New ITR Forms for AY 2025-26: 9 Big Changes in ITR-1 to ITR-4 You Should Know Before Filing
Summary of Key Changes
Taxpayers will see
(1) LTCG up to ₹1.25 lakh now reportable in the simplest
forms (ITR‑1 and ITR‑4), with pre‑filled fields to reduce
errors;
(2) updated tax‑slab options and clear toggles for the new
regime;
(3) a revamped ITR‑2 tailored for ₹50 lakh–₹1 crore
earners;
(4) granular house‑property and capital‑gains schedules;
(5) an ITR‑3 overhaul for business/profession disclosures;
6) enhanced donation (80G) reporting;
(7) tighter foreign‑asset/income disclosures; and
(8) the forms are notified early, with e‑filing utilities to follow on the Income Tax portal.
1. LTCG up to ₹1.25 lakh Allowed in ITR‑1 & ITR‑4
Taxpayers realizing long‑term capital gains (LTCG) up to ₹1.25 lakh
from listed equity shares or equity‑oriented mutual funds can now file via ITR‑1
(Sahaj) and ITR‑4 (Sugam), rather than being forced into ITR‑2/ITR‑3 This
change stems from Section 112A amendments and removes a major hurdle for
small investors, enabling faster, simpler filings.
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2. Pre‑filled LTCG Data in ITR‑1
The ITR‑1 form now includes a dedicated “Exempt LTCG” field
for gains up to ₹1.25 lakh under Section 112A; this field will be auto‑populated
from AIS/TIS (Annual Information Statement/Taxpayer Information Summary) or
broker‑provided data, minimizing manual entry and errors. Pre‑filled capital‑gains
reporting aligns with the ITD’s ongoing push for pre‑filled returns and error
reduction.
3. Updated Tax Regime Slabs & Opt‑in/Opt‑out Toggle
All ITR forms reflect the new tax‑slab structure introduced
in Budget 2023 (Section 115BAC). Alongside default rates, the forms
now present a clear checkbox for taxpayers to opt out
of the new regime, with fields calculating tax liability under both regimes for
easy comparison. This ensures accurate tax computation and transparency for
those evaluating trade‑offs.
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4. ITR‑2 Tailored for ₹50 lakh–₹1 crore Earners
ITR‑2 has been restructured to benefit salaried/pensioned individuals earning ₹50 lakh–₹1 crore annually:
- Separate Schedule for multiple house‑property incomes, including self‑occupied vs. let‑out splits.
- Dedicated sections for exemption disclosures (e.g., agricultural income, gratuity).
- Enhanced deduction fields (Sections 80C/80D) laid out clearly for high‑income filers.
- These tweaks streamline reporting for higher earners who don’t have business income yet need comprehensive disclosure.
5. Granular House‑Property & Capital‑Gains Reporting
In ITR‑2 and ITR‑3, disclosures on house‑property and capital gains have become more detailed:
House‑Property Schedule requires tenant PAN (for rents ≥ ₹50 000/yr), actual rent received, municipal taxes paid, and interest on home‑loan breakdown.
Capital‑Gains Schedule mandates bifurcation by asset type (equity, debt, immovable), holding period (short/long), and exemptions claimed (Section 54/54F). This aids accurate calculation of indexation benefits and tax liabilities.
6. ITR‑3 Overhauled for Business & Profession
The ITR‑3 form now includes:
- Presumptive Income Options (Sections 44AD/44ADA) with turnover/receipts fields to declare presumptive vs. actual income.
- Turnover Bifurcation between digital and cash receipts, reconciling with GST returns to curb under‑reporting.
- Asset‑Liability Disclosure threshold raised: only those with total income > ₹1 crore must list assets/liabilities now, reducing compliance for small professionals.
7. Enhanced Donation (Section 80G) Reporting
Schedules for 80G deductions are more granular:
- Separate tables (A–D) classify institutions (100 %/50 % eligible).
- Mandatory PAN of Donee for receipts > ₹2 000 to curb fraudulent claims.
- Breakup of Qualifying vs. Non‑Qualifying Donations ensures only eligible donations are deducted.
8. Tighter Foreign‑Asset & Income Disclosure
Residents with foreign assets/income face stricter reporting in ITR‑2/ITR‑3:
- Asset‑Wise Disclosure: Each foreign asset (bank accounts, investments, property) must be listed separately, with country and maximum value.
- Income from Foreign Sources (interest, dividends, rental) requires schedule‑wise declaration.
- These align with FATCA/CRS norms to enhance transparency and discourage tax evasion.
9. E‑Filing Utilities Await Release
Although the forms were notified on April 29 (ITR‑1/4) through May 11 (ITR‑7), the e‑filing utilities (Java/Excel‑based) required for submission are pending release on the Income Tax portal. The latest versions (v1.9 for Excel) were last updated on 27 March 2025, with full JSON schemas updated on 16 January 2025; filers should watch for upcoming portal updates before starting e‑filing.
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Next Steps for Taxpayers
- Review Your Eligibility: Confirm which ITR form applies based on your income sources and updated thresholds.
- Gather Documents: Obtain AIS/TIS statements, broker PAN summaries, donation receipts (with donee PAN), and details of foreign assets/income.
- Wait for Utilities: Monitor the Income Tax e‑Filing portal for the release of updated Java/Excel utilities.
- Opt‑Out Analysis: If you earn under the new regime, use the in‑form comparison fields to decide whether to stick with or drop the new tax regime.
Conclusion
The new ITR forms for AY 2025–26 reflect a strategic shift toward
simplification, digitization, and tighter compliance. From allowing modest
capital gains in ITR-1/4 to granular disclosures in ITR-2/3, the updated forms
offer both convenience and greater accountability. Taxpayers must assess their
eligibility, understand revised reporting requirements, and gather the right
documentation—especially for donations, capital gains, and foreign assets. With
e-filing utilities expected soon, early preparation will ensure timely and
hassle-free filing. By staying ahead of these 9 key changes, you can avoid
penalties, optimize your tax planning, and ensure a smooth filing experience
this financial year.
More Read: ITR-1 & ITR-4 Forms Notified for AY 2025-26: Who Should File Which Income Tax Return?
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