Top Stories Income Tax Return: Major Changes in New ITR Forms ITR-1 and ITR-4 A prima-facie analysis of ITR-1 (SAHAJ) and ITR-4 (SUGAM) reveals key updates By Manu Sharma – On April 30, 2025 3:40 pm – 2 mins read The Income Tax Department has introduced several significant modifications in the Income Tax Return (ITR) forms for Assessment Year (AY) 2025–26, simplifying compliance while expanding disclosure requirements.

A prima-facie analysis of ITR-1 (SAHAJ) and ITR-4 (SUGAM) reveals key updates, particularly concerning capital gains, deductions, and the new tax regime.  ITR-1 (SAHAJ) Now Permits Limited Long-Term Capital Gains  One of the most notable changes is the relaxation in ITR-1 eligibility for taxpayers with long-term capital gains (LTCG) under Section 112A. Previously, any capital gains—short-term or long-term—disqualified taxpayers from using ITR-1.

However, for AY 2025–26:  – ITR-1 can now be filed if LTCG under Section 112A does not exceed ₹1.25 lakh.  – The form remains ineligible if there is any capital loss to be carried forward or set off.  This change benefits small investors with modest gains from equity shares or equity-oriented funds, reducing their compliance burden.  Complete GST Act & Rules with amendments made by financial bill, 2025 Click Here Similar Relaxation in ITR-4 (SUGAM) for Presumptive Income Earners  ITR-4, used by taxpayers under the presumptive taxation scheme (Sections 44AD, 44ADA, and 44AE), has also been amended to allow LTCG under Section 112A up to ₹1.25 lakh, provided there is no loss under the capital gains head.  Additionally, Section 44AD (for businesses) now raises the turnover threshold to ₹3 crore (from ₹2 crore) if 95% or more transactions are digital. Similarly, Section 44ADA (for professionals) increases the presumptive taxation limit to ₹75 lakh (from ₹50 lakh) under the same digital transaction condition.  Income Tax Bill 2025: What’s New, What’s Gone, and What You Must Know! Click here  Enhanced Disclosure for New vs. Old Tax Regime  Taxpayers opting out of the new tax regime (Section 115BAC) must now provide additional details:  – If they opted out in AY 2024–25, they must declare whether they wish to continue or reverse their decision.  – First-time opt-outs in AY 2025–26 must submit Form 10-IEA acknowledgment details.

– Late filing provisions for Form 10-IEA has also been clarified.  Mandatory Drop-Down Selection for Deductions (Sections 80C to 80U)  Both ITR-1 and ITR-4 now require taxpayers to select deductions from a drop-down menu in the e-filing utility. Specific clauses and sub-sections must be explicitly mentioned, reducing errors and improving transparency.  Complete Referencer of GSTR-1, GSTR-1A, GSTR-3B, GSTR-9 & GSTR-9C Click here  Expanded Reporting for Foreign Retirement Accounts (Section 89A)  Taxpayers with foreign retirement accounts must now provide enhanced disclosures, including relief tracking under Section 89A.

This ensures proper reporting of income from overseas retirement funds.  Stricter Bank Account Reporting  All active Indian bank accounts held during the previous year must be reported in ITR-1 and ITR-4 (excluding dormant accounts). Taxpayers must designate at least one account for refund credits.  Know How to Prepare Estimation and Viability for Project Reports? Know more Click Here Conclusion

The revised ITR forms for AY 2025–26 ease filing for small taxpayers while ensuring better compliance through structured disclosures. The inclusion of LTCG in ITR-1 and ITR-4, higher presumptive taxation limits, and stricter deduction reporting reflect the tax department’s push for ease of filing alongside adaptability. Complete Ready to Use PDFs of 200+ Agreements Click Here Taxpayers should review these changes carefully to avoid errors and maximize benefits under the updated rules.