Key changes in new ITR forms individual taxpayers should know about
Individual taxpayers should familiarise themselves with these updates to ensure accurate and timely filing.
ITR-1 (Sahaj): For salaried individuals
The ITR-1, also known as 'Sahaj', is for resident individuals (other than not ordinarily resident) with a total income not exceeding Rs 50 lakh from salary or pension, one house property (excluding cases with brought-forward losses), and other sources such as interest. The new ITR-1 now also applies to individuals who earned up to Rs 1.25 lakh in the previous financial year from long-term capital gains (LTCG) through the sale of listed equity shares or equity-oriented mutual funds.
Neeraj Agarwala, Partner at Nangia Andersen LLP, points out a significant relief for taxpayers with LTCG under Section 112A below Rs 1.25 lakh. Previously, they might have been required to file the more complex ITR-2. "This inconvenience is reduced with the new Form ITR-1 for AY 2025–26 incorporating a small section for reporting income in the nature of long-term capital gains on which tax is not payable by virtue of the exemption limit provided in Section 112A." However, he clarifies that if LTCG under Section 112A exceeds Rs 1.25 lakh, or if there are other types of capital gains (long-term or short-term), or carried forward/brought forward capital losses, individuals will still need to file ITR-2.
ITR-4 (Sugam): For presumptive income
ITR-4, or 'Sugam', is applicable to resident individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with total income up to Rs 50 lakh. They must have income from business or profession computed under the presumptive taxation schemes. Similar to ITR-1, Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, notes that the new ITR-4 also allows for reporting of LTCG under Section 112A up to Rs 1.25 lakh.
ITR-2: Detailed reporting for wider income sources
ITR Form 2 is for individuals (both residents and non-residents) and HUFs with total income excluding income from business or profession, but including income from salary, multiple house properties, capital gains, and other sources.
Sanjoli Maheshwari, Executive Director at Nangia Andersen India, highlights several key changes in ITR-2 for AY 2025–26:
Separate reporting of capital gains : Taxpayers must now report capital gains separately for periods before and after 23 July 2024, aligning with amendments in the Finance Act, 2024, including revised tax rates and indexation rules.
Reporting of unlisted bonds and debentures : Gains from these are to be reported as short-term or long-term capital gains based on the holding period.
Buy-back proceeds as dividend income : Buy-back proceeds received on or after 1 October 2024 are to be reported as dividend income under 'Income from Other Sources'. However, a separate disclosure as 'Nil' consideration with the cost of acquisition is also required under 'Capital Gains' for potential set-off and carry forward of capital loss.
Revised threshold for assets and liabilities disclosure: Individuals with total income exceeding Rs 1 crore (up from Rs 50 lakh previously) are now required to furnish details of their assets and liabilities.
ITR-3: For business and profession income
ITR-3 is applicable to individuals and HUFs earning income from business or profession. Deepak Kumar Jain, Founder and CEO of TaxManager, outlines key changes in ITR-3 for AY 2025–26:
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