Owning two houses but no rental income: Can you still file ITR-1, or is ITR-2 mandatory?

Hi, my father owns two properties but earns no rental income from either. He has no stock or mutual fund investments and meets all other eligibility criteria for ITR-1. I’m unsure whether owning multiple properties—even without rental income—requires filing ITR-2 instead of ITR-1. Could anyone clarify this? Any guidance from tax experts or fellow investors would be greatly appreciated, as we want to ensure his ITR filing is fully compliant with regulations.

Advice by CA Parag Jain, Tax Head at 1 Finance

For AY 2025-26, ITR-1 (Sahaj) is available only to individuals who own a single house property. When a person holds more than one property, ITR-1 cannot be used, regardless of whether the second house is vacant, locked, or not generating rental income.

Under the Income Tax Act, only one property can be claimed as self-occupied. Any additional property is automatically treated as a “deemed let-out” property, and the notional rental value must be disclosed in the return.

In your father’s case, since he owns two houses, ITR-2 becomes mandatory. This form is structured to capture multiple properties and apply the deemed let-out provisions correctly.

File ITR-2 to remain fully compliant and avoid unnecessary queries from the CPC or tax authorities. This ensures transparency, proper reporting of both properties, and peace of mind that the return has been filed in line with the law.

ITR-1 vs ITR-2

Filing the correct Income Tax Return (ITR) form is crucial for every taxpayer. Selecting the wrong form can lead to rejection of the return and even penalties. Among individual taxpayers, the most common confusion lies between choosing ITR-1 (SAHAJ) and ITR-2. With the Income Tax Department recently releasing the Excel-based utilities for ITR-2 and ITR-3 for FY 2024-25, clarity on their applicability has become even more important.

ITR-1 applicability

Form ITR-1, also called SAHAJ, is designed for salaried resident individuals whose total income does not exceed ₹50 lakh in a financial year. It applies to taxpayers earning from salary or pension, income from one house property, agricultural income up to ₹5,000, long-term capital gains under Section 112A up to ₹1.25 lakh (without carry-forward losses), and other sources like savings or fixed deposit interest. However, individuals with foreign assets, multiple properties, business income, or income from gambling, lotteries, or horse racing cannot file ITR-1.

ITR-2 applicability

ITR-2, on the other hand, is for individuals and Hindu Undivided Families (HUFs) without business or professional income but with broader income sources. It covers cases where taxable income exceeds ₹50 lakh, agricultural income crosses ₹5,000, or where the taxpayer has more than one house property, capital gains, unlisted equity shares, or foreign income/assets. Non-residents and directors of companies also fall under this category.

Key differences

Applicant type: ITR-1 is only for resident individuals, while ITR-2 applies to residents, non-residents, and HUFs.

Income limit: ITR-1 applies up to ₹50 lakh; ITR-2 is for incomes beyond ₹50 lakh.

Capital gains: Limited under ITR-1, but fully covered under ITR-2.

Other sources: ITR-1 excludes gambling/lotteries, while ITR-2 includes them.

Tax experts advise taxpayers to carefully evaluate their income sources before filing to avoid mistakes and penalties.

(Views expressed by the expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)