Changes in ITR Forms for Indian Taxpayers
Notified on April 29, 2025
The Income Tax Department of India, through the Central Board of Direct Taxes (CBDT), announced updates to the Income Tax Return (ITR) forms on April 29, 2025, for the Assessment Year (AY) 2025-26, covering income earned from April 1, 2024, to March 31, 2025 (Financial Year 2024-25). These changes primarily affect ITR-1 (Sahaj) and ITR-4 (Sugam), forms designed for individuals with straightforward income sources, such as salaried employees, small business owners, and small investors. The updates aim to simplify tax filing, enhance transparency, and align with recent tax policy changes. Below, we break down these changes in simple terms, explaining key terms to help taxpayers navigate the new requirements.
1. New ITR Forms Released
The CBDT has released updated versions of ITR-1 (Sahaj) and ITR-4 (Sugam) for AY 2025-26. These forms are used to report income earned during FY 2024-25, with a filing deadline of July 31, 2025, for non-audit taxpayers (those not required to have their accounts audited). If you miss this deadline, you can file a belated return by December 31, 2025, but you’ll face penalties and interest.
ITR-1 (Sahaj): For resident individuals with total income up to ₹50 lakh from:
Salary (e.g., wages from your job).
One house property (e.g., rental income or loss from a single property).
Other sources like interest from savings accounts or fixed deposits (excluding lottery winnings or horse race income).
Agricultural income up to ₹5,000.
ITR-4 (Sugam): For individuals, Hindu Undivided Families (HUFs), and firms (except Limited Liability Partnerships) with income up to ₹50 lakh from business or profession, in addition to the sources covered by ITR-1.
This update ensures that taxpayers with simpler income profiles can continue using these user-friendly forms, with modifications to accommodate new tax rules.
2. Expanded Eligibility for ITR-1
One significant change is that taxpayers with long-term capital gains (LTCG) up to ₹1.25 lakh can now file ITR-1, instead of the more complex ITR-2. Previously, any capital gains required filing ITR-2 or ITR-3, which are lengthier and more detailed.
What are long-term capital gains? These are profits from selling assets held for more than one year, such as listed equity shares (stocks), equity mutual funds, or units of business trusts (e.g., Real Estate Investment Trusts). The gains must be covered under Section 112A, which applies when Securities Transaction Tax (STT) is paid on the sale.
Example: If you sold shares you held for two years and made a profit of ₹1 lakh, you can now use ITR-1 to report this, making the process easier.
This change benefits small investors by reducing the complexity of tax filing, allowing them to use a simpler form without needing extensive financial expertise.
3. New Section for Reporting Exempt Income
A new section titled "Income on which no tax is payable" has been added to both ITR-1 and ITR-4. This section is for reporting long-term capital gains that are exempt from tax under Section 112A.
What does this mean? Some long-term capital gains are not taxed if they fall within certain limits. For instance, gains up to ₹1.25 lakh from equity shares or mutual funds may be exempt, but you still need to report them.
What to report: You must provide:
Total sale consideration: The amount you received from selling the asset.
Total cost of acquisition: The amount you paid to buy the asset.
Long-term capital gains: The profit calculated (sale price minus purchase price).
Why is this important? This ensures the tax department can verify that your gains are indeed exempt, preventing errors or disputes.
This addition promotes transparency and helps taxpayers clearly document their tax-exempt income.
4. House Rent Deduction and Form 10BA
Taxpayers claiming a deduction for house rent paid under Section 80GG must now electronically file Form 10BA along with their ITR. This applies to salaried or self-employed individuals who pay rent but do not receive House Rent Allowance (HRA) from their employer.
What is Section 80GG? It allows a deduction for rent paid if you don’t own a house and don’t get HRA. The deduction is the least of:
₹5,000 per month (₹60,000 per year).
25% of your total income.
Rent paid minus 10% of your total income.
What is Form 10BA? A form where you declare details of your rented accommodation, such as the landlord’s name, address, and rent paid, to claim the deduction.
Key restriction: This deduction is not available if you opt for the new tax regime, which offers lower tax rates but fewer deductions.
This change ensures that rent deductions are properly documented, reducing the risk of fraudulent claims.
5. Detailed TDS/TCS Reporting
In the TDS/TCS schedule (where you report Tax Deducted at Source or Tax Collected at Source), you must now specify the sections under which TDS was deducted. This makes it easier for the tax department to match your return with their records.
What is TDS/TCS?
TDS (Tax Deducted at Source): Tax deducted by your employer, bank, or other entities before paying you (e.g., on salary or interest).
TCS (Tax Collected at Source): Tax collected by sellers on certain transactions (e.g., sale of goods above a threshold).
Examples of sections:
Section 194: For dividends from company shares.
Section 194A: For interest from bank accounts or fixed deposits.
Where to find details? Check your Form 16A (issued by employers or banks for TDS) or Form 26AS (your annual tax statement, available on the Income Tax Department’s website).
This update ensures accurate reporting and minimizes discrepancies between your return and the tax department’s data.
6. Clarity on Old vs. New Tax Regimes
For taxpayers filing ITR-4, there’s a new prompt to indicate whether you have filed Form 10-IEA. This form is required if you want to opt out of the new tax regime and choose the old tax regime.
What are the tax regimes?
New Tax Regime: Introduced in 2020, it offers lower tax rates but fewer deductions (e.g., no deductions for house rent or investments under Section 80C).
Old Tax Regime: The traditional system with higher tax rates but more deductions (e.g., for house rent, insurance premiums, or investments).
What is Form 10-IEA? A form you file to opt out of the new tax regime and choose the old regime, allowing you to claim deductions.
Key rule: If you haven’t filed Form 10-IEA before, you must file it with your return to opt out. The deadline to opt out is the same as the return filing deadline (July 31, 2025, for non-audit cases).
This change provides flexibility to choose the tax regime that best suits your financial situation while ensuring proper documentation.
Impact on Taxpayers
These changes affect various groups differently:
Salaried Individuals: If you have long-term capital gains up to ₹1.25 lakh from equity investments, you can now use ITR-1, simplifying your filing process.
Small Business Owners: If filing ITR-4, ensure you indicate your tax regime choice and file Form 10-IEA if opting for the old regime.
Renters: If claiming house rent deduction without HRA, file Form 10BA electronically with your return.
Investors: Report your long-term capital gains accurately in the new section to avoid scrutiny from the tax department.
Practical Steps for Compliance
To file your taxes correctly under the new rules:
Determine Your ITR Form: Check if ITR-1 or ITR-4 applies based on your income sources and total income (up to ₹50 lakh).
Gather Documents: Collect:
Form 16A (for TDS details from salary or other income).
Form 26AS (your annual tax statement, showing TDS/TCS).
Proofs for deductions (e.g., rent receipts for Section 80GG).
Report Capital Gains: If you have long-term capital gains, use the new section in ITR-1 or ITR-4 to report them, even if exempt.
File Form 10BA: If claiming house rent deduction, submit Form 10BA electronically via the Income Tax Department’s e-filing portal (Income Tax e-Filing).
Choose Your Tax Regime: Decide between the old and new tax regimes. If opting for the old regime, file Form 10-IEA by July 31, 2025.
Meet the Deadline: File your return by July 31, 2025, to avoid penalties. Use the e-filing portal or consult a tax professional for assistance.
Why These Changes Matter
The updates to ITR-1 and ITR-4 reflect the government’s efforts to:
Simplify Tax Filing: By allowing more taxpayers to use simpler forms, the process becomes less daunting for salaried individuals and small investors.
Enhance Transparency: New reporting requirements, like the section for exempt capital gains and detailed TDS/TCS schedules, ensure accurate income reporting.
Align with Policy Changes: The focus on tax regime choices and electronic filing of forms like 10BA aligns with recent tax reforms, such as the new tax regime’s increasing adoption.
Key Terms Explained
Assessment Year (AY): The year you file your taxes for income earned in the previous financial year (e.g., AY 2025-26 is for FY 2024-25).
Financial Year (FY): The period from April 1 to March 31 when you earn income (e.g., FY 2024-25 is April 1, 2024, to March 31, 2025).
ITR-1 (Sahaj): A simple form for individuals with income from salary, one house property, and other sources up to ₹50 lakh.
ITR-4 (Sugam): A form for individuals, HUFs, and firms with business or professional income up to ₹50 lakh.
Long-Term Capital Gains (LTCG): Profits from selling assets held for over one year, taxed at 10% (plus surcharge and cess) under Section 112A if above ₹1.25 lakh.
Section 112A: A tax rule for LTCG from equity shares, mutual funds, or business trusts where STT is paid.
Form 10BA: A form to claim house rent deduction under Section 80GG, detailing rent payments and landlord information.
TDS/TCS: Taxes deducted or collected at source by employers, banks, or sellers.
Form 16A: A certificate showing TDS deducted on income like salary or interest.
Form 26AS: An annual tax statement showing all TDS/TCS and tax payments linked to your PAN.
New Tax Regime: A tax system with lower rates but fewer deductions, introduced in 2020.
Old Tax Regime: The traditional tax system with higher rates but more deductions.
Form 10-IEA: A form to opt out of the new tax regime and choose the old regime.