On April 29, 2025, the Central Board of Direct Taxes (CBDT) officially notified the new Income Tax Return (ITR) Forms 1 (Sahaj) and 4 (Sugam) for Assessment Year 2025–26, pertaining to Financial Year 2024–25. These forms primarily cater to salaried individuals, pensioners, and small business owners or professionals. The due date for filing returns in non-audit cases is July 31, 2025.
While the structure of these forms has not changed drastically, there are several key updates designed to align with recent policy shifts. The new features focus on enhancing clarity, simplifying disclosures, and improving the overall transparency of the return-filing process. Tarun Kumar, Lead – Business Advisory at Coherent Advisors, explains the significant updates and what taxpayers should keep in mind while filing this year.
1. Simplified Forms for Small Investors
In a major relief for small investors, ITR-1 and ITR-4 can now be used by taxpayers earning long-term capital gains under Section 112A up to ₹1.25 lakh—provided there are no brought forward or carry forward losses under this head. This is a notable expansion in eligibility, as even minimal capital gains previously required filing ITR-2 or ITR-3.
Section 112A pertains to gains from equity shares, units of equity-oriented mutual funds, or business trust units, where Securities Transaction Tax (STT) is paid. Gains up to ₹1.25 lakh are exempt, with any excess taxed at 12.5% plus applicable cess and surcharge. This change simplifies the filing process for many retail investors.
2. Mandatory Disclosure of Exempt Gains Under Section 112A
A new section titled “Income on which no tax is payable” has been added. Taxpayers availing the Section 112A exemption must now disclose the sale consideration, cost of acquisition, and the calculated long-term capital gains—even if the gains are below the ₹1.25 lakh exemption limit. This ensures better documentation and monitoring of exempt income.
3. Form 10BA Requirement for Rent Deduction (Section 80GG)
The new forms bring clarity regarding rent deductions under Section 80GG. Both salaried and self-employed individuals who do not receive House Rent Allowance (HRA) can claim this deduction—provided they file Form 10BA electronically. This form must now be submitted along with the return of income. It’s important to note that taxpayers opting for the new tax regime under Section 115BAC are not eligible for this deduction.
4. Enhanced TDS/TCS Reporting in Returns
In a move towards detailed income tracking, taxpayers must now report the specific section under which Tax Deducted at Source (TDS) has been deducted in the TDS/TCS schedule. For instance, dividend income under Section 194 or bank interest under Section 194A. These details can be verified using Form 16A or Form 26AS, ensuring accurate credit of tax paid.
5. Clarity on New vs. Old Tax Regime (Section 115BAC)
ITR-4 now includes prompts to confirm the taxpayer’s choice of tax regime. It asks whether Form 10-IEA was filed in AY 2024–25 and whether the taxpayer is continuing with or opting out of the new regime for the first time. If Form 10-IEA was not previously filed (such as when using ITR-1 or ITR-2), it must be submitted now for AY 2025–26 to officially opt out of the new regime. This must be done before the due date for filing returns under Section 139(1).
