Income Tax Return Filing 2025: Income tax return (ITR) filing for the Financial Year (FY) 2024–2025 will begin after the Income Tax Department notifies the ITR-1 (Sahaj) and ITR-4 (Sugam) forms for Assessment Year (AY) 2025–2026. The tax department made major changes this year to make filing returns easier for investors and small taxpayers.
ITR-1 Provides Relief for Small Investors
The ITR-1 form has undergone one of the most significant changes. If the gains fall within the threshold, taxpayers with long-term capital gains (LTCG) under Section 112a may file ITR-1 for the first time. Such taxpayers were previously required to use the more complicated ITR-2 form. The action is intended to reduce small equity investors' compliance burden.
Income on which no tax is payable: Long Term capital gains u/s 112a not chargeable to Income-tax" is a new section in the updated ITR-1. In this section, taxpayers can report LTCG from listed equity shares, equity-oriented mutual funds, or business trusts up to Rs 1.25 lakh.
AY 2025–2026: Who Can and Cannot Use ITR-1
ITR-1, however, is still prohibited for people who have- Gains on short-term capital (STCG), LTCG from real estate, where tax is due, LTCG under Section 112a, Losses that were carried forward or brought forward, for Presumptive Income Up to Rs 50 Lakh, ITR-4.
ITR-4 is intended for resident individuals, HUFS, and businesses (apart from LLPS) with a combined income of up to Rs 50 lakh. It applies to people who make money through their business or profession under presumptive taxation schemes (Sections 44ad, 44ada, and 44ae). Additionally, this form now permits LTCG reports up to Rs 1.25 lakh under Section 112a.
Limitations on the Use of ITR-4
ITR-4 cannot be used if you are a director of a business or invest in shares that are not listed, or possess assets or income from overseas or earn more than Rs 5,000 from agriculture or have ESOPS with deferred taxes
The E-Filing Portal Will Go Live Soon
It is anticipated that the income tax e-filing portal will soon allow both online and offline ITR submissions. Because improper filing may result in return rejections or compliance notices, taxpayers are advised to carefully select the appropriate ITR form based on their income type and financial profile.