Govt notifies ITR forms; individuals with LTCG up to Rs 1.25 lakh can file ITR 1, 4

New Delhi: The government has notified the income tax return forms 1 and 4 for assessment year 2025-26, and made it easier for individuals with long term capital gains of up to Rs 1.25 lakh from listed equities to file returns.

The government has also made certain changes in the form with regard to deductions claimed under 80C, 80GG and other sections and has provided a drop down menu in the utility for tax filers to select from. Also, assessees will have to furnish in the ITR section-wise details with regard to TDS deductions.

Once the utility for filing ITR is made available by the I-T department, people can start filing ITR for income earned in 2024-25 fiscal. The last date for filing ITR for individuals and those who do not have to get their accounts audited is July 31.

Usually, the ITR forms are notified before the end of the fiscal, mostly around February/March. This time, however, the ITR forms and the filing utility got delayed as revenue department officials were pre-occupied with the new Income Tax Bill, which was introduced in Parliament in February.

ITR forms 1 and 4 for assessment year (AY) 2025-26 are to be filed by individuals and entities with total income of up to Rs 50 lakh a year.

Now, salaried individuals and those under presumptive taxation scheme, having long-term capital gains (LTCG) of up to Rs 1.25 lakh in a fiscal year will be able to file ITR-1 and ITR-4, respectively. Earlier, such persons/entities were required to file ITR-2.

Under I-T law, LTCG of up to Rs 1.25 lakh from sale of listed shares and mutual funds are exempt from tax. Gains exceeding Rs 1.25 lakh/ annum are subject to 12.5 per cent tax.

EY India Tax Partner Samir Kanabar said allowing those with minimal LTCG to continue using ITR-1 or ITR-4 reduces the burden of navigating more complex forms.

"This move reflects a clear shift towards enhancing taxpayer services by simplifying the return filing process for individual taxpayers. The change is expected to encourage greater voluntary compliance, reduce filing-related stress, and make the system more user-friendly for small taxpayers," Kanabar said.

Like last year's form, ITR-1 also seeks detail from individuals if they have incurred expenditure exceeding Rs 2 lakh for travel to a foreign country for yourself or for any other person. It also seeks detail on whether an asseessee has incurred an expenditure exceeding Rs 1 lakh on consumption of electricity during the previous year.

ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) are simpler forms that cater to a large number of small and medium taxpayers.

Sahaj can be filed by a resident individual having annual income up to Rs 50 lakh and who receives income from salary, one house property, other sources (interest) and agricultural income up to Rs 5,000 a year.

Sugam can be filed by individuals, Hindu Undivided Families (HUFs) and firms (other than Limited Liability Partnerships (LLPs)) having total annual income up to Rs 50 lakh and income from business and profession.

ITR-2 is filed by individuals and HUFs not having income from profits and gains in business or profession.

Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP said so far salaried individuals having income under the head capital gains were required to file form ITR-2 even where the capital gains were exempt by virtue of the threshold limit prescribed under Section 112A, resulting in elaborate disclosure requirements including information about accrual or receipt of capital gain, details of securities etc.

This inconvenience is reduced with the new form ITR-1 for AY 2025-26 incorporating a small section for reporting the income in the nature of LTCG on which tax is not payable by virtue of the exemption limit provided in Section 112A.

"However, in cases, where the taxpayer earns LTCG under Section 112A in excess of Rs 125,000 or where the taxpayer earns any other LTCG other than that taxable under Section 112A or earns short term capital gains or has carried forward or brought forward capital losses or derived income from any combination of the above, the salaried individual would have to resort to Form ITR-2 for filing return of income," Jhunjhunwala said.

A similar change has been made to form ITR-4 which applies to taxpayers resorting to presumptive taxation for their business income. The new ITR-4 form for AY 2025-26 subsumes reporting of LTCG subject to tax under Section 112A of the IT Act within the limit of Rs 1.25 lakh.

AKM Global Partner-Tax Sandeep Sehgal said, "this change streamlines the tax filing process, making it more accessible and less burdensome for small investors and salaried individuals, thereby encouraging timely and accurate compliance".