The Income Tax Department has initiated the Income Tax Return (ITR) filing process for the Assessment Year (AY) 2025-26, corresponding to the Financial Year 2024-25. As a significant step, the department has released the Excel utilities for ITR-1 (Sahaj) and ITR-4 (Sugam) forms, facilitating easier filing for eligible taxpayers.

Eligibility for ITR-1 and ITR-4

• ITR-1 (Sahaj): This form is designed for resident individuals (excluding those "not ordinarily resident") with a total income of up to ₹50 lakh. Their income should be derived from sources like salary, one house property, other sources (such as interest), long-term capital gains (LTCG) under Section 112A up to ₹1.25 lakh, and agricultural income up to ₹5,000. A key update for AY 2025-26 is the inclusion of LTCG up to ₹1.25 lakh under Section 112A, which was earlier not permitted under ITR-1. However, ITR-1 cannot be used by individuals who are company directors, have invested in unlisted equity shares, own foreign assets, have income from sources outside India, or have a total income exceeding ₹50 lakh.
• ITR-4 (Sugam): This form is applicable to resident individuals, Hindu Undivided Families (HUFs), and firms (excluding Limited Liability Partnerships - LLPs) with a total income of up to ₹50 lakh. Their income should be from presumptive business or profession under Sections 44AD, 44ADA, or 44AE, income from one house property, other sources (excluding lottery or racehorses), and LTCG under Section 112A up to ₹1.25 lakh. ITR-4 is not for those with income exceeding ₹50 lakh, income from more than one house property, foreign assets, or those who are directors in a company.

Key Updates and Changes in ITR Forms for AY 2025-26

The Income Tax Department has notified all seven ITR forms for AY 2025–26, incorporating structural updates and simplifications to enhance transparency and ease compliance. Some key changes include:

• Inclusion of LTCG under ITR-1 and ITR-4: Salaried individuals and those opting for the presumptive taxation scheme can now report long-term capital gains (LTCG) up to ₹1.25 lakh under ITR-1 and ITR-4, respectively.
• Separate Reporting of Capital Gains: A new requirement mandates reporting capital gains separately based on whether they arose before or after July 23, 2024, due to changes in LTCG tax treatment introduced in the 2024 Union Budget.
• Increased Reporting Threshold under Schedule AL: For ITR-3, the reporting threshold under Schedule AL (Assets and Liabilities) has increased from ₹50 lakh to ₹1 crore, reducing compliance for middle-income taxpayers.
• Rationalized Capital Gains Taxation: The ITR forms incorporate amendments introduced by the Finance Act 2024 and have enhanced reporting requirements relating to deductions being claimed, requirement to report TDS section codes, provide the bifurcation of capital gains for pre and post 23 July 2024, etc.

Extension of ITR Filing Deadline

The Central Board of Direct Taxes (CBDT) has extended the due date for filing ITRs for the Assessment Year 2025–26 from July 31, 2025, to September 15, 2025, for non-audit taxpayers. This extension is attributed to the extensive changes introduced in the notified Income Tax Returns (ITRs) and the time required for system readiness and rollout of ITR utilities for AY 2025-26. Taxpayers who miss the extended deadline can still file a belated return by December 31, 2025, with penalties and interest.

Importance of Timely Filing

Filing Income Tax Returns (ITR) is a crucial obligation for every taxpayer in India. It ensures compliance with tax regulations, involves declaring all sources of income, availing eligible deductions, and reporting tax liabilities to the Income Tax Department. Missing the deadline may result in interest charges under Section 234A and a late filing fee under Section 234F. Taxpayers are advised to compile their income details early, calculate their tax liabilities, and discharge any balance tax liability promptly to avoid penal interest under Section 234B of the Income Tax Act.

Availability of ITR e-Filing Utilities

While all seven ITR forms for AY 2025-26 have been released, taxpayers can currently file their returns using the Excel utilities for ITR-1 and ITR-4. The Income Tax Department is expected to release the e-filing utilities (both online and offline) for all ITR forms soon, enabling taxpayers to submit their returns online.