Updated ITR forms for AY 2025-26 bring expanded eligibility, stricter HRA disclosures, and a new Rs 1 crore asset reporting threshold.
The Income Tax Department regularly updates ITR forms to streamline the filing process. For Assessment Year 2025-26 (Financial Year 2024-25), several significant modifications have been introduced that taxpayers must review before filing.
Key Updates for ITR Filing: AY 2025-26
The updated ITR-1 and ITR-4 forms for the upcoming assessment year have been released, featuring critical changes to eligibility and reporting requirements.
Expanded Eligibility for ITR-1 and ITR-4
Starting from AY 2025-26, the criteria for filing ITR-1 and ITR-4 have been broadened. Taxpayers with long-term capital gains from listed equity shares or equity-oriented mutual funds (under Section 112A) are now permitted to use these simpler forms. This applies provided the capital gains do not exceed Rs. 1,25,000 and the taxpayer has no brought forward or carried forward losses.
Aadhaar Enrollment ID No Longer Accepted
Following the 2024 Budget, the use of an Aadhaar Enrollment ID is no longer valid for applying for a PAN or filing income tax returns. The specific column for the Enrollment ID has been removed from the forms for AY 2025-26. Filers must now possess and quote a valid Aadhaar Number to file their returns.
Opting Out of the New Tax Regime
For small business owners filing ITR-4, the disclosure requirements regarding tax regimes have been detailed further. Taxpayers must now confirm if they have previously filed Form 10-IEA and explicitly state whether they wish to opt out of the new tax regime for the current financial year.
Mandatory Reporting of TDS Sections
Filers are now required to specify the exact section under which Tax Deducted at Source (TDS) was deducted on their income during FY 2024-25.
Revised Capital Gains Reporting
Accurate reporting of sale dates is now essential for capital gains arising from assets such as shares, mutual funds, or property. The new ITR forms require distinct reporting for transfers that occurred before, on, or after July 23, 2024. This distinction ensures the correct application of revised tax rates and indexation benefits.
Treatment of Buy-Back Proceeds as Deemed Dividends
Per the 2024 Budget, proceeds received from the buy-back of shares by domestic listed companies on or after October 1, 2024, are treated as deemed dividends. In ITR-2, ITR-3, and ITR-5, these amounts must be reported under “Income From Other Sources.” To reflect the cost of acquisition as a capital loss (which can be carried forward for eight years), shareholders must report the sale proceeds as zero.
Documentation for Disability Deductions (Section 80DD and 80U)
To claim deductions for the medical treatment of persons with disabilities, taxpayers must now furnish the acknowledgement number of the disability certificate along with Form 10-IA.
Higher Threshold for Asset Reporting
The income threshold triggering mandatory reporting of assets and liabilities (Schedule AL) has been raised. Previously set at Rs. 50 lakhs, this requirement now applies only if the total gross income exceeds Rs. 1 crore.
Detailed Disclosures for HRA Claims
Employees claiming House Rent Allowance (HRA) exemption under Section 10(13A) must now provide granular details, including:
- Work location
- Actual HRA received
- Actual rent paid
- Basic salary and Dearness Allowance
- The applicable salary percentage (40% for non-metro, 50% for metro cities)
These details enable precise calculation of the allowable exemption.
Enhanced Home Loan Interest Disclosures
When claiming deductions for home loan interest under Section 24(b), 80EE, or 80EEA, filers must provide:
- Name of the lender
- Loan account number
- Loan sanction date
- Total principal amount
- Year-end closing balance
- Interest accrued during the year
Additional Data for Section 80C Investments
Simply entering the investment amount is no longer sufficient for Section 80C deductions. Taxpayers must now provide specific references, such as:
- Document or receipt numbers
- PPF account numbers
- Insurance policy numbers
Section 80D Health Insurance Details
Claims for health insurance premiums now require disclosing:
- Name of the insurance provider
- Policy or document number
Section 80DDB Specific Disease Reporting
Taxpayers claiming deductions for the treatment of specified diseases must now explicitly name the disease.
Education Loan Interest (Section 80E)
Deductions for education loan interest require full disclosure of:
- Lender’s name
- Bank name and loan account number
- Sanction date and total loan amount
- Outstanding balance as of March 31
Electric Vehicle Loan Interest (Section 80EEB)
Similarly, claiming deductions for interest on EV loans requires detailed reporting of the lender, loan account, sanction date, and outstanding balance.
Conclusion
The updates for AY 2025-26 bring stricter disclosure norms across capital gains, deductions, and asset reporting. These changes impact a wide range of taxpayers, emphasizing the need for careful review of the applicable tax regime and ensuring all new data points are accurately reported to determine correct tax liability.
