From capital gains relief to higher income thresholds, the revamped ITR forms aim to ease compliance for salaried individuals, professionals, and investors in FY 2024–25.
July-12, 2025: The Income Tax Department has significantly revised the Income Tax Return (ITR) forms for Assessment Year (AY) 2025–26, introducing user-friendly changes that simplify the tax filing process for individuals, professionals, and small businesses. The most notable update allows taxpayers with long-term capital gains (LTCG) up to ₹1.25 lakh to now file under the simplified ITR-1 form, provided their total taxable income does not exceed ₹50 lakh and they meet other eligibility criteria.
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🔹 What’s New in ITR-1 (Sahaj)?
Previously, individuals with any capital gains were ineligible to file ITR-1. However, for FY 2024–25, LTCG under ₹1.25 lakh from listed equity shares or mutual funds (under Section 112A) is now allowed under ITR-1. Eligible taxpayers must:
- Be ordinarily resident
- Have income from salary, one house property, and other sources (like pension or interest)
- Have agricultural income up to ₹5,000
This move broadens the scope of ITR-1 and reduces compliance burdens for middle-income investors.
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🔹 Updates to ITR-2: Relief for High-Income Individuals
For taxpayers ineligible for ITR-1, ITR-2 has seen notable updates:
- It now supports capital gains reporting split by the July 23, 2024, rule change
- Taxpayers can now claim capital losses on share buybacks (effective from October 1, 2024)
- The threshold for mandatory reporting of assets and liabilities has been doubled from ₹50 lakh to ₹1 crore
These changes improve flexibility for individuals with multiple income sources, complex capital gains, or higher net worth.
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🔹 Professionals and Small Businesses: ITR-4 Made More Accessible
Professionals like doctors and lawyers can now use ITR-4 if their gross receipts are up to ₹75 lakh, provided that most payments are received via digital or banking channels. For presumptive taxation businesses, the income threshold remains ₹2 crore, but can go up to ₹3 crore if digital receipts dominate.
This shift promotes digital payments and simplifies the filing process for MSMEs and individual professionals.
🔹 Choosing the Right ITR Form: Key Considerations
The Income Tax Department’s changes are part of a broader push to digitise and streamline compliance. Taxpayers are advised to:
- Review their total income and its sources
- Account for capital gains, digital receipts, and foreign assets
- Match their eligibility to the revised ITR criteria
These updates are designed to reduce filing complexity, encourage transparency, and align with current economic realities.
Conclusion:
The revamped ITR forms for AY 2025–26 reflect the government’s intent to modernise India’s tax ecosystem and make compliance easier for a diverse range of taxpayers—from salaried individuals and mutual fund investors to professionals and business owners.
Tags:
ITR-1 changes AY25-26, ITR-4 for professionals, ITR-2 updates, Income Tax India, Tax Filing FY2024-25, Capital Gains in ITR, Digital tax compliance, LTCG under Section 112A, New ITR forms, Presumptive Taxation India
#Tags:
#IncomeTaxReturn #ITR2025 #ITR1 #ITR4 #TaxFilingIndia #CapitalGainsTax #IncomeTaxIndia #DigitalCompliance #AY2526 #FinancialYear2024 #TaxUpdates #BudgetFriendlyTaxFiling