Rashmi
The Central Board of Direct Taxes (CBDT) has notified the revised Income Tax Return Form ITR-7 via Notification No. 46/2025 dated May 9, 2025, applicable from Assessment Year 2025-26 (FY 2024-25). This new format is in alignment with amendments introduced by the Finance Act, 2024 and is a crucial compliance update for charitable trusts, religious institutions, political parties, research bodies, and other tax-exempt entities.
Who Must File ITR-7?
The ITR-7 form is mandatory for persons, including companies, who are required to file returns under the following sections of the Income-tax Act, 1961:
- Section 139(4A): Trusts and institutions deriving income from property held under trust wholly or partly for charitable or religious purposes.
- Section 139(4B): Political parties.
- Section 139(4C): Research associations, news agencies, and institutions claiming exemptions under various clauses of Section 10.
- Section 139(4D): Universities, colleges, and other institutions referred to in Section 35.
Entities typically filing ITR-7 include those claiming exemptions under Sections 11, 12, 13A, 10(21), and 10(23C).
Key Highlights and Structural Changes in New ITR-7
The updated ITR-7 reflects the policy intent to enhance transparency, strengthen compliance checks, and ensure that tax-exempt entities continue to meet the conditions required for exemption.
1. Capital Gains Reporting Split Pre/Post 23.07.2024
Capital gains must now be reported separately for transactions made before and after July 23, 2024, in light of the revised capital gains rules introduced in the Finance Act, 2024. This distinction is important for accurate indexation and tax computation.
2. Capital Loss on Share Buyback (Post 01.10.2024)
Effective October 1, 2024, capital losses on share buybacks can now be claimed, provided the related dividend income was disclosed as 'income from other sources'. This amendment addresses the earlier issue of double taxation on buyback transactions.
3. Enhanced Disclosures for Exempt Entities
Expanded fields have been introduced to capture:
- Voluntary contributions
- Application and accumulation of income
- Compliance with conditions under Sections 11 and 12
This includes granular tracking of fund utilization, and clearer classification between programme and non-programme expenses, supporting transparency in charitable operations.
4. Reporting of TDS Section Codes
Entities must now report TDS section codes under Schedule-TDS. This move improves cross-verification by tax authorities and supports cleaner reconciliation of tax credits with deductions.
5. Section 24(b) - Housing Loan Interest Deductions
The form now specifically requires disclosure of interest on borrowed capital claimed under Section 24(b) for house property, helping clarify property-related claims made by eligible institutions.
6. Disclosures on Registration and Other Legal Compliances
New sections have been added for reporting:
- Foreign Contributions (FCRA)
- Registrations with SEBI, MCA, etc.
- Compliance status with respect to tax exemptions and approvals
Entities failing to meet these disclosure requirements risk denial of exemptions, particularly under Section 13, where violations are now more tightly monitored.
Due Dates for Filing ITR-7
- July 31, 2025 - for entities not subject to audit
- October 31, 2025 - for entities subject to audit
Entities must file electronically through the Income Tax Department's e-filing portal (https://www.incometax.gov.in). A Digital Signature Certificate (DSC) is mandatory for political parties and all entities required to get their accounts audited.
Action Points for Tax-Exempt Entities and Advisors
- Review and align accounting systems to capture new disclosure requirements.
- Ensure proper classification of capital transactions around the new cutoff dates.
- Update internal controls and documentation for compliance with FCRA, SEBI, and other registrations.
- Prepare for greater scrutiny around utilisation of funds, corpus handling, and specific exemptions claimed.
Conclusion
The revised ITR-7 is more than just a format change-it is a compliance and governance milestone. Organizations eligible for tax exemptions must adopt a more structured, transparent, and digitally auditable approach to financial and statutory reporting. Early preparation, accurate classification, and proactive disclosures will not only ensure smooth filing but also reinforce stakeholder confidence in institutional accountability.
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