An overview of the Key Changes in ITR Forms for AY 2025–26

 

The Income Tax Department has notified several important updates in ITR Forms for AY 2025–26. Here’s a quick summary of what’s new:

1. Relaxation in ITR-1 and ITR-4 Usage:
• Taxpayers can now use ITR-1 or ITR-4 even if they have Long-Term Capital Gains (LTCG) under Section 112A, provided:
• The LTCG amount does not exceed Rs. 1.25 lakh, and
• There is no capital loss to be carried forward or set off.
• Earlier, any capital gains would make these forms inapplicable.

2. Expanded Disclosures in ITR-4 – New Tax Regime (Section 115BAC):
• If a taxpayer opted out of the new regime in AY 2024–25 via Form 10-IEA, they must disclose it and confirm whether they wish to continue or revise the decision.
• First-time opt-outs in AY 2025–26 must provide acknowledgment details of Form 10-IEA.
• Additional clarification options are available for delayed filings of Form 10-IEA.

3. Common Updates in ITR-1 and ITR-4:
• Deductions under Sections 80C to 80U must now be selected via dropdown with specific clause/sub-section details in the e-filing utility.
• Income reported under Section 89A (foreign retirement accounts) includes enhanced fields and relief tracking.
• Disclosure of all Indian bank accounts held during the previous year is mandatory (except dormant accounts).
• At least one bank account must be selected for refund credit.

4. Higher Thresholds for Presumptive Taxation under ITR-4:
• Section 44AD (business): Turnover limit increased to Rs. 3 crore if digital transactions constitute at least 95% of total receipts.
• Section 44ADA (professionals): Limit increased to Rs. 75 lakh under the same condition.

These changes aim to streamline compliance and better reflect evolving taxpayer profiles.