ITR filing 2025: Traders, investors, freelancers drive tax filing surge beyond salaried for AY2025-26

India’s income tax base is undergoing a fundamental transformation, with taxpayers steadily moving away from a single-income, salary-dependent model towards a new generation of multi-income earners. According to ClearTax’s How India Filed in 2025 annual report, the country is witnessing the rise of what it calls the “Hybrid Indian” — a taxpayer who earns simultaneously from salary, business or professional activity, and investments.

The shift is visible in the changing pattern of income tax return (ITR) filings. Traditionally, the bulk of salaried taxpayers filed simpler forms such as ITR-1, reflecting dependence on fixed monthly income. That profile is now being reshaped by a sharp rise in complex filings that capture business income, trading activity and capital gains.

Growth in ITR-3 filing

The report shows that ITR-3 filings surged 45% year-on-year in 2025, driven by a jump in self-employed professionals, small business owners, traders and those active in futures and options (F&O) markets. At the same time, ITR-2 filings — typically used by salaried individuals with capital gains or multiple income sources — grew 17%, underscoring how investing has become mainstream for a widening base of taxpayers.

The report noted: “ITR-3 filings, representing taxpayers with business and trading income, surged by 45.4%, while ITR-2 filings covering capital gains and investment income rose 17% year-on-year. This marks a fundamental shift: tax returns are no longer mere salary documents but have evolved into comprehensive financial biographies capturing every facet of an individual’s earning and investment behaviour.”

This marks a decisive break from the past, when tax returns largely reflected salary slips. Today, filings increasingly resemble what the report calls a “financial biography”, capturing not just what people earn from their employer but also how they participate in markets, manage risk and build wealth across asset classes.

ITR-3 is meant for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession. Often described as a comprehensive return form, it allows taxpayers to report multiple streams of income in one place. You must file ITR-3 if your earnings include profits from a proprietary business or professional practice, remuneration as a partner in a firm, income from more than one house property, capital gains, or income from other sources such as dividends and interest. It also applies to those earning from virtual digital assets, company directors and investors in unlisted shares. Taxpayers who do not qualify for ITR-1, ITR-2 or ITR-4 generally fall under this category.

ITR-2 is meant for individuals and HUFs who do not earn income from business or profession but have more complex sources of income. This return form is typically used by taxpayers whose total income exceeds ₹50 lakh, those reporting capital gains, owning more than one house property, or earning income from foreign assets. It also applies to non-resident Indians and individuals who do not qualify for simpler forms such as ITR-1. ITR-2 allows taxpayers to disclose income from salary or pension, investments, overseas holdings and other sources like interest and dividends in detail.

Age profile of taxpayers

A striking feature of this transition is the age profile of the new taxpayer. Millennials between 25 and 35 years now account for over 42% of all ITR-3 filers, making them the single largest cohort in complex tax filings. Unlike earlier generations that spent their early careers focused on stable employment and gradual savings, today’s young professionals are entering the workforce with exposure to stocks, derivatives and other investment avenues from the outset. For many, their first tax return already includes capital gains, not just salary income.

Even younger Indians are joining the system with a market-first mindset. The report notes that ITR-2 filings among taxpayers under 25 grew by about 18% year-on-year, highlighting how Gen Z is gaining early familiarity with investing and financial planning. This early engagement is redefining how wealth creation is perceived — no longer tied solely to promotions and annual increments, but increasingly to portfolio returns and entrepreneurial income.

"Gen Z is demonstrating an equally remarkable shift. Among taxpayers under 25 years, ITR-2 growth of 18% year-on-year suggests first-time filing is no longer just salary or internship income, but increasingly includes investments too. These trends indicate that Gen Z is entering the formal tax system with early exposure to markets, investing and wealth creation," the report noted. 

Archit Gupta, Founder & CEO, Clear, said: “India’s tax data is telling a very different story than it did a decade ago. The surge in multi-income filers shows that Indians are no longer relying on a single source of earnings. They are combining salary with capital gains, trading, and business income, and building portfolios that are more layered and resilient. This shift is driven by digital access and a stronger preference for market-linked earnings. Younger taxpayers are entering the system with investing behaviour once seen only in seasoned investors, and this mindset will shape India’s economy for the next two decades."

From salaried to freelancers, traders, investors

More professionals are now managing multiple income streams at the same time: salary for stability, business income for growth, and investments for long-term wealth. Over 83% of ITR-3 filers reported capital gains alongside business income, pointing to the rise of a diversified income model that is fast becoming the new default rather than the exception.

For policymakers and tax administrators, this evolution carries significant implications. A tax system designed primarily around salaried employees must now cater to a more dynamic and financially sophisticated population. As freelancing, trading and investing become routine, simple returns are giving way to more complex filings, increasing the need for digital tools, automated compliance and clearer guidance for taxpayers navigating multiple income categories.

For the economy, the rise of the “hybrid” taxpayer signals a deeper shift in how Indians view work and wealth. Careers are increasingly being treated like portfolios, with individuals balancing risk across income streams rather than relying on a single employer. As this trend accelerates, India’s tax data is no longer just a record of earnings — it is becoming a mirror of a society in transition, where financial independence, market participation and entrepreneurial ambition are reshaping the very definition of the Indian taxpayer.