The authorities has notified Income Tax Return (ITR) varieties 1 and 4 for Assessment Year (AY) 2025-26, simplifying the submitting course of for individuals incomes wage or presumptive revenue who’ve long-term capital gains (LTCG) up to ₹1.25 lakh from listed equities. Previously required to file the extra advanced ITR-2, these taxpayers can now use the less complicated ITR-1 (Sahaj) and ITR-4 (Sugam) varieties, respectively.
This change addresses a selected inconvenience highlighted by tax specialists. Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, defined that beforehand, (*4*)
The new ITR-1 and ITR-4 varieties for AY 2025-26 incorporate a bit for reporting LTCG exempt beneath Section 112A up to the ₹1.25 lakh restrict. According to the Income Tax legislation referenced within the notification context, LTCG up to ₹1.25 lakh every year from the sale of listed shares and mutual funds are exempt, with gains exceeding this threshold topic to a 12.5 per cent tax.
However, Mr. Jhunjhunwala clarified that salaried individuals should nonetheless use Form ITR-2 if their LTCG beneath Section 112A exceeds ₹1.25 lakh, in the event that they produce other forms of LTCG or short-term capital gains, or if they’ve capital losses to carry ahead or carry ahead. An analogous simplification for reporting exempt LTCG (up to ₹1.25 lakh beneath Section 112A) has been integrated into the brand new ITR-4 type for taxpayers utilizing the presumptive taxation scheme.
Experts lauded the simplification. EY India Tax Partner Samir Kanabar said that permitting these with minimal LTCG to use ITR-1 or ITR-4 “reduces the burden of navigating more complex forms.” He added, “This move reflects a clear shift towards enhancing taxpayer services… [it] is expected to encourage greater voluntary compliance, reduce filing-related stress, and make the system more user-friendly for small taxpayers.” AKM Global Partner-Tax Sandeep Sehgal echoed this, noting the change “streamlines the tax filing process, making it more accessible and less burdensome… thereby encouraging timely and accurate compliance”.
ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) cater to small and medium taxpayers with whole annual revenue up to ₹50 lakh. Sahaj is for resident individuals with revenue from wage, one home property, different sources (like curiosity), and agricultural revenue up to ₹5,000. Sugam is for individuals, Hindu Undivided Families (HUFs), and corporations (excluding LLPs) with revenue from enterprise and occupation beneath the presumptive scheme. ITR-2 is filed by individuals and HUFs with out enterprise or occupation revenue.
Beyond the LTCG change, the federal government has launched different modifications. The varieties now function a drop-down menu within the utility for choosing deductions claimed beneath sections like 80C and 80GG. Additionally, assessees should furnish section-wise particulars relating to Tax Deducted at Source (TDS) deductions throughout the ITR.
Consistent with final 12 months, ITR-1 continues to search particulars on expenditures exceeding ₹2 lakh on overseas journey and over ₹1 lakh on electrical energy consumption through the earlier 12 months.
Regarding the timeline, the ITR varieties are usually notified earlier, round February or March. The delay this 12 months was attributed to Revenue Department officers being preoccupied with the brand new Income Tax Bill launched in Parliament in February. Taxpayers can start submitting their returns for revenue earned within the 2024-25 monetary 12 months as soon as the I-T division makes the submitting utility obtainable. The deadline for individuals not requiring an audit stays July 31.
Published – May 01, 2025 01:38 am IST
