A company director or person who held unlisted equity shares during the year cannot use ITR-1 or ITR-4.
A company director or person who held unlisted equity shares during the year cannot use ITR-1 or ITR-4. Use ITR-2 where no business or professional income exists and ITR-3 where it does.
Legal or Computational Framework
Governing rule
The return requires directorship and unlisted-equity particulars even where there was no sale. ESOP, founder shares, foreign shares and private-company transfers can also create salary, capital-gain or foreign-asset schedules.
Correct workflow
List every directorship and unlisted holding; capture company identifiers, opening, acquisition, transfer and closing quantities and values; calculate perquisite or gain; choose ITR-2 or ITR-3; reconcile company records.
Step-by-step method
- List every directorship and unlisted holding.
- capture company identifiers, opening, acquisition, transfer and closing quantities and values.
- calculate perquisite or gain.
- choose ITR-2 or ITR-3.
- reconcile company records.
- Reconcile the conclusion with official statements and supporting documents.
Worked example
A salaried employee is a non-executive director and holds startup shares but has no business income. ITR-2 is generally appropriate even if total income is ₹18 lakh and no share was sold.
The example is an audit trail, not a substitute for the user's facts. Change one input—residence, payment date, tax year, asset, return form, GST status, employer category or supporting document—and the result can change.
Edge cases
- Nominee directorship still needs review: record the factual and legal conclusion in the working paper.
- Foreign unlisted shares can trigger Schedule FA: record the factual and legal conclusion in the working paper.
- ESOP exercise and sale are separate tax events: record the factual and legal conclusion in the working paper.
- Dormant-company directorship is not ignored: record the factual and legal conclusion in the working paper.
- Corporate actions affect quantity and cost: record the factual and legal conclusion in the working paper.
What Generic Pages Miss
- Using ITR-1 because no director fee was received.
- Reporting only sold shares.
- Omitting foreign startup shares.
- Mixing ESOP perquisite and gain.
- Using face value as tax cost.
Generic pages often confuse gross income with net receipt, TDS with final tax, GST turnover with income-tax turnover or a portal value with legal eligibility. Finin2min should show why an amount is accepted, deferred, reversed, rejected or carried forward.
Practical Documentation Checklist
- Form 16 and income schedules
- Residential-status file
- Capital-gain and loss schedules
- Foreign-asset/director checklist
- AIS and Form 26AS
- Form-selection memo
For the complete rules on this topic, see the core guide: New ITR Forms for AY 2026-27: Key Changes Explained.
See the broader Income-tax Act 2025 study guide hub for related rules and calculators on this topic.
Finin2min Summary
A company director or person who held unlisted equity shares during the year cannot use ITR-1 or ITR-4. Use ITR-2 where no business or professional income exists and ITR-3 where it does.
Finin2min rule: classify the legal event, calculate from source records and show every adjustment.
Frequently Asked Questions
What is the direct answer for ITR for director and unlisted shares AY 2026-27? ▼
A company director or person who held unlisted equity shares during the year cannot use ITR-1 or ITR-4. Use ITR-2 where no business or professional income exists and ITR-3 where it does.
Which law or period applies? ▼
The return requires directorship and unlisted-equity particulars even where there was no sale. ESOP, founder shares, foreign shares and private-company transfers can also create salary, capital-gain or foreign-asset schedules. AY 2026–27 remains under the Income-tax Act, 1961; income from 1 April 2026 is governed by the Income-tax Act, 2025 where relevant.
What calculation or workflow should be followed? ▼
List every directorship and unlisted holding; capture company identifiers, opening, acquisition, transfer and closing quantities and values; calculate perquisite or gain; choose ITR-2 or ITR-3; reconcile company records.
What does the example demonstrate? ▼
A salaried employee is a non-executive director and holds startup shares but has no business income. ITR-2 is generally appropriate even if total income is ₹18 lakh and no share was sold.
Which records should be retained? ▼
Keep Form 16 and income schedules, residential-status file, capital-gain and loss schedules, foreign-asset/director checklist, AIS and Form 26AS so the result can be reproduced and defended.
What is the most common error? ▼
The most frequent errors are using ITR-1 because no director fee was received and reporting only sold shares.