The Income Tax Department administers major changes to the seven ITR forms for the Assessment Year 2025 2026 (financial year), aiming at improving compliance and facilitating smooth reporting. From simplified norms in simple returns to detailed disclosures in more involved cases, taxpayers must acquaint themselves with the new requirements-understanding that the due date stands extended up to September 15, 2025, in view of the changes brought about in the Income Tax Act, 1961.
Simplified Filing for Small Investors
For AY 2025‑26, ITR‑1 (Sahaj) and ITR‑4 (Sugam) have become more taxpayer‑friendly. Hitherto, reporting long-term capital gains (LTCG) from equities required higher-level forms. Now, gains up to ₹1.25 lakh under Section 112A can be included in these simpler returns—provided there are no carried-forward losses—making it easier for small investors to file returns without migrating to ITR‑2 or ITR‑3. The threshold relaxation means more salaried taxpayers with modest equity profits can use Sahaj or Sugam, saving effort and time.
Split Reporting of Capital Gains
Beginning AY 2025‑26, ITR‑2 and ITR‑3 require taxpayers to bifurcate capital gains based on the sale date relative to July 23, 2024—the effective date of new capital gain tax rules Why? Gains from before the date are taxed at old rates (e.g., 10% on listed equity gains over ₹1 lakh), while post-July gains fall under the updated rate of 12.5% and a raised exemption threshold of ₹1.25 lakh.
New Reporting for Buybacks and Dividends
A notable addition for taxpayers with share buybacks is the mandatory disclosure of capital loss under share buybacks in Schedule CG–A(A), paired with the declaration of dividend-equivalent gains under “Income from Other Sources”. For iTR‑2, a new field reports dividend income falling under Section 2(22)(f), while corresponding capital losses from buybacks are recorded distinctly. This adaptation is necessary due to the Finance Act, 2024 provision that treats buyback monies as deemed dividends while generating notional capital losses.
Higher Asset/Liability Threshold
Earlier, taxpayers with income exceeding ₹50 lakhs were needed to furnish details of every asset and liability. With the new ₹1 crore mark, the documentation burden lifts for middle-income earners while keeping compliance high for the people possessing wealth.
Mandatory TDS Section Codes
All ITR forms (1–5) now require taxpayers to specify exact section codes (e.g., 194A, 194J) in Schedule TDS. While seeming minor, this change improves accuracy in tax credit reconciliation, aligning with data from Form 26AS and AIS/TIS.
Enhanced Disclosure for Deductions and Exemptions
Deductions under Sections 80C to 80U, including HRA, life/health insurance, donations, and interest on housing loans, must now be accompanied by proof details—policy numbers, insurer names, landlord PAN, rent receipts, and lender information. ITR‑3 goes further, demanding bank sanction dates and account numbers for loan-related deductions. This ensures that claims have valid documentation and lenders can be audited more easily.
New Fields for VDA/Crypto and Business Income
For ITR‑3, which covers business, F&O trading, and profession, new schedules capture Virtual Digital Asset (VDA) income—especially relevant to cryptocurrency earnings—for the first time in AY 2025‑26 forms. Start-ups and traders must now declare these incomes along with capital gains, dividends, assets, and liabilities using the updated Excel utilities.
Excel Utility Enhancements & Validation Norms
Gradual releases of the Excel utilities occurred: ITR 1 and ITR 4 got released by the end of May followed by ITR 2 and ITR 3 in mid-July via the IT e-filing portal. These features are equipped with easy drop-downs, AIS/TDS/AIS/TIS data auto-filled, and conformed to stiffer set of validation rules to avoid errors. The blocking or Category-A defects have increased from nearly 584 to 724 in ITR 2 alone.
Extended Deadline
Due to the extensive updates, the Income Tax Department has extended the deadline from July 31 to September 15, 2025. This gives taxpayers additional time to collect documents, reconcile 26AS, and adapt to new schedules—essential for accurate reporting.
Impact on Taxpayers
Taxpayers filing simple returns with minimal capital gains and no investments above ₹1 crore will find the revised Sahaj and Sugam forms adequate. They must now collate detailed documentation and reconcile multiple schedules—including buyback income, bifurcated capital gains, asset details, proofs for deductions, and TDS section codes—to avoid rejection or scrutiny.
Preparing for Filing
Begin by organizing necessary documents: capital gain and asset statements, bank interest proofs, crypto disclosures, 26AS/AIS/TIS forms, loan documents, HRA receipts, and policy receipts. Clear house with your employer and banks to ensure all TDS and transaction data is correct. Download the latest utilities post-July 11 and use validation tools to catch Category A errors early. Finally, confirm the correct ITR form and file well before the September 15 deadline to reduce hassle and avoid late fees.
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Conclusion
AY 2025‑26’s ITR forms bring a mix of simplification and complexity. While easier for small investors via Sahaj and Sugam, significant updates across ITR‑2 and ITR‑3 demand careful attention—especially regarding capital gains, buybacks, crypto, assets/liabilities, deductions, and TDS coding. Proper planning, documentation, and use of updated utilities will help taxpayers file confidently and compliantly.
FAQs:
1. What are the key changes introduced in the ITR forms for AY 2025-26?
The ITR forms for AY 2025-26 now include new disclosures related to virtual digital assets, foreign income, and detailed reporting of business expenditures. These additions aim to increase transparency and plug tax evasion by collecting granular data from taxpayers under different heads.
2. Do I need to report income from crypto or virtual digital assets (VDAs)?
Yes, taxpayers must now report details of income from crypto assets or any other VDAs under a separate schedule. This includes date of acquisition, transfer, cost, and sale value, as the government continues its focus on taxing digital asset transactions.
3. Has anything changed for salaried individuals in ITR forms?
Yes, salaried taxpayers must now provide a more detailed breakdown of salary components, including exempt allowances and perquisites. The form also asks for more structured disclosure of income from other sources like interest and dividends.
4. Are there any updates related to capital gains reporting?
Absolutely. Taxpayers reporting capital gains must provide more granular details such as ISIN code, date of acquisition and sale, and scrip-wise data. These fields are now mandatory for listed shares, unlisted shares, mutual funds, and land/building sales.
5. What new disclosures are required for business owners or professionals?
For AY 2025-26, businesses and professionals must disclose more detailed information about expenses, especially those exceeding ₹50,000 per transaction. In addition, more data on cash transactions, foreign travel, and nature of business is required in the updated forms.
6. Is there any change in reporting agricultural income?
Yes, agricultural income reporting now needs supporting details such as ownership proof, land size, and income breakup if it exceeds ₹5 lakh. This ensures only genuine agricultural income is exempt from taxation under the Income Tax Act.
7. How has foreign income reporting changed in ITR forms?
Individuals earning foreign income or holding overseas assets must now disclose country-wise breakup of income, taxes paid abroad, and bank account details. This complies with India’s international reporting obligations and aims to curb global tax evasion.
8. Do NRIs have additional disclosure requirements in AY 2025-26?
Yes, NRIs must now furnish detailed information on Indian income sources, residential status, and the duration of stay in India. If they claim DTAA benefits, they must specify the treaty article, foreign tax residency, and attach proof.
9. Are there any changes related to new and old tax regimes?
ITR forms now include a declaration for opting between the new or old tax regimes for individuals and HUFs. If you’re opting for the new regime, you may also need to submit Form 10IEA online within the prescribed time.10. Do I need to disclose high-value transactions in the new ITR forms?
Yes, taxpayers are required to report high-value transactions such as large credit card payments, mutual fund purchases, or foreign travel expenses. These disclosures help match data with information available to the income tax department via other sources like SFT.
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