Income Tax Dept. Notifies all 7 ITR Filing Forms for AY 2025-26: Changes to Capital Gains, TDS, Regime and More

The Income Tax Department has officially notified all seven Income Tax Return (ITR) forms for the Assessment Year (AY) 2025-26. Taxpayers are to apprise themselves of a series of newly incorporated structural and substantive changes that aims to simplify the filing process, while aligning itself with the announcements made during the Union Budget 2024.

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Though all the 7 forms have been notified, the Department is yet to release the e-utilities for online filing. In the meanwhile, read on to know about the significant changes introduced for AY 2025-26, particularly in the areas of capital gains, tax deducted at source (TDS) disclosures, tax regime choices, and asset reporting.

Income Tax Return Filing: Complete ITR Form 1 Checklist for AY 2025-26 Read More

Who Should Use Which Form?

The Income Tax Department has provided clear applicability guidelines for each ITR form:

ITR-1 (Sahaj): For resident individuals with income up to ₹50 lakh from salary, one house property, and interest income. It also includes agricultural income up to ₹5,000. Now also available for taxpayers with LTCG up to ₹1.25 lakh from listed equity or mutual funds.

ITR-2: For individuals and HUFs with income from capital gains but no business or professional income.

CBDT notifies Revised Income Tax Return Form ITR-2 Read More

ITR-3: For individuals and HUFs with income from business or profession.

ITR-4 (Sugam): For individuals, HUFs, and firms (except LLPs) with total income up to ₹50 lakh from business or profession under the presumptive taxation scheme. Now extended to include LTCG up to ₹1.25 lakh, with no carry-forward losses.

ITR-5: For firms, LLPs, and cooperative societies.

ITR-6: For companies governed by the Companies Act.

ITR-7: For trusts and charitable institutions.

Income Tax Return Filing: Complete ITR Form 3 Checklist for AY 2025-26 Read More

Increased Scope of ITR-1 and ITR-4 Eligibility for Capital Gains

A key change for AY 2025-26 is the relaxation of eligibility criteria for ITR-1 (Sahaj) and ITR-4 (Sugam), especially concerning taxpayers with small capital gains.

The revised norms require individuals earning long-term capital gains (LTCG) up to ₹1.25 lakh from listed equity shares and equity-oriented mutual funds to use ITR-1 or ITR-4, provided they have zero brought forward or carry forward capital losses.

Income Tax Return Filing: Complete ITR Form 4 Checklist for AY 2025-26 for Small Business Owners Read More

Separate Reporting of Capital Gains

Taxpayers shall now be required to report capital gains in ITR-2, ITR-3, ITR-5, ITR-6, and ITR-7 based on the date of transfer. The changes are reflective of the guidelines laid down through Budget 2024, which altered the tax rates applicable to certain capital assets; the new ITR forms require taxpayers to separately report gains arising before and after July 23, 2024.

For example, capital gains on properties transferred post this date may attract a reduced LTCG tax rate of 12.5% without indexation, whereas transfers prior to the date may continue to be taxed under the older provisions.

In similar manner, unlisted debentures and bonds redeemed or sold after July 23, 2024, shall be uniformly treated as short-term capital gains and taxed as per applicable slab rates, regardless of the holding period.

Taxpayers shall now be required to disclose details of both, the date of acquisition and transfer, permitting precise application of the correct tax regime.

Mechanism to Opt-Out of Enhanced Tax Regime for Business Taxpayers

For taxpayers with business income and filing ITR-4, a key change for this assessment year is the need to give more details about their choice of tax regime.

Normally, business owners can opt out of the new tax regime only once in their lifetime. To do this, they must submit Form 10-IEA.

The new ITR-4 now asks whether the taxpayer has already submitted this form in the past and whether they want to continue with the old tax regime this year. The change ensures that the taxpayer’s choice of regime is clearly recorded and wards off confusion about the tax regime that they are following.

Income Tax Return: CBDT notifies ITR Form V for AY 2025-26 Read More

TDS Disclosure and Deemed Dividend Reporting

The updated ITR forms for AY 2025-26 (including ITR 1, ITR 2, ITR  3, and ITR 5) introduce mandatory disclosure of the specific section under which TDS has been deducted from incomes other than salary. The changes are deemed to aid transparency and reconciliation between TDS returns filed by deductors and the credit claimed by deductees.

Additionally, the forms now accommodate new provisions related to deemed dividends arising from share buy-backs by listed domestic companies, made effective from 1 October, 2024. Taxpayers should now report the proceeds received from the company’s buy-back of shares as ‘income from other sources’, while recording nil sale proceeds under capital gains. The change intends to ensure that any resulting capital loss is carried forward for setting off against future gains.

Income Tax Returns: CBDT notifies ITR Form 6 for AY 2025-26, Know Complete Changes Here Read More

Removal of Enrolment ID Field

A less significant but important change is the removal of the Aadhaar Enrolment ID field from all the ITR forms for AY 2025-26, including ITR 1, 2, 3, and 5. The is a temporary, 28-digit acknowledgement number that you receive at the time you visit an Aadhaar Seva Kendra (or an authorised enrolment centre) to register for your Aadhaar number.

While the enrolment ID was previously acceptable as a valid form of identification to file your income tax returns, the latest forms for AY 2025-26 have removed the option to enter an Aadhaar enrolment ID and now required taxpayers to use the 12-digit Aadhaar number for all PAN applications and ITR filings.

Liability Disclosure threshold under Schedule AL

Previously, individuals and Hindu undivided families (HUF) having a total income below ₹50 lakh were not required to file Schedule AL in their ITR. The latest changes have raised the liability disclosure threshold under Schedule AL from ₹50 lakh to ₹1 crore, thereby exempting middle-income taxpayers from tedious reporting requirements, particularly to those filing ITR-3.

Income Tax Return: CBDT Notifies ITR Form 7 for AY 2025-26 Read More

Deductions under Sections 80DD and 80U

Taxpayers claiming deductions under Section 80DD and Section 80U for disability–related expenses are now required to furnish the acknowledgement number of the disability certificate along with Form 10-IA. The requirement is applicable only for taxpayers filing ITR-2 and ITR-3 and aims to bring greater accountability and verification to claims under the provisions.

With all 7 ITR forms being notified by the Income Tax Department, taxpayers are advised to scour through the resources and identify the forms relevant to them and ensure timely and accurate filing. With the deadline for non-audit cases set to 31 July, 2025, early preparation will help avoid last-minute rush and related consequences.

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