Govt notifies ITR types; people with long-term capital positive aspects as much as ₹1.25 lakh can file ITR 1, 4

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The federal government has notified Revenue Tax Return (ITR) types 1 and 4 for Evaluation 12 months (AY) 2025-26, simplifying the submitting course of for people incomes wage or presumptive revenue who’ve long-term capital positive aspects (LTCG) as much as ₹1.25 lakh from listed equities. Beforehand required to file the extra advanced ITR-2, these taxpayers can now use the easier ITR-1 (Sahaj) and ITR-4 (Sugam) types, respectively.

This modification addresses a particular inconvenience highlighted by tax specialists. Sandeep Jhunjhunwala, Tax Associate at Nangia Andersen LLP, defined that beforehand, “salaried people having revenue below the pinnacle capital positive aspects have been required to file kind ITR-2 even the place the capital positive aspects have been exempt by advantage of the edge restrict prescribed below Part 112A, leading to elaborate disclosure necessities.”

The brand new ITR-1 and ITR-4 types for AY 2025-26 incorporate a piece for reporting LTCG exempt below Part 112A as much as the ₹1.25 lakh restrict. In accordance with the Revenue Tax legislation referenced within the notification context, LTCG as much as ₹1.25 lakh every year from the sale of listed shares and mutual funds are exempt, with positive aspects exceeding this threshold topic to a 12.5 per cent tax.

Nonetheless, Mr. Jhunjhunwala clarified that salaried people should nonetheless use Kind ITR-2 if their LTCG below Part 112A exceeds ₹1.25 lakh, in the event that they produce other sorts of LTCG or short-term capital positive aspects, or if they’ve capital losses to hold ahead or convey ahead. An analogous simplification for reporting exempt LTCG (as much as ₹1.25 lakh below Part 112A) has been included into the brand new ITR-4 kind for taxpayers utilizing the presumptive taxation scheme.

Consultants lauded the simplification. EY India Tax Associate Samir Kanabar said that permitting these with minimal LTCG to make use of ITR-1 or ITR-4 “reduces the burden of navigating extra advanced types.” He added, “This transfer displays a transparent shift in direction of enhancing taxpayer providers… [it] is anticipated to encourage higher voluntary compliance, scale back filing-related stress, and make the system extra user-friendly for small taxpayers.” AKM World Associate-Tax Sandeep Sehgal echoed this, noting the change “streamlines the tax submitting course of, making it extra accessible and fewer burdensome… thereby encouraging well timed and correct compliance”.

ITR Kind 1 (Sahaj) and ITR Kind 4 (Sugam) cater to small and medium taxpayers with whole annual revenue as much as ₹50 lakh. Sahaj is for resident people with revenue from wage, one home property, different sources (like curiosity), and agricultural revenue as much as ₹5,000. Sugam is for people, Hindu Undivided Households (HUFs), and corporations (excluding LLPs) with revenue from enterprise and career below the presumptive scheme. ITR-2 is filed by people and HUFs with out enterprise or career revenue.

Past the LTCG change, the federal government has launched different modifications. The types now function a drop-down menu within the utility for choosing deductions claimed below sections like 80C and 80GG. Moreover, assessees should furnish section-wise particulars relating to Tax Deducted at Supply (TDS) deductions throughout the ITR.

In keeping with final yr, ITR-1 continues to hunt particulars on expenditures exceeding ₹2 lakh on international journey and over ₹1 lakh on electrical energy consumption throughout the earlier yr.

Relating to the timeline, the ITR types are sometimes notified earlier, round February or March. The delay this yr was attributed to Income Division officers being preoccupied with the brand new Revenue Tax Invoice launched in Parliament in February. Taxpayers can start submitting their returns for revenue earned within the 2024-25 monetary yr as soon as the I-T division makes the submitting utility obtainable. The deadline for people not requiring an audit stays July 31.