Introduction
The Central Board of Direct Taxes (CBDT) has notified the revised Income Tax Return (ITR) forms for the Assessment Year (AY) 2025-26, introducing a series of notable changes aimed at improving the accuracy, transparency, and granularity of income reporting across various taxpayer categories.
These updates are in alignment with evolving tax regulations and policy objectives, reflecting the government's broader push toward a more robust and compliance-driven tax ecosystem. The modifications encompass eligibility criteria revisions, enhanced capital gains disclosure requirements, detailed deduction reporting, refinements in presumptive taxation rules, and additional reporting obligations in specific scenarios such as foreign assets, virtual digital assets, and income under multiple heads.
With these changes, the ITR forms are now more comprehensive and demand greater clarity and precision in disclosures. As such, taxpayers ranging from salaried individuals and professionals to businesses and trusts must take careful note of the updated formats to ensure accurate and compliant return filing.
In this article, we present a detailed overview of the newly notified ITR forms for AY 2025-26, outlining the key changes introduced and their practical implications for different categories of assessees.
Key Updates Specific to ITR Forms
1. Expansion of Eligibility to File ITR-1 and ITR-4
From A.Y. 2025-26, taxpayers earning LTCG up to Rs. 1.25 lakh under Section 112A, with no carry forward or brought forward losses, can now file ITR-1 or ITR-4.
Earlier, even small equity gains made taxpayers ineligible for these simpler forms.
This change eases return filing for salaried individuals and small business owners with modest investments.
2. Detailed Disclosures for Opting Out of New Tax Regime in ITR-4
ITR-4 now requires detailed disclosures from taxpayers opting out of the new tax regime under Section 115 BAC.
In addition to Form 10-IEA details, taxpayers must confirm past filings and ongoing preference to opt out.
This ensures clarity, especially as opting out is allowed only once for business income taxpayers.
3. Mandatory Disclosure of TDS Sections in ITR Forms
ITR-1, 2, 3, and 5 now require taxpayers to mention the exact TDS section (like 194A, 194J, etc.) for non-salary income.
Previously, this was not needed to claim TDS credit.
The update aims to improve transparency, prevent mismatches, and ensure smoother processing of returns.
4. New Capital Gains Rules Incorporated in ITR Forms
ITR forms for A.Y. 2025-26 now reflect updated capital gains provisions effective from 23rd July, 2024.
Taxpayers must disclose the date of asset transfer to determine whether old or new rules apply.
Transfers before this date follow earlier tax rates (like 15% on STCG under 111A, 20% with indexation under 112), which later transfers fall under the new regime, requiring separate reporting in the ITR.
5. Higher Income Threshold for Reporting Assets and Liabilities
There's good news for high-income taxpayers.
From A.Y. 2025-26, Schedule AL (reporting of assets and liabilities) is mandatory only if the gross total income exceeds Rs. 1 crore.
Previously, the reporting threshold was Rs. 50 lakhs. This relaxation reduces the compliance burden for many individuals with income between Rs 50 lakhs and Rs 1 crore.
6. Documents required before deduction claimed
Taxpayers, especially those under the old regime, will need to provide comprehensive information while claiming exemptions and deductions in their income tax return (ITR) for the assessment year 2025-26. The ITR utility is now available, and tax experts have stated that submitting detailed information has become compulsory. This includes insurance company names, policy numbers, housing loan particulars, actual house rent allowance (HRA), and rent payments.
Additional requirements include information on landlords for HRA claims, registration numbers of political parties for donation deductions, and other relevant details. For medical treatment deductions, specific ailment details are now required. Tax experts indicate that this unprecedented requirement for detailed information aims to prevent fraudulent deduction claims.
For HRA exemption: The taxpayer will have to give details of the following:
- Place of work,
- Actual HRA received,
- Actual Rent paid,
- Information of landlords
- Deduction under Section 80C: The taxpayer must provide the document or receipt number of the insurance policy and the PPF account number.
- Deduction under Section 80D: The name of the health insurance company and the policy number must be provided.
- For home loan interest deduction: The taxpayer must provide the details of the lender, Loan Account No., Sanction Date, Loan Amount, Outstanding balance as on 31.03.2025.
- Treatment of diseases: To claim a deduction for the treatment of a specific disease, details of disease will have to be provided.
7. Simplified Compliance for Foreign Retirement Accounts
Taxpayers availing relief under Section 89A for income accrued in foreign retirement benefit accounts will now experience an easier reporting process. The revised ITR forms streamline disclosures, reducing complexity and compliance burden for eligible individuals.
8. Mandatory Disclosure of Active Bank Accounts
All taxpayers are now required to report non-dormant bank accounts held in India during the financial year. However, dormant accounts those inactive for over two years are excluded from this requirement, easing compliance for accounts with no recent activity.
Conclusion
The revisions introduced in the ITR forms for Assessment Year 2025-26 reflect the government's continued push toward transparency, digital compliance, and accurate tax reporting. With broader eligibility for simpler forms, stricter deduction documentation, and enhanced disclosure norms, taxpayers must exercise greater diligence while filing returns. From salaried individuals and professionals to businesses and investors, each category must carefully assess the changes applicable to them and align their filings accordingly. Timely preparation, supported by complete and correct information, will be key to avoiding discrepancies and ensuring smooth ITR processing under the new framework.
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