The Income Tax Department has officially released the Income Tax Return (ITR) forms 1 and 4 for the assessment year 2025–26, enabling individual taxpayers, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with total income up to ₹50 lakh to begin filing their income tax returns. This marks the beginning of the tax season for income earned during the financial year April 1, 2024, to March 31, 2025. Taxpayers must submit their returns by the due date of July 31, 2025, to avoid late filing penalties, which can be levied if the deadline is missed.
Changes in ITR Forms
This year’s release of ITR forms brings a significant change that benefits salaried taxpayers, especially those with modest investments in the stock market. For the first time, ITR-1 (Sahaj) will allow salaried individuals to report long-term capital gains (LTCG) up to ₹1.25 lakh from listed equity shares and equity-oriented mutual funds under Section 112A of the Income Tax Act. Previously, such individuals were compelled to file the more detailed and complex ITR-2, which was often viewed as a hurdle for small investors with otherwise simple tax profiles.
Policy Shift Towards Inclusivity
According to Samir Kanabar, Tax Partner at EY India, this change signals a policy shift toward making the tax system more inclusive, accessible, and taxpayer-friendly. “This move reflects a clear shift towards enhancing taxpayer services by allowing individual taxpayers to file simplified tax returns where they have long-term capital gains up to ₹1.25 lakh. It removes the burden of navigating more complex forms,” Kanabar said. He added that the change is expected to encourage greater voluntary compliance, reduce tax filing stress, and simplify processes for small taxpayers.
ITR-1 and ITR-4 Details
ITR-1 is designed for resident individuals whose total income does not exceed ₹50 lakh and includes income from salary or pension, one house property, and other sources like interest from savings or fixed deposits. Additionally, it accommodates individuals with agricultural income up to ₹5,000. However, ITR-1 comes with specific exclusions for certain individuals.
- Company directors and holders of unlisted equity shares are not eligible to use ITR-1.
- Individuals with foreign assets or income sourced outside India must file alternative forms.
- Deferred tax on employee stock options (ESOPs) or coverage under Section 194N also disqualifies the use of ITR-1.
ITR-4 is meant for resident individuals, HUFs, and firms (excluding LLPs) whose total income does not exceed ₹50 lakh during the financial year. This form caters specifically to those earning income under the presumptive taxation schemes—Sections 44AD (business), 44ADA (professionals), and 44AE (transporters).
