Major Changes in ITR Forms for AY 2025-26: Eligibility & Updates Explained

The Income Tax Department keeps changing its ITR forms to simplify the ITR filing procedure. Likewise, several updates have been made for the Assessment Year 2025-2026 (FY 2024-2025) that taxpayers should know about. 

Read on to learn the changes in AY 2025-26 ITR forms!

Key Changes in ITR Filing: Updates for AY 2025-26

The Income Tax Department has released the updated ITR-1 and ITR-4 Forms for AY 2025-26. Some significant updates have been made to the ITR filing process that every taxpayer must know before filing.

Expansion of Eligibility to File ITR-1 And ITR-4

From AY 2025-2026 (FY 2024-25), the Income Tax Department expanded eligibility criteria, making more taxpayers eligible to file ITR-1 and ITR-4. This new rule now allows even taxpayers with long-term capital gain from listed equity shares and equity mutual funds under section 112A to file a tax return using ITR-1 and ITR-4, subject to the condition that the capital gain does not exceed Rs. 1,25,000 and there are no carry forward or brought forward losses.

Aadhaar Enrollment ID No Longer Valid for Filing ITR

Budget 2024 has removed the acceptance of the Aadhar Enrollment ID for the PAN application and filing of the ITR. From AY 2025-26, PAN applications and ITRs can no longer be filed using an Aadhaar enrollment ID instead of the actual Aadhaar number. It is to be noted that the ITR Forms for AY 2025-26 (FY 2024-25) do not have the Aadhar Enrollment ID column this year. If taxpayers don't have an Aadhaar Number, they won't be able to file the ITR this year.

Opting Out of the New Tax Regime by Small Business Owners

AY 2025-26 (FY 2024-25) has introduced more detailed disclosure requirements for small business owners filing ITR-4; now it seeks confirmation of past filing of Form 10-IEA and asks whether the taxpayers want to continue opting out of the new tax regime in the current year.

Mention TDS Section in ITR Forms

For AY 2025-26 (FY 2024-25), the TDS section under which TDS is deducted from the income earned in FY 2024-25 must be mentioned.

New Capital Gain Rules

For AY 2025-26 (FY 2024-25) reporting of capital gain made by selling listed or unlisted shares, equity mutual funds, houses, land, or any other capital assets, then the date of sale is important to calculate the correct capital gain amount and appropriate tax liability. The ITR forms required separate reporting for transfers made before, on, or after 23 July 2024 and the proper application of revised tax rates and indexation rules.

Reporting of Buy-Back Proceeds as Deemed Dividends.

This new rule was announced in Budget 2024. From 1 October 2024, the amount received on buy-back of shares by domestic listed companies will be considered as a deemed dividend in the hands of shareholders.

ITR-2, ITR-3, and ITR-5 have been amended to report the buy-back proceeds as dividend income under the heading "Income From Other Sources." All shareholder taxpayers are required to report zero as sale proceeds so that the cost of acquiring shares results in a capital loss. This capital loss can be brought forward and set off against other long-term capital gains for the next eight assessment years.

Providing Disability Certificate For Deduction Under Section 80DD and 80U:

For AY 2025-26 (FY 2024-25), to claim deduction under sections 80DD and 80U for expenditures made for the treatment of disabled individuals. The acknowledgement number of the disability certificates must now be provided along with Form 10-IA.

Assets Reporting Applicable If Total Income Exceeds Rs. 1 Crore.

For FY 2024-25, the reporting requirement of assets and liabilities for taxpayers having income above Rs 50 lakhs is changed to income exceeding Rs 1 crore. From this year, taxpayers must report assets and liabilities in Schedule AL, which is mandatory only if gross income exceeds Rs 1 crore.

Enhanced Disclosure For HRA (Section 10(13A)

All taxpayers claiming HRA exemption now must have to disclose the following details:-

• Place of Work.
• Actual HRA Received.
• Actual Rent Paid.
• Basic Salary and Dearness Allowances.
• 50% or 40% of Basic Salary, depending on whether the city is metro or non-metro.
• The above disclosure ensures precise calculation of HRA exemption under section 10(13A)

Enhanced Disclosure For Home Loan (Section 24(b), 80EE & 80EEA)

• Name of the Loan Giver, 
• Loan Account Number, 
• Date of Sanction of Loan, 
• Total Amount of Loan, 
• Closing Balance at the year-end 
• Interest amount for the year.

From AY 2025-26, all taxpayers are required to disclose the above details while claiming a deduction under section 24(b) for Interest on a home Loan under the heading "Income From House Property" and under sections 80EE & 80EEA.

Section 80C Deduction: Additional Documents Required

Section 80C allows claim deduction for various investments made to claim tax benefit of up to Rs. 1,50,000, although previously it was easy to claim by just putting the amount of the investment from AY 2025-26; disclosure of the following details are required:-

• Documents or Receipt Number
• PPF Account Number
• Insurance Policy Number

Section 80D Deduction of Health Insurance Premium

The following disclosures are required;

• Name of the Insurance Company
• Policy or Document Number

Section 80DDB Deduction For Treatment of Specified Diseases

Taxpayers claiming deduction under this are required to disclose the following details;

• Name of Specified Disease

Section 80E Deduction of Education Loan Interest

For the deduction of Interest paid for the education loan, the following details are required to be disclosed:

• Name of the Lender
• Bank Name
• Loan Account Number
• Date of Loan Sanction
• Total Loan Amount
• Loan Outstanding as of 31 March

Section 80EEB Deduction of Interest on Loan For Electric Vehicle

For AY 2025-26, Interest paid on the loan taken for the purchase of an electric vehicle shall required to disclose the following details to claim deduction under section 80EEB:

• Name of the Lender
• Bank Name
• Loan Account Number
• Date of Loan Sanction
• Total Loan Amount
• Loan Outstanding as of 31 March

Final Word  

The important changes and updates introduced in ITR forms by the Tax Department for FY 2024-25 (AY 2025-26) are discussed above. Such changes enhance disclosure for deductions and capital gains, new tax regime selection, and asset reporting, impacting almost every category of taxpayers. It is essential for every taxpayer to compare before filling out which regime is beneficial for them and the effect of such updates on their tax liability.