New ITR Forms Released! What’s Changing for Taxpayers in AY 2025–26?

Key Changes in ITR-1 and ITR-4 for AY 2025–26

1. Expanded Eligibility for ITR-1 (Sahaj)

Previously, individuals with long-term capital gains (LTCG) from listed equity shares or mutual funds were required to file ITR-2. Now, individuals with LTCG up to ₹1.25 lakh under Section 112A can file ITR-1, simplifying the process for small investors .​

2. Enhanced Clarity in Reporting Income Sources

The updated forms provide improved clarity in reporting various income sources, aiding taxpayers in accurate disclosures .​

3. New Section for Exempt LTCG

A new section titled “Income on which no tax is payable” has been introduced to capture details of exempt long-term capital gains under Section 112A

4. Improved Deductions Disclosure

The forms now include dropdown menus for deductions under sections like 80C and 80GG, streamlining the process of claiming deductions .​

Overview of ITR-1 and ITR-4

ITR-1 (Sahaj)

• Applicable To: Resident individuals (excluding not ordinarily resident) with total income up to ₹50 lakh.

• Income Sources:

  • Salary or pension

  • One house property (excluding cases with brought-forward losses)

  • Other sources (interest, etc.)

  • Agricultural income up to ₹5,000

  • LTCG up to ₹1.25 lakh under Section 112A

• Not Applicable If:

  • Director in a company

  • Held unlisted equity shares

  • Income from more than one house property

  • Foreign assets or income

  • Total income exceeds ₹50 lakh .

ITR-4 (Sugam)

• Applicable To: Resident individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) with total income up to ₹50 lakh, having income from business or profession computed under sections 44AD, 44ADA, or 44AE.

• Income Sources:

  • Business or profession (presumptive income)

  • Salary or pension

  • One house property

  • Other sources (interest, etc.)

  • Agricultural income up to ₹5,000

• Not Applicable If:

  • Director in a company

  • Held unlisted equity shares

  • Foreign assets or income

  • Total income exceeds ₹50 lakh .​

Filing Deadline

The due date for filing ITR-1 and ITR-4 for non-audit cases is July 31, 2025. Taxpayers are encouraged to file their returns well before the deadline to avoid last-minute issues.​

Positive Aspects:

1. Early Notification:
   The government released the forms months in advance, which is excellent. It gives individuals, tax consultants, and businesses more time to prepare, reducing last-minute stress.

2. Inclusion of Small Investors (LTCG up to ₹1.25 lakh):
   Letting individuals with small capital gains under Section 112A use ITR-1 is a very taxpayer-friendly move. This simplifies the process for lakhs of mutual fund and equity investors who earlier had to shift to ITR-2 unnecessarily.

3. Dropdowns & Simpler Deductions:
   UI improvements like dropdowns for deduction categories are small but effective for reducing confusion, especially among first-time or self-filing taxpayers.

4. Focus on Transparency:
   The addition of exempt income disclosure (like exempt LTCG) shows a push towards greater transparency while keeping the form usable for common taxpayers.

Concerns or Limitations:

1. Still No Relief on Complexity for Businesses:
   While individuals get simplified forms, small business owners using ITR-4 still face reporting challenges, especially if they have hybrid income (capital gains, multiple house properties, etc.).

2. Exempt LTCG Limit of ₹1.25 Lakh Seems Arbitrary:
   While the inclusion is welcome, the choice of ₹1.25 lakh (instead of full ₹1 lakh exemption as per Section 112A) could cause confusion and may need clearer clarification.

3. Excludes Foreign Assets, Unlisted Shares:
   The forms still exclude anyone with foreign income or unlisted equity — even if their total income is well within ₹50 lakh — limiting flexibility for NRIs and startups.

4. Disclaimer:
   The information provided above is based on official notifications and news reports from the Income Tax Department of India, reputable media sources as of April 2025. While every effort has been made to ensure accuracy, users are advised to verify details with the official Income Tax e-filing portal or consult a qualified tax professional for personalized guidance. The content is for informational purposes only and does not constitute legal or financial advice.

For more detailed information and to access the forms, you can visit the official Income Tax Department website: https://www.incometax.gov.in/.