New ITR Forms Out: Individuals With LTCG Up To Rs 1.25 Lakh Can Use ITR-1, 4; Details Here

The Income Tax Department has officially released Income Tax Return (ITR) forms 1 and 4 for the Assessment Year 2025–26, introducing changes aimed at simplifying the filing process, particularly for individuals with modest long-term capital gains (LTCG). Taxpayers earning up to Rs 1.25 lakh in LTCG from listed shares and mutual funds will now be eligible to file returns using the simplified ITR-1 and ITR-4 forms, rather than the more complex ITR-2, as previously required.

This revision is expected to benefit salaried individuals and small business owners opting for the presumptive taxation scheme, who fall within the Rs 50 lakh annual income threshold applicable for these forms. The move aligns with the government’s broader objective of streamlining tax compliance and enhancing user experience.

More Clarity And Accuracy

Additional changes have been incorporated into the return forms, especially around commonly claimed deductions under sections like 80C and 80GG. To improve clarity and accuracy, the Central Board of Direct Taxes (CBDT) has added a dropdown selection feature within the return filing utility. This update is designed to help taxpayers select applicable deductions more easily. Moreover, individuals are now required to provide section-wise details of tax deducted at source (TDS) in their return filings.

The utility for e-filing the newly notified ITR forms is expected to be made available soon. Once live, taxpayers can begin filing their returns for income earned during the financial year 2024–25. The deadline for non-audit cases, primarily individual taxpayers, is July 31, 2025.

While ITR forms are typically notified toward the end of the financial year, usually in February or March, this year’s release saw a delay. According to officials, the postponement was due to the drafting and presentation of the new Income Tax Bill, introduced in Parliament in February.

The recent government decision to allow individuals with limited long-term capital gains (LTCG) to continue filing their returns through simplified forms such as ITR-1 and ITR-4 is being seen as a positive step toward easing tax compliance. EY India Tax Partner Samir Kanabar said the move reduces the need for small taxpayers to navigate more complex return forms, reported PTI.

Also Read: Tesla Begins Search For Next CEO Amid Elon Musk’s Political Focus

Enhanced Taxpayer Services

"This move reflects a clear shift towards enhancing taxpayer services by simplifying the return filing process for individual taxpayers. The change is expected to encourage greater voluntary compliance, reduce filing-related stress, and make the system more user-friendly for small taxpayers," Kanabar noted.

As with last year, ITR-1 requires individuals to disclose if they have spent more than Rs 2 lakh on foreign travel either for themselves or for someone else, and if their electricity consumption expenses exceeded Rs 1 lakh during the previous year.

ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) are simplified forms designed for a large segment of small and medium taxpayers. Sahaj is meant for resident individuals with an annual income of up to Rs 50 lakh, deriving income from salary, one house property, other sources such as interest, and agricultural income up to Rs 5,000. Sugam can be used by individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with annual income up to Rs 50 lakh and income from business or profession.

ITR-2 is applicable to individuals and HUFs who do not have income from business or profession.

business