Representative image used for purpose. File | Photo Credit: Hindu
The government has informed the Income Tax Return (ITR) Form 1 and 4 for the Assessment Year (AY) 2025-26, which simplifies the filing process for persons earning salary or presumed income, which has long-term capital gains (LTCG) up to ₹ 1.25 lakh from the listed equity. Earlier there was a need to file more complex ITR -2, these taxpayers can now use simple ITR -1 (Sahaj) and ITR -4 (Sugam) forms.
This change addresses a specific discomfort highlighted by experts. Tax partner Sandeep Jhunjhunwala at Nangia Anderson LLP said that earlier, “Slarnous persons in income under Head Capital Gain were required to form ITR -2, even the capital gains were exempted on the limit based on the limit set under Section 112A, resulting in clearly revealed requirements.”
The new ITR-1 and ITR-4 form for AY 2025-26 include a section for reporting LTCG, which gives a discount to a limit of ₹ 1.25 lakhs under Section 112A. According to the Income Tax Act referred to in terms of notification, the sale of LTCG listed shares and mutual funds has been exempted up to 1.25 lakhs per year, 12.5 percent tax with profit of higher than this limit.
However, Mr. Jhunjhunwala clarified that salaried persons still have to use ITR-2 if their LTCG under Section 112A is more than 1.25 lakhs, if they have other types of LTCG or short-term capital gains, or if they have capital loss to carry or bring them forward. A uniform simplification for reporting LTCG (under Section 112A) up to 1.25 lakhs) has been included in the new ITR-4 form for taxpayers using a proposed taxation scheme.
Experts appreciated the simplification. EY India Tax partner Sameer Kanabar said that allowing people with minimum LTCG to use ITR-1 or ITR-4 “reduces the burden of navigating more complex forms.” He said, “This step shows a clear change in the direction of increasing taxpayer services … [it] Expect to encourage maximum voluntary compliance, reduce filing-related stress and make the system more user friendly for small taxpayers. “AKM Global Partner-Tax Sandeep Sehgal echoed this change,” by streamlining the tax filing process, made it more accessible and less cumbersome … to encourage timely and accurate compliance on time “.
ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) complete small and medium taxpayers with total annual income to ₹ 50 lakh. The Sahaj is for residents with a salary, a house property, other sources (eg interest), and income from agricultural income from income from income from income. Fragrant individuals, Hindu undivided families (HUFs), and are accompanied by business and profession for firms (except LLP). ITR-2 is filed by individuals and Huf without the income of business or profession.
Beyond the LTCG change, the government has introduced other amendments. The form now offers a drop-down menu in utility to select the cuts claimed under classes such as 80C and 80GG. Additionally, evaluators should present a section-wise details about the tax deduction on the source (TDS) cut within the ITR.
According to the previous year, ITR -1 continues to take details of more than ₹ 2 lakh on foreign travel and over 1 lakh on electricity consumption during the previous year.
About the timeline, ITR forms are usually informed first around February or March. The delay of this year was held responsible for living in Parliament in February with the new Income Tax Bill presented in Parliament. Taxpayers can start filing their returns for income earned in 2024-25 financial year, once the IT department provides filing utility. The deadline of individuals not required audit remains on 31 July.
Published – May 01, 2025 01:38 am IST