ITR Filing AY 2025–26: Major Form Updates Every Indian Taxpayer Should Be Aware Of
As the income tax filing season for Assessment Year (AY) 2025–26 approaches, the Central Board of Direct Taxes (CBDT) has introduced several significant updates to the Income Tax Return (ITR) forms. These changes aim to enhance transparency, streamline the filing process, and align with recent legislative amendments. This article provides a comprehensive overview of the key modifications, ensuring taxpayers are well-informed and prepared.
1. Extended Eligibility for ITR-1 and ITR-4 Filers
Previously, individuals with long-term capital gains (LTCG) under Section 112A exceeding ₹1 lakh were required to file more complex forms like ITR-2 or ITR-3. However, for AY 2025–26, taxpayers can now use ITR-1 or ITR-4 if their LTCG under Section 112A does not exceed ₹25 lakh, provided there are no carried forward or set-off capital losses . This change simplifies the filing process for many investors with moderate capital gains.
2. New Tax Regime as Default
The Finance Act 2023 has made the new tax regime under Section 115BAC the default for individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), and Bodies of Individuals (BOIs). Taxpayers wishing to continue with the old tax regime must explicitly opt out by indicating their choice in the ITR form. For those with business or professional income, this opt-out must be exercised by filing Form 10-IEA before the due date .
3. Detailed Reporting of Capital Gains
ITR-3 and ITR-5 forms now require a more granular reporting of capital gains. Taxpayers must bifurcate gains earned before and after July 23, 2024. Additionally, specific reporting is mandated for capital losses from share buybacks occurring after October 1, 2024, especially if the associated dividend income is reported elsewhere .
4. Enhanced TDS Reporting
Taxpayers are now required to specify the exact section under which Tax Deducted at Source (TDS) has been deducted. This detail must be furnished in Schedule TDS of ITR-1 and Schedule TDS-2 of ITR-4, pertaining to income other than salary . This change aims to improve the accuracy of TDS claims and reduce discrepancies.
5. Mandatory Aadhaar Number
The new ITR forms have removed the provision to mention the Aadhaar Enrolment ID. Taxpayers must now provide their Aadhaar number when filing returns, in line with the provisions under Section 139AA . This move seeks to streamline taxpayer identification and reduce instances of duplication.
6. Asset and Liability Reporting Threshold Increased
For ITR-3 and ITR-5 filers, the threshold for mandatory reporting of assets and liabilities has been increased. Previously, taxpayers with income exceeding ₹50 lakh were required to provide this information. Now, only those with income exceeding ₹1 crore need to report their assets and liabilities . This adjustment reduces the compliance burden for many taxpayers.
7. Introduction of Legal Entity Identifier (LEI)
The ITR forms now require the Legal Entity Identifier (LEI), a 20-character alphanumeric code used globally to identify parties in financial transactions. Taxpayers seeking refunds of ₹50 crore or more must provide their LEI details . This measure enhances transparency in large financial transactions.
8. Deductions Under Section 80CCH
A new section, 80CCH, introduced by the Finance Act 2023, allows a tax deduction for individuals enrolled in the Agnipath Scheme who subscribe to the Agniveer Corpus Fund on or after November 1, 2022. ITR-1 now includes a new column to provide details for deductions under this section .
9. Verification Methods Expanded
Individuals and HUFs subject to audit can now validate their ITR using an Electronic Verification Code (EVC), in addition to the previously available digital signature option . This provides more flexibility in the verification process.
Conclusion
The updates to the ITR forms for AY 2025–26 reflect the government’s ongoing efforts to simplify tax compliance, enhance transparency, and align with technological advancements. Taxpayers should familiarize themselves with these changes to ensure accurate and timely filing. Consulting with a tax professional or using the Income Tax Department’s e-filing portal can further aid in navigating these updates effectively.
