⁠Income Tax Filing 2025: Key Changes In New ITR Forms You Should Know

The Income Tax Department has rolled out the new Income Tax Return (ITR) forms for Assessment Year (AY) 2025–26, covering income earned in the financial year 2024-25.

The changes in ITR filing for FY 2024-25 aim to simplify the process, especially for salaried individuals and small businesses. The new ITR forms, recently notified by the Income Tax Department, also include specific sections for reporting capital gains, if any, in FY25.

The seven ITR forms cater to different taxpayer categories:

ITR-1 (Sahaj): Designed for resident individuals earning up to Rs 50 lakh from salary, a single house property and interest income. It also includes agricultural income up to Rs 5,000.

ITR-2: Applicable to people and HUFs with income from capital gains but no business income.

ITR-3: Intended for those with income from business or profession.

ITR-4 (Sugam): Best suited for individuals, Hindu Undivided Families (HUFs) and companies (except LLPs) with income up to Rs 50 lakh from business or profession under the presumptive taxation scheme.

ITR-5: For companies, Limited Liability Partnerships (LLPs) and cooperative societies.

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

ITR-7: For trusts and charitable entities.

Taxpayers earning long-term capital gains (LTCG) up to Rs 1.25 lakh from listed shares or mutual funds can now opt for ITR-1 or ITR-4, provided they meet other eligibility criteria. Earlier, such taxpayers were required to file ITR-2, a more detailed form.

This update streamlines the process for salaried people and small business owners who deal with modest investments. Since gains up to Rs 1.25 lakh remain tax-exempt, the revised criteria prevent unnecessary complexity for low-value investors.

Another change relates to how capital gains must be reported. If you are using ITR-2, 3, 5, 6, or 7, gains must now be categorised based on whether they occurred before or after July 23, 2024. This follows the Budget 2024 announcement that adjusted the tax rate on real estate LTCG to 12.5% without indexation, but only for properties acquired before this date. This allows taxpayers to compare both methods and opt for whichever results in a lower tax outgo.

Small business owners and professionals using ITR-3 will benefit from a reduced disclosure burden. Earlier, anyone with a net worth above Rs 50 lakh had to fill out the 'Schedule AL' section detailing their assets and liabilities. Now, this threshold has been raised to Rs 1 crore, offering relief to mid-income taxpayers from tedious reporting.

The deadline to file ITR for most individual taxpayers, whose accounts are not subject to tax audit, is July 31. Given the new form structures and updated rules, taxpayers are advised not to leave filing to the last moment. Waiting for the last day may lead to errors in ITR filing.