While filing an income tax return (ITR), it is important to choose the correct ITR form. For individuals with more than one source of income— for example, a salaried person who also invests or trades in stocks, earns rental income, or offers consulting services—selecting between ITR‑2 and ITR‑3 can be confusing. Here is an explanation on how a taxpayer can use the right form before filing their ITR.

ITR‑2 is meant for individuals and Hindu Undivided Families (HUFs) who earn more than Rs 50 lakh from salary, more than one house property, capital gains, or other sources like dividends and interest. This form also accommodates foreign income and assets. However, it is not suitable for those earning income from a business or profession. For example, if you're a salaried employee who also earns rental income and made gains from selling mutual funds or stocks, ITR‑2 is your form. 

On the other hand, ITR‑3 is applicable if you earn income from a business or a profession, either as a sole proprietor or a partner in a firm. This includes consultants, freelancers, gig workers, and even salaried individuals with side hustles that bring in business income. It also includes those holding unlisted equity shares or board directorships. 

ITR‑3 supports all income types that ITR‑2 does—salary, house property, capital gains, and other sources—but adds specific schedules for business and professional income. Like ITR‑2, it also requires capital gains to be split based on the transfer date and mandates a declaration if you are opting for the old tax regime using Form 10-IEA. 

To simplify, if your income sources include only salary, house property, capital gains, and interest/dividends—but no business income—you can safely use ITR‑2. But the moment you have income from freelancing, a side business, F&O trading income or partnership, you must switch to ITR‑3. 

Filing the wrong form may lead to a defective return notice from the tax department, forcing you to refile and delaying any refunds.

In short, multi-income taxpayers need to be especially cautious. With increasing income diversification among professionals, investors, and freelancers, choosing the correct ITR form is the first step toward a smooth tax filing experience. If in doubt, it’s advisable to consult a tax expert or use a trusted tax platform that automatically suggests the right form based on your income sources.

The last date to file ITR for FY 2024-25 is September 15, 2025.