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Income Tax Department Notifies

Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26

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Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26

Income Tax Department Notifies ITR-5 Form For AY 2025-26 The Income Tax Department, through the Central Board of Direct Taxes (CBDT), has notified the revised ITR-1 (SAHAJ) and ITR-4 (SUGAM) forms for the Assessment Year (AY) 2025-26, pertaining to Financial Year (FY) 2024-25. Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26 These forms are applicable for filing tax returns for income earned from April 1, 2024, to March 31, 2025.

The early notification of ITR forms is aimed at giving taxpayers sufficient time to understand the changes and file their returns promptly, thereby improving overall compliance.

📌 Overview of Forms

FormSuitable ForKey Eligibility
ITR-1 (SAHAJ)Individuals (Resident) with income up to ₹50 lakhSalary, one house property, family pension, other sources
ITR-4 (SUGAM)Individuals, HUFs, Firms (other than LLP) under presumptive income schemeBusiness income under section 44AD or professional income under 44ADA

🆕 Key Changes in ITR-1 (SAHAJ) for AY 2025-26

  1. Reporting of Long-Term Capital Gains (LTCG) under Section 112A

For the first time, taxpayers can use ITR-1 to report capital gains from the sale of listed equity shares and equity mutual funds, if:

  • LTCG is not more than ₹1.25 lakh.
  • No capital loss is carried forward or set off.

👉 Earlier, ITR-1 did not allow reporting any capital gains. This change simplifies filing for small investors.

⚠️ Exclusions:
ITR-1 cannot be used if you have:

  • Capital gains from the sale of house property
  • Short-term capital gains (STCG) on equity or mutual funds
  • LTCG exceeding ₹1.25 lakh

  1. Option to Continue/Opt-Out of New Tax Regime

  • Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26 Taxpayers who opted out of the New Tax Regime in AY 2024-25 must confirm or change their choice for AY 2025-26.
  • Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26 If opting out for the first time, it is mandatory to furnish the Form 10-IEA acknowledgement number.
  • Provisions are included for late filing of Form 10-IEA.

  1. Deduction Details (80C to 80U) with Clause Reference

  • All deductions must be selected from a drop-down menu.
  • The exact section, clause, and sub-section (e.g., 80C(2)(v)) must be mentioned for transparency.

  1. Mandatory Reporting of Bank Accounts

  • All bank accounts held in India during FY 2024-25 must be reported except dormant accounts.
  • This step ensures better tracking of financial transactions and prevents tax evasion.

  1. Improved Reporting for Retirement Accounts Abroad (Section 89A)

  • Taxpayers with retirement income from foreign accounts (e.g., US 401(k) plans) can now:
    • Track relief claimed
    • Report income more transparently
    • Avoid double taxation issues

🆕 Key Changes in ITR-4 (SUGAM) for AY 2025-26

  1. Presumptive Income Limit Increased for Digital Transactions

  • Under Section 44AD (for businesses):
    If 95% or more receipts are digital, the turnover limit for presumptive taxation is increased to ₹3 crore (from ₹2 crore).
  • Under Section 44ADA (for professionals):
    If 95% of receipts are digital, the gross receipt limit is increased to ₹75 lakh (from ₹50 lakh).

✅ This move encourages digital transactions and eases compliance for small businesses and professionals.

  1. Form 10-IEA Acknowledgement Requirement

  • Taxpayers opting out of the new tax regime for the first time must submit the Form 10-IEA acknowledgment number.
  • This ensures that taxpayers are making a conscious and documented choice about their tax regime.

  1. Bank Account Disclosure

  • Just like ITR-1, all active bank accounts in India must be disclosed (excluding dormant ones).
  • Helps in financial traceability and better enforcement.

  1. Detailed Deduction Declaration

  • All deductions under Chapter VI-A (80C to 80U) to be selected with precise clause reference from a structured dropdown.

📋 Final Words: What You Should Do as a Taxpayer

Income Tax Department Notifies ITR-5 Form For AY 2025-26 With these early notifications, you now have enough time to prepare:
  • Review your capital gains statements, especially if you sold mutual funds or shares.
  • If you’re considering switching tax regimes, understand the implications and keep Form 10-IEA ready.
  • Ensure all your bank accounts are documented and updated. Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26
  • Maintain digital records of your business or professional receipts to benefit from increased limits under 44AD/44ADA.

✳️ Start collecting all required documents and verify your income sources. Filing early helps avoid last-minute errors and penalties.

🗓️ When Can You Start Filing?

Income Tax Department Notifies ITR-5 Form For AY 2025-26 Although the forms are notified, the income tax portal will soon begin accepting filings for AY 2025-26, likely from May or June 2025. Income Tax Department Notifies ITR-1 and ITR-4 for AY 2025-26 Keep an eye out for updates from the Income Tax Department.
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Sources link – https://encr.pw/JJHkg 

Sources Link- https://incometaxindia.gov.in/communications/notification/notification-40-2025.pdf