Major Changes in ITR Forms for AY 2026-27: 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 2026-2027 (FY 2025-2026) that taxpayers should know about. 

Individuals with up to 2 house properties can file under ITR 1 and ITR 4 for FY 2025-26 (AY 2026-27).

Key Changes in ITR Filing: Updates for AY 2026-27

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 2026-2027 (FY 2025-26), the Income Tax Department expanded eligibility criteria, making more taxpayers eligible to file ITR-1 and ITR-4. 
• Even taxpayers with two house properties file their taxes under ITR form 1 and 4. Previously, only those who have income from one house property can file under ITR 1 and 4.

Additional Field - Unrealised Rent

Previously, the field for unrealised rent was not available in ITR 1 and 4. For AY 2026-27, a new field is added  - “The amount of rent which cannot be realized”.

15% STCG and 10% LTCG fields Removed 

Since the old capital gains rates for listed equity securities i.e., 15% for STCG and 10% for LTCG is no longer applicable for gains in financial year 2025-26, the respective fields has been removed from all the relevant ITR forms.

Opting Out of the New Tax Regime

• In the preceding assessment years, opting in and out of the new tax regime using Form 10-IEA has been a major area of confusion and ambiguity.
• The notified forms contain detailed disclosure requirements for opting in and out of the new tax regime, facilitating seamless choice of regime for business income taxpayers.

ITR filing by Representative Assessee

A new field is added to indicate whether the return is filed by a representative assessee. This change has been made in all the ITR forms.

Section 89A Relief - Field removed from Form ITR 1 and 4

• As per section 89A, Indian residents with foreign retirement accounts can claim double taxation benefit.
• The field for claiming this relief is now removed from ITR 1 and ITR 4.
• This means that section 80A double taxation relief can be claimed only through ITR 2 and 3, thereby simplifying ITR 1 and 4 further.

Additional Details for Claiming Deductions

Section 80G - Donations

New details required are as under:

• Transaction Reference number
• IFSC code of bank

Section 80G - Donations to Political Parties

New details required are as under:

• Name of the political party
• PAN of the political party

Section 234-I - Revised Return Late Fee

• As per Budget 2026 amendments, revised returns can be filed until 31st March of the subsequent tax year, with late fee.
• This is an extension from the original due date, 31st December of the next tax year.
• However, the revised returns can be filed only with a late fee, if filed after 31st December.
• The additional field containing the late fee details has been added in all the ITR forms.

Investments and Bank Balance Details - ITR 4

For assessment year 2026-27, investment and bank balance details are required to be disclosed for taxpayers filing under ITR-4.

Final Word  

The important changes and updates introduced in ITR forms by the Tax Department for FY 2025-26 (AY 2026-27) 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.