Income Tax Department, through Notification No. 40/2025 dated 29th April 2025, has introduced ITR Forms 1 and 4 for AY 2025-26 with notable changes. ITR Form 1 (Sahaj) now allows individuals with long-term capital gains (LTCG) of up to ₹1.25 lakh to file this simpler form, previously limited to more complex filings, while excluding individuals who are company directors, hold unlisted shares, or have foreign assets. The eligibility for ITR Form 4 (Sugam) has been extended to individuals, HUFs, and firms with business income under Sections 44AD, 44ADA, or 44AE, and now includes LTCG up to ₹1.25 lakh. Additionally, the presumptive taxation limits have been increased to ₹3 crores for Section 44AD and ₹75 lakhs for Section 44ADA for cases where cash transactions are under 5%. Other common updates include the requirement to submit Form 10-IEA for opting out of the new tax regime, detailed income disclosures for salary and housing loan interest, and full reporting of all bank accounts held during the year. These forms will be available for filing shortly. Key changes announced in the notification are as follows:
ITR Form – 1 (Sahaj) Eligibility:
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Applicable for individuals who are residents other than not ordinarily residents.
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Having total income up to ₹50 lakhs.
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Having income from salaries.
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Having income from one house property.
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Having income from other sources.
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Having agricultural income up to ₹5,000.
The most important change introduced from AY 2025-26 is as follows:
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Individuals who have accrued long-term capital gains (LTCG) of up to ₹1.25 lakh within a financial year are also eligible to file the user-friendly ITR-1 (Sahaj) form. Previously, these individuals were required to navigate the more complex ITR-2 form.
Exclusions:
ITR Form 1 is not eligible for:
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An individual who is a director in a company.
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An individual who has invested in unlisted equity shares.
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Cases where TDS is deducted under Section 194N or ESOP deferrals, or where the individual has assets located outside India.
Reporting LTCG up to ₹1.25 lakhs in ITR:
An additional declaration is required in the form as “Income on which no tax is payable (Capital Gain under Section 112A)” with full details about the sale consideration, cost of acquisition, etc.
ITR 4 (Sugam) Eligibility:
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Applicable for individuals, HUFs, and firms other than LLPs.
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Having income from business or profession computed under Sections 44AD, 44ADA, or 44AE.
Changes Introduced:
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Individuals who have accrued long-term capital gains (LTCG) of up to ₹1.25 lakh within a financial year can also file this form.
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Threshold for opting presumptive taxation has increased to ₹3 crores under Section 44AD and ₹75 lakhs under Section 44ADA, provided cash receipts and payments are less than 5% of total receipts and payments.
Other Common Changes:
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Taxpayers choosing to opt out of the new tax regime under Section 115BAC(6) must submit Form 10-IEA before the due date.
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Detailed income reporting is required for salary income.
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Additional details are required in case of interest paid on a housing loan.
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Disclosure of deductions claimed under Sections 80C, 80D, etc.
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Disclosure of all bank accounts held at any time during the year.
That’s all for today. These forms will be available for filing shortly, within a week. For any clarification or assistance, please email mamta0581@gmail.com.
