The Central Board of Direct Taxes (CBDT) has notified the Income Tax Return forms ITR-1 (Sahaj) and ITR-4 for the financial year 2024-25 (assessment year 2025-26). The forms will be effective from income earned between April 1, 2024, and March 31, 2025, and have introduced several changes to ensure ease of compliance while expanding tax coverage.
LTCG Reporting Now Allowed in ITR-1 Under Section 112A
One of the most significant changes in this year’s ITR-1 form is the inclusion of a provision to report Long-Term Capital Gains (LTCG) under Section 112A. Taxpayers earning up to ₹1.25 lakh in LTCG from listed equity shares or equity-oriented mutual funds can now file ITR-1, provided they have no capital loss to carry forward or set off.
Earlier, ITR-1 did not allow capital gains reporting, pushing such taxpayers to use more complex forms. However, the new provision does not allow the form’s use if the taxpayer has gains from house property sales or short-term capital gains.
Form 10-IEA Now Mandatory for Switching Tax Regimes
Taxpayers opting out of the new income tax regime for the first time in AY 2025–26 must now provide acknowledgement details of Form 10-IEA while filing returns. This change ensures consistency in tracking regime changes. The notification also calls for clarity around delayed filing of the form, urging taxpayers to keep their compliance on record.
Improved Deductions and Relief Tracking
In both ITR-1 and ITR-4, all deductions claimed under Sections 80C to 80U will now need to be selected from drop-down menus on the income tax portal. Taxpayers must also specify the exact clauses and sub-sections, increasing the level of disclosure and reducing errors.
Additionally, the new forms have enhanced features for reporting income under Section 89A (retirement accounts held abroad), including an improved relief tracking mechanism.
Revised Turnover Limits for Businesses and Professionals in ITR-4
The ITR-4 form now includes changes under presumptive taxation schemes:
- Section 44AD (Business): For businesses with 95% digital transactions, the turnover limit has been revised upward to ₹3 crore.
- Section 44ADA (Professionals): Under the same digital receipts condition, the limit has been increased to ₹75 lakh.
These changes aim to encourage digital payments and simplify filing for small businesses and professionals.
Mandatory Reporting of Active Indian Bank Accounts
Taxpayers filing ITR-1 or ITR-4 now need to mandatorily disclose all Indian bank accounts as of the end of the last year, excluding dormant accounts only. This will be a partial increase in transparency and help in automating the process of refunds.
Incentivising Taxpayer
These notices help CBDT advance a bit further on larger digital openness, simplicity in compliance, and encompassing reportorial regimes. The taxpayer is incentivized to thoroughly question what type of form applies to its class and prepare appropriate disclosures and waivers, if required, to facilitate timely filling-in and compliance before e-file upload.
Also Read: Income Tax Return Filing for AY 2025-26: What We Know So Far
