ITR Form Changes for AY 2025–26 as compared to AY 2024–25

Main ITR Form Changes for AY 2025–26 as compared to AY 2024–25

Tax filing isn’t just about submitting figures, it’s about understanding context and reporting accurately. Each year, even small updates can significantly impact eligibility, deductions, and tax liability. Staying informed Helps avoid penalties Ensures faster processing/refunds AND demonstrates financial prudence and transparency

Changes in ITR-1 (SAHAJ): For Salaried, Pensioners, and Presumptive Income Taxpayers

1. LTCG u/s 112A Allowed ((LTCG on Equity Shares, Equity Mutual Funds): Now eligible for ITR-1 if LTCG ≤ ₹1.25 lakh and no capital loss to be carried forward or set off. Now allowed in ITR-1 & ITR-4, if LTCG ≤ ₹1.25 lakh and no carry-forward/set-off.  Previously, any capital gain made the taxpayer ineligible.
2. Drop-down Selection for Deductions(Mandatory Dropdown for Deductions) : Deductions (80C, 80D, 80U etc.) must be selected from a dropdown list with specific sub-sections. Deductions (e.g., 80C, 80D, 80U) must now be selected from a drop-down list with specific clause details.
3. Mandatory e-Submission of Form 10BA for Section 80GG : Taxpayers claiming deduction u/s 80GG (rent paid where HRA is not received) must now: Electronically file Form 10BA along with the ITR. Non-filing of this form may result in disqualification of the deduction.
4. Enhanced TDS/TCS Reporting : Taxpayers must now mention the TDS/TCS section code in the return. E.g., 194A (interest), 194C (contract), 194H (commission), etc. This ensures better reconciliation with AIS/Form 26AS and faster processing of returns.
5. Foreign Retirement Accounts (Section 89A): Enhanced disclosure required for relief claimed on foreign retirement benefits.
6. Reporting Active Bank Accounts: All active Indian bank accounts must be disclosed.  At least one account to be selected for refund. Dormant accounts excluded.

ITR-2 (Applicable for Individuals and HUFs not having income from business or profession) AY 2025–26 (CBDT Notification No. 43/2025 dated 03.05.2025)

1. Schedule – Capital Gains: Capital Gains bifurcation is now mandatory:

• • Into pre-23rd July 2024 and post-23rd July 2024 gains.
  • Reflects the mid-year change introduced by the Finance Act, 2024, which could involve modifications in indexation benefits, exemptions, or tax rates.

2. Share Buyback Loss Reporting: Capital loss from buyback (post 01.10.2024): Can be claimed only if the associated dividend income was previously reported under ‘Income from Other Sources’. Aimed at curbing tax arbitrage where losses are claimed without accounting for income received from the same corporate action.
3. Asset & Liability Schedule – Threshold Revised: Earlier, reporting of assets & liabilities (Schedule AL) was required if income exceeded ₹50 lakh. Now, this threshold is raised to ₹1 crore of total income. Provides compliance relief for taxpayers in the ₹50 lakh–₹1 crore range.
4. Enhanced Disclosure for Deductions: Sections 80C to 80U: Now includes granular sub-section level reporting, ensuring precise claim tracking. Specific enhancement mentioned under:

• Section 80C (e.g., LIC, PPF, ELSS, etc.)
• Section 10(13A) for HRA claims—may require additional field-wise inputs like rent, landlord PAN (if applicable), etc.

5. Schedule-TDS – Detailed Reporting: New requirement to mention TDS section code (e.g., 194A, 194I, 194H) alongside TDS claims. Improves matching with Form 26AS / AIS and reduces processing delays or mismatches during verification.

Changes in ITR-3: For Individuals/HUFs with Business or Professional Income

1. Asset-Liability Reporting Threshold Raised:

1. • Old Rule: Disclose assets & liabilities if income > ₹50 lakh.

1. • New Rule: Now required only if income > ₹1 crore.  Required only if income exceeds ₹1 crore (earlier ₹50 lakh).
2. Capital Gains Reporting Split: Capital Gains Reporting (Post-July 23, 2024):
   • Gains now to be bifurcated into periods before and after 23rd July 2024 (due to differing tax treatment).
   • Gains must now be bifurcated into pre- and post-July 23 to align with revised taxation rules.
   • Capital Loss on Share Buybacks: From October 1, 2024, capital losses can be claimed only if:
     1. Dividend income is reported under “Income from Other Sources”, and
     2. Separate disclosure is made.
3. Share Buyback Loss Reporting:
   • Capital loss claim on buybacks post 1st October 2024 only allowed if corresponding dividend income is shown under “Income from Other Sources”.
4. TDS Schedule Update: TDS Section Code Reporting:
   • Must mention specific section codes in Schedule-TDS. Was optional earlier. Now mandatory to mention section codes of TDS in Schedule-TDS.
5. Cruise Business Reporting (New Section 44BBC):
   • New section introduced requiring specific disclosures by cruise operators. Taxpayers in cruise operations must now report separately under new section.

Changes in ITR-4 (SUGAM):

1. LTCG Inclusion: Allowed to file ITR-4 if LTCG u/s 112A does not exceed ₹1.25 lakh and no capital loss is reported. ITR-1 and ITR-4 now permit reporting of long-term capital gains u/s 112A, provided: LTCG does not exceed ₹1.25 lakh, and No capital loss is carried forward or set off. A new subsection has been introduced titled “Income on which no tax is payable” for exempt LTCG reporting.
2. Increased Presumptive Income Threshold:
   • Section 44AD: Limit raised from ₹2 crore to ₹3 crore (if 95% or more transactions are digital).
   • Section 44ADA: Limit raised from ₹50 lakh to ₹75 lakh (with same digital condition).
3. Form 10-IEA (New Regime Opt-Out):
   • Required if opting out of the new tax regime for the first time.
   • Must disclose Form 10-IEA acknowledgment number.
4. Tax Regime Status Declaration in ITR-4:  A dedicated section is now available in ITR-4 to declare the taxpayer’s tax regime choice (old vs. new). If the taxpayer had opted out of the new regime in AY 2024–25: They must confirm whether they wish to continue or revert.

• If opting out for the first time in AY 2025–26: Form 10-IEA must be filed electronically on or before the due date.

Changes in ITR-5: For Firms, LLPs, AOPs, BOIs, etc.

Many of the above changes (esp. TDS section codes and capital gains reporting) are also applicable to ITR-5 filers

• Capital Gains Split Reporting: Like ITR-3, bifurcation for capital gains pre/post 23rd July 2024 is required.
• Extended Disclosures: Reporting enhancements for partnership firms, LLPs, and AOPs, particularly for income categorization and partner disclosures. Enhanced reporting obligations for business-related income in light of sector-specific changes.

ITR-6 (Applicable for Companies other than those claiming exemption u/s 11) AY 2025–26

1. Schedule – Capital Gains: Split of Capital Gains, Gains must now be bifurcated into Before 23rd July 2024 and On or After 23rd July 2024. This is in line with amendments from the Finance Act, 2024, affecting indexation and taxation periods.
2. Share Buyback Loss Adjustment: Capital loss on share buyback (post 01.10.2024): Allowed only if the corresponding dividend income is disclosed under “Income from Other Sources”. Prevents double benefit where buyback loss is claimed without accounting for prior dividend receipt.
3. New Reference to Section 44BBC: Section 44BBC (newly introduced): Pertains to presumptive taxation for cruise business operators. And Added across applicable schedules to accommodate such businesses in ITR-6 filings.
4. Schedule BP (Business & Profession): Rule 10TIA (Presumptive Taxation for Raw Diamonds): Profit from sale of rough diamonds must now be ≥ 4% of gross receipts to qualify under presumptive scheme. Rule 10TIA references added to Schedule BP accordingly.
5. Deduction U/s 24(b): ITR-6 now includes structured reporting for:

• Interest on home loan deduction u/s 24(b).
• Likely linked to properties held/used for business purposes.

6. Schedule-TDS – Enhanced Reporting: Section code-wise TDS disclosure mandatory:

• Each TDS entry must specify the relevant section under which TDS was deducted (e.g., 194J, 194C).
• Promotes transparency and reduces mismatches in TDS-TCS reconciliation.

Income tax taxpayers must ensure while filing of ITR AY 2025–26.

• Choose the correct ITR form based on income type and threshold conditions.
• Check LTCG thresholds if planning to use ITR-1 or ITR-4.
• Ensure accurate reporting of deductions via drop-downs with clause selection.
• Verify digital transaction percentage for presumptive schemes.
• Disclose active bank accounts and foreign retirement incomes properly.
• Timely file Form 10-IEA if opting out of the new tax regime.
• Keep proper documentation for share buyback-related capital losses and dividend incomes.