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.

2. 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.

3. 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.

4. 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.

5. 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