ITR Forms for AY 2025–26: What’s New!
When the Income Tax Department updates the ITR forms, it’s not just a change in format-it’s a change in how the system views your financial life. For Assessment Year (AY) 2025-26, the changes are subtle in places and sweeping in others. But one thing is clear: the I-T Department now wants more details, cleaner disclosures, and better alignment with its own intelligence tools like the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS).
Let’s decode what’s really changed in ITR forms for FY 2024-25 (AY 2025-26), the logic behind them, and the form in which you should file the ITR.
1. Deductions? Now With Full Proof Details for Department:
This year, ITR filers opting for the old tax regime must now furnish deeper details for each deduction and exemption they claim.
· House Rent Allowance (HRA): You must now declare your city of work, actual rent paid, and landlord’s name and PAN (if rent exceeds ₹1 lakh).
· Section 80C Investments: You’re required to specify the policy number or certificate number for life insurance, PPF, ELSS, etc.
· Section 80D: Provide insurance company name and policy number.
· Section 24(b): Home loan interest deduction now asks for lender’s name, PAN, and opening/closing loan balances.
· Section 80DDB (Medical treatment): Must now state the disease for which the deduction is claimed.
But Why?
Over the years, deduction claims have become a tool of tax evasion for some taxpayers, especially in a paperless system where no documents are required at the filing stage. By asking for specific details, the department is creating a validation trail. This helps in cross-checking:
· PAN of landlord with TDS/TCS database.
· Life insurance premiums with data from IRDA.
· Health insurance with policy issuer records.
· Home loan interest with reported bank/NBFC data.
This is expected to improve refund processing times and reduce scrutiny notices—for honest taxpayers.
2. Excel Utilities Are Now Smarter than ever:
If you’re still in the “Excel over JSON” camp, this one’s for you. The utilities for ITR-1 and ITR-4 now have smart validations built in. This ensures:
· Mismatch detection between Form 16 and ITR entries
· Auto-calculation of deduction limits
· Mandatory fields highlighted to prevent incomplete submissions.
Why This Makes Sense:
As filings increase each year, incorrect forms create a bottleneck for both taxpayers and the department. These built-in validations act like Google Maps for your tax return—redirecting you before you hit a dead end.
3. Kicked Out of ITR – 1 or ITR – 4 for ₹1 LTCG? Not Anymore!Taxpayers earning long-term capital gains (LTCG) up to ₹1.25 lakh from equity shares or equity-oriented mutual funds can now use ITR-1 or ITR-4, provided other conditions are met. Earliereven ₹1 of LTCG meant you were kicked out of ITR-1.
Logic Behind the Move:
LTCG Exemption up to ₹ 1 lakh was available under Section 112A which has been increased to ₹ 1.25 lakh from FY 2024-25. Since the amount is already exempt from tax, enabling small taxpayers to file ITR – 1 or 4 aligns with the Government’s ease-of-compliance push for small investors.
4. TDS Reporting Gets More Granular:
The new forms now ask taxpayers to specify the section under which TDS was deducted. For example, whether the TDS was under 194A (interest), 194C (contract), or 194J (professional services), the same is required to be mentioned in the ITR form.
Why This Matters:
Previously, only aggregate TDS was required. Now, this sectional reporting helps match:
· TDS entries in Form 26AS and AIS
· Income source in the return (interest, commission, salary)
It minimizes mismatches, especially useful for freelancers, professionals, and those with multiple income sources.
5. More Details, Please – Foreign Assets & Income:
Foreign assets reporting in ITR-2 and ITR-3 has always been strict. This year, it gets even more detailed:
· Country code
· Nature of asset
· Date of acquisition
· Income earned and tax paid outside India
Reason Behind This:
India has signed multiple automatic exchange of information (AEOI) agreements under FATCA and CRS. So, with the increased database, the Government is trying to track and cross check it.
6. Standard Deduction Bump in the New Regime:
From FY 2024–25 onwards, the standard deduction under the new regime has been increased from ₹50,000 to ₹75,000. This reduces the effective tax burden—especially for middle-class salaried individuals & may nudge salaried taxpayers toward the new regime. It also narrows the benefit gap between both regimes, potentially making the “no-deductions” route more appealing.
Form Impact:
This shows up automatically in ITR-1 and ITR-2 for salaried individuals under the new regime. You no longer need to worry about it—it’s pre-fed like your name on your school exam sheet.
7. Asset and Liability Reporting Threshold Raised in ITR-3:
The old rule was that if your total income exceeded ₹50 lakh, you had to report all your assets and liabilities in ITR-3. This threshold has been doubled to ₹1 crore.
Why Relaxation?
This eases compliance for upper-middle-class professionals and business owners who may cross ₹50 lakh due to inflationary income growth but don’t necessarily have an ultra-high net worth. The ₹1 crore bar now better reflects actual HNI profiling.
8. Choosing the Right ITR Form: A Quick Guide:
| Form | For Whom | Key Conditions |
| ITR-1 | Salary, 1 house property, interest income | Income ≤ ₹50 lakh, no foreign income/assets |
| ITR-2 | Salary + capital gains or foreign assets | No business/professional income |
| ITR-3 | Business/profession + any other income | Proprietors, freelancers, etc. |
| ITR-4 | Presumptive income (44AD, 44ADA) | Business/profession up to ₹ 2 Cr or ₹ 50L. |
| ITR-5 | Firms, LLPs, AOPs | Except companies |
| ITR-6 | Companies (not under Section 11) | No exemption-claiming entities |
| ITR-7 | Charitable Trusts/ Institutions, political parties | As per Section 139(4A)–(4D) |
Final Word: Transparency Over Complexity:
With every new version of the ITR, the Government is drawing a tighter link between taxpayer transparency and systemic accountability. Every deduction claimed, every rupee earned abroad, every TDS credit-must now have a story, a number, and ideally, a supporting document. It may feel like the forms are asking a lot more questions, but if you’re filing with honesty and clarity, there’s nothing to fear. So open that AIS, download your Form 26AS, gather your rent receipts, insurance policies, and maybe a cup of strong tea-because this year, the I-T return isn’t just a form. It’s a financial autobiography.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
