liable for audit have until August 31, 2026, while those subject to tax audit must file by October 31, 2026. Missing the July 31 deadline results in a late filing fee of ₹5,000 under Section 234F. For taxpayers with total income below ₹5 lakhs, the late fee is capped at ₹1,000. Additionally, interest at 1% per month accrues on unpaid tax balances under Section 234A. You can file a belated return until December 31, 2026, but penalties and interest will apply.

Recommendation: File by July 20-25, 2026, to avoid last-minute portal congestion and ensure your refund is processed quickly. The Income Tax portal typically experiences heavy traffic in the final week of July.

Which ITR Form Should Salaried Employees File? ITR-1, ITR-2, or ITR-3?

Choosing the correct ITR form is the most critical step. Filing in the wrong form results in a defective return notice, which costs time and causes delays. The choice depends on your income sources, total income level, and other factors. Here is the definitive guide:

ITR-1 (Sahaj): For Simple Salaried Incomes

File ITR-1 if ALL of the following apply:
– Total annual income does NOT exceed ₹50 lakh
– Income from salary or pension (primary source)
– Income from up to 2 house properties (expanded scope from April 2026)
– Interest income from banks/savings accounts
– Long-term capital gains (LTCG) under Section 112A from listed equity shares: UP TO ₹1.25 lakh ONLY
– Agricultural income: UP TO ₹5,000
– NO income from business or profession
– NO significant capital gains beyond the ₹1.25L threshold
– Not an NRI or RNOR (Resident But Not Ordinarily Resident)

ITR-1 is the simplest form and was expanded in April 2026 to now allow reporting income from up to 2 house properties (previously only 1). This change benefits salaried employees who own a second residential property. However, if your total income exceeds ₹50 lakh or if you have capital gains beyond ₹1.25 lakhs, you must file ITR-2 regardless of other factors.

ITR-2: For Individuals with Capital Gains or High Income

File ITR-2 if:
– Your total income EXCEEDS ₹50 lakh, OR
– You have LTCG over ₹1.25 lakh (Section 112A), OR
– You have short-term capital gains from any source, OR
– You own more than 2 house properties, OR
– You have foreign assets or foreign income, OR
– You are an NRI or RNOR
– You have income from clubbing provisions (spouse’s income, minor child’s income, etc.)

ITR-2 is broader and accommodates higher incomes and diverse income sources. However, you CANNOT file ITR-2 if you have business or professional income. Furthermore, ITR-2 is more complex than ITR-1 and requires detailed schedules.

ITR-3: For Salaried Employees with Business Income

File ITR-3 if:
– You have income from business or profession (even if part-time or freelance), IN ADDITION to salary, OR
– You are a self-employed professional (doctor, lawyer, consultant, etc.)

If you have dual income (salary + freelance consulting, salary + rental business, salary + partnership income), ITR-3 is mandatory. ITR-3 requires detailed income and expense schedules and is more complex than ITR-1 and ITR-2. Most salaried employees who do NOT have business income should not file ITR-3.

How to File ITR for Salaried Employees: Step-by-Step Guide

Step 1: Gather Required Documents

Before you start filing, collect all documents:
– Form 16/Form 130 (issued by your employer showing salary, TDS deducted, and tax paid). Note: From April 2026, Form 130 replaces Form 16. However, many employers may still issue Form 16 for FY 2025-26. Form 16 has two parts: Part A (TDS details) and Part B (income and deductions).
– Form 26AS (consolidated TDS statement from income tax portal, showing all TDS deducted across all employers and sources)
– PAN Card and Aadhaar Card
– Bank account details (for refund, if any)
– Salary slips (for cross-verification)
– Investment receipts (for Section 80C claims: LIC, ELSS, PPF, home loan principal, etc.)
– Rent receipts (if claiming HRA or rent under Section 80GG)
– Interest certificates (from banks for interest income)
– Capital gains statements (if you sold mutual funds, shares, or property)
– Insurance premium receipts (Section 80D, health insurance)
– Education loan interest proof (Section 80E)

Step 2: Log In to the Income Tax e-Filing Portal

Visit https://www.incometaxindia.gov.in and click on “e-File” → “Income Tax Return”. Log in using your PAN and password (or Aadhaar OTP). Most details will auto-populate from your TDS information submitted by your employer. Review all pre-filled data carefully and errors here compound through the filing.

Step 3: Select the Correct ITR Form and Assessment Year

Select “Assessment Year 2026-27” (for FY 2025-26 income) and choose your appropriate ITR form (ITR-1, ITR-2, or ITR-3). Double-check this selection and you cannot change the form after starting the return. If you realize you chose the wrong form, you must abandon this return and start a new one.

Step 4: Enter Your Personal and Income Details

– Personal Information: Verify name, PAN, date of birth, address, mobile, email.
– Income Details: Enter salary, pension, interest, capital gains, and other income from all sources. Most salary and TDS information will auto-populate from Form 16 and TDS returns filed by your employer. However, you MUST manually enter:
– Interest from savings accounts and fixed deposits (only if NOT auto-populated)
– Rental income from house property (rental received minus deductible expenses under Section 24)
– Capital gains from sale of shares, mutual funds, or property
– Income from other sources (gifts, family pension, etc.)

Step 5: Claim Deductions Under Sections 80C to 80U

Deductions must be claimed under specific sections. For salaried employees, the key deductions are:

Section 80C (₹1.5 lakh limit):
– Life Insurance Premium (LIC)
– Provident Fund (PF) contributions
– ELSS Mutual Fund investments
– Sukanya Samriddhi Scheme
– NSC (National Savings Certificate)
– Home loan principal repayment

Section 80D (Health Insurance Premium):
– Self and family health insurance premium: ₹25,000 (₹50,000 for senior citizens)
– Parent’s health insurance: ₹25,000 additional (₹50,000 for senior citizen parents)
– No income limit applies

Section 80E (Education Loan Interest):
– Interest on education loan taken for higher studies: No limit
– Must be taken from a financial institution
– Applies during the loan repayment period

Section 80G (Charitable Donations):
– Donations to approved charities: 50-100% deduction based on charity type
– Must have proof of donation

Section 80GGC (Election Commission Contributions):
– Contributions to political parties: Full deduction, ₹2,000 limit

Section 80GG (Rent Deduction if NO HRA received):
– If salaried but your employer doesn’t provide HRA, you can claim rent under this section
– Cannot claim both HRA exemption and 80GG simultaneously

Section 80CCD(1B) (NPS Contribution):
– National Pension System additional contribution: ₹50,000 (beyond 80C limit)
– Exclusively for NPS Tier-I accounts

Note: Deductions under Sections 80C to 80U are now selected from a drop-down menu on the portal. You must specify the exact clause and sub-section. Do NOT randomly claim multiple deductions and each section has specific eligibility criteria.

Step 6: Claim Standard Deduction (New Tax Regime)

If you opt for the new tax regime (default for non-business individuals), you are entitled to a Standard Deduction of ₹50,000 from salary income. This is automatic and does NOT require any proof. However, the Standard Deduction is ONLY available in the new tax regime and if you switch to the old tax regime, you lose it.

Important: You CANNOT claim Section 80C deductions (LIC, PF, ELSS) in the new tax regime. If you have significant investments, the old tax regime may be more beneficial. Calculate both regimes and choose the one that saves more tax.

Step 7: Add TDS Credit and Verify Total Tax Payable

The portal will auto-populate TDS deducted from Form 16. Verify this amount matches your Form 16 and Form 26AS. Additionally, check if any TDS was deducted on interest income or other sources (shown in Form 26AS). Add all TDS credits. Then, the portal calculates your total tax payable:

Total Tax = Tax on Total Income − TDS Credit − Tax Benefit (rebate under Section 87A, if applicable)

If Total Tax is negative (meaning you paid more tax than required), you are entitled to a refund. The portal will show the refund amount.

Step 8: Upload Investments and Supporting Documents

The portal will ask if you want to upload supporting documents. While uploading is optional during filing, it is strongly recommended to upload:
– Proof of Section 80C investments (LIC receipts, ELSS statements, PPF certificates)
– HRA proof (rent receipts, rental agreement, landlord PAN)
– Home loan statement (for principal repayment claim)
– Health insurance premium receipts
– Any other investment or deduction proof

Note: You are NOT required to attach documents physically at the time of filing. However, if the Income Tax Department issues a notice for scrutiny or defective return, you must produce these documents within the specified timeline. Having them uploaded serves as a backup.

Step 9: Review and e-Verify Your ITR

Before submitting, review all entered data:
– Income figures match Form 16 and Form 26AS
– Deduction claims are accurate and supported by proof
– TDS credit is correct
– Refund or tax payable amount is reasonable

Once satisfied, the portal will ask you to e-verify your return. E-verification is mandatory. You can e-verify using:
1. Net banking (if your bank participates) and fastest method
2. Aadhaar OTP and sent to your registered mobile linked to Aadhaar
3. DSC (Digital Signature Certificate) and if you have one

Select your e-verification method and complete the process. Your return is considered “filed” only after e-verification.

Step 10: Receive ITR Acknowledgment

After e-verification, the portal generates an ITR-V (ITR Acknowledgment). This shows your:
– ITR acknowledgment number
– Filing date and time
– Income summary
– Refund amount (if any)

Save a PDF copy of ITR-V for your records. You do NOT need to post a physical copy of ITR-V to the IT Department and e-filing and e-verification are fully digital.

Form 16 vs Form 130: What Changed in April 2026?

A major change under the new Income Tax Act 2025 (effective April 1, 2026) is the replacement of Form 16 with Form 130. However, for FY 2025-26 (filed in 2026), employers are still issuing Form 16. From Tax Year 2026-27 onwards, Form 130 becomes mandatory.

Key Differences:
– Form 16: Traditional form issued by employers showing TDS deducted and salary details. Part A contains TDS information; Part B contains estimated income and deductions.
– Form 130: New form under the Income Tax Act 2025. It is system-generated by the Income Tax Department based on TDS returns filed by employers. Employers no longer issue Form 130 manually and the IT Department auto-generates it and makes it available on the e-filing portal.

For FY 2025-26: Most employers will issue Form 16. However, once TDS returns are filed with the IT Department, your TDS information will auto-populate in the portal when you log in to file your ITR.

For Tax Year 2026-27 onwards: Form 130 becomes the standard. If your employer doesn’t issue a physical Form 16, you can access all TDS information directly from the portal through Form 130. This shift reduces reliance on employers for tax document issuance.

Frequently Asked Questions: ITR Filing for Salaried Employees 2026

Q1: My employer hasn’t issued Form 16 yet. Can I still file my ITR by July 31?

Yes. If your employer has filed their TDS returns with the IT Department, your TDS information will auto-populate in the portal. You can file your ITR without a physical Form 16. However, keep your salary slips and Form 26AS handy for verification. If TDS information does not appear, contact your employer immediately or file using Manual Entry (you’ll need to manually enter salary and TDS figures). Avoid filing belated returns if possible.

Q2: What happens if I file ITR in the wrong form?

Filing in the wrong form results in a defective return notice under Section 139(9). The IT Department will ask you to resubmit under the correct form within 15 days. Refunds are delayed, and the process becomes cumbersome. To avoid this: carefully check all eligibility criteria before selecting your form. If unsure, consult a CA. Once you’ve selected a form, you CANNOT change it and you must file a new return if a mistake is discovered.

Q3: Can I claim both HRA exemption (from salary) and rent deduction under Section 80GG?

No. You must choose one. If your employer provides HRA in your salary and you claim HRA exemption (under Section 10(13A)), you CANNOT claim Section 80GG. Conversely, if you don’t receive HRA from your employer but pay rent, you can claim Section 80GG (limited to ₹5,000/month or 25% of adjusted total income, whichever is lower). Choose the option that saves more tax.

Q4: Is filing an ITR mandatory even if TDS was deducted from my salary?

Yes, if your total income exceeds ₹2.5 lakhs, ITR filing is mandatory under Section 139(1) of the Income Tax Act, regardless of TDS deduction. TDS deduction does NOT exempt you from filing. Filing ITR ensures that you claim refunds for excess TDS, carry forward losses if any, and maintain tax compliance.

Q5: My ITR shows a refund. When will I receive it?

Refunds are typically processed within 60-90 days of filing if your ITR is accepted without any scrutiny. However, if the IT Department raises queries, the timeline extends. Ensure your bank account details in the return are correct and refunds are transferred directly to your account. You can check refund status on the e-filing portal by logging in and checking “View Latest Status”.

Sources & References: Section 139(1), Income Tax Act 1961 (continued under Income Tax Act 2025 from April 1, 2026). Income Tax Rules 2026. Form 16, Form 130 (IT Rules 2026). Section 87A (Rebate for individuals), Sections 80C-80U (Deductions). CBDT Notifications for ITR forms (March 30, 2026). Finance Bill 2026 amendments. Income Tax Department e-filing portal guidance.