Categories: Direct Tax

Top 5 Changes in Income Tax Return Filing for AY 2025–26

5 key changes in income tax return forms for FY 2024–25 (AY 2025–26):

  1. Wider Eligibility for ITR-1 and ITR-4

  • What’s new: Taxpayers having Long-Term Capital Gains (LTCG) from listed equity shares or mutual funds up to ₹1.25 lakh can now file using ITR-1 or ITR-4.
  • Earlier: Such taxpayers were forced to use ITR-2 or ITR-3.
  • Benefit: Easier and quicker filing for small investors with minor capital gains.
  1. Mandatory Disclosure of TDS Section

  • What’s new: Taxpayers must now specify the exact section (like 194A, 194N, 194R, etc.) under which TDS has been deducted.
  • Applicable to: ITR-1, ITR-2, ITR-3, and ITR-5.
  • Why it matters: This helps the Income Tax Department cross-verify TDS claims and avoid mismatches with Form 26AS and AIS.
  1. Capital Gains Rules Updated Based on Budget 2024

  • What’s new: New capital gains tax regime based on 23rd July 2024 as the cutoff date.
  • Implication: Taxpayers must segregate capital gains:
    • Before July 23, 2024: Old regime applies.
    • On/after July 23, 2024: New rules apply (e.g., cost of acquisition, indexation, exemptions may vary).
  • Applies to: All capital assets – shares, MFs, property, gold, etc.
  1. Asset and Liability Reporting Threshold Increased

  • What’s new: The reporting threshold for disclosing assets and liabilities (Schedule AL) has been raised from ₹50 lakh to ₹1 crore of gross total income.
  • Who’s impacted: Only those earning more than ₹1 crore now need to report:
    • Immovable property
    • Investments
    • Bank balances
    • Jewellery, vehicles, etc.
  • Benefit: Simplifies filing for upper-middle-income taxpayers.
  1. Buy-Back Proceeds Now Treated as Deemed Dividends

  • Effective from: 1 October 2024
  • What’s new: Income from buyback of shares by listed domestic companies will be treated as deemed dividend in the hands of shareholders.
  • ITR Changes:
    • Must be reported under “Other Sources”.
    • Specific fields added in ITR-2 and ITR-3.
  • Impact: This change plugs a tax arbitrage and shifts tax burden to individual investors.

Income Tax Return  form to use for AY 2025–26 (FY 2024–25)

ITR-1 (Sahaj)

Eligibility:

  • Income up to ₹50 lakh
  • Sources:
    • Salary/Pension
    • One house property
    • Other sources (e.g. interest)
    • LTCG < ₹1.25 lakh from listed equity funds (Section 112A)

Not Eligible for:

  • HUFs
  • Crypto, multiple properties, foreign income

ITR-2

Use if:

  • Income > ₹50 lakh from any source under ITR-1
  • You have:
    • Multiple house properties
    • Capital gains (long/short-term)
    • Foreign income or assets
    • ₿ Crypto income
    • Brought forward/carry-forward losses
    • Directorship/unlisted shares

ITR-3

Use if:

  • You have income from business/profession
  • You are a partner in a firm

ITR-4 (Sugam)

Use if:

  • You have presumptive income under Sections 44AD, 44ADA, or 44AE
  • Income < ₹50 lakh from any source covered under ITR-1

Note:

  • HUFs cannot file ITR-1 — must use ITR-2/3/4 as applicable.

Summary Table Key Changes for AY 2025–26:

Change Impacted ITRs Affected Taxpayers
Wider eligibility for ITR-1/4 ITR-1, ITR-4 Salaried/Small investors
TDS section disclosure ITR-1 to ITR-3, ITR-5 Everyone with TDS
Capital gains rule split ITR-2, ITR-3 Those with capital assets
Asset reporting limit raised ITR-2, ITR-3 HNIs with income > ₹1 cr
Buyback as deemed dividend ITR-2, ITR-3 Shareholders of listed firms

More Disclosures Required:

  • Full details needed for 80C, HRA, loans, donations
  • Capital gains split between gains made before and after 23 July 2024
  • TDS on dividends, interest, etc. will be auto-filled — verify with Form 26AS & AIS

Simplified Rules:

  • ITR-1/ITR-4 now allowed for LTCG ≤ ₹1.25L
  • Schedule AL threshold (Asset & Liability) raised to ₹1 crore
  • Buyback income now shown under “Other sources”
    • Losses from buyback (after 1 Oct 2024) can be adjusted
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Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

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