ITR Filing AY 2025–26: Complete Guide to All Forms, Key Changes in LTCG Rules & High-Value Transactions Reporting

Introduction: Planning to file your Income Tax Return (ITR) for AY 2025–26? Learn about the latest updates in ITR forms, long-term capital gains (LTCG) reporting, new high-value transaction disclosures, and compliance tips in this detailed article from CMA Knowledge.

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Income Tax Return (ITR) filing season is crucial for all taxpayers—whether you’re a salaried individual, a business owner, or a professional. For Assessment Year 2025–26, the Central Board of Direct Taxes (CBDT) has introduced important changes in the ITR forms that affect every segment of taxpayers.

From new reporting requirements for long-term capital gains (LTCG) to detailed disclosures for high-value transactions, these updates aim to enhance transparency, compliance, and digital ease. In this guide, we at CMA Knowledge explain the changes in a simple and practical manner.

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Section 1: Overview of ITR Filing AY 2025–26

The ITR filing window for FY 2024–25 (AY 2025–26) opens in April 2025. This year’s update includes:

• Earlier notification of all ITR forms
• Improved capital gains reporting mechanism
• Revised thresholds for asset disclosures
• New sections in business and professional income reporting

This early release gives taxpayers enough time to plan their taxes and gather relevant documents in advance.

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Section 2: ITR-1 (Sahaj) – What’s New for Salaried and Small Investors

ITR-1 is designed for:

• Resident individuals (non-HUF)
• Income up to ₹50 lakh
• Income from salary, one house property, and other sources

New Change:

Now, you can report LTCG up to ₹1.25 lakh under Section 112A (like equity shares or mutual funds) directly in ITR-1. Earlier, even small capital gains required shifting to ITR-2. This change:

• Makes tax filing easier for retail investors
• Avoids unnecessary complications

Note: If you have capital losses to carry forward, you must still use ITR-2.

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Section 3: ITR-2 – Detailed Capital Gains and Foreign Asset Reporting

This form suits:

• Individuals/HUFs with more than one property
• Capital gains, foreign assets, and agricultural income above ₹5,000

Key Updates in ITR-2:

1. Separate reporting of LTCG before and after July 23, 2024
   This aligns with changes in tax rates or exemptions that may apply post-budget.

2. Unlisted Bonds/Debentures:
   Mandatory reporting based on period of holding and classification. This helps in tracking exempt or taxable capital gains better.

3. Buyback of Shares (post-October 1, 2024):
   You need to report such transactions as:

   • Zero value under “Income from Other Sources”
   • Zero value under “Capital Gains”

4. Increased Asset Disclosure Threshold:
   If your total income exceeds ₹1 crore, you must report all assets and liabilities, up from the earlier ₹50 lakh limit.

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Section 4: ITR-3 – For Business Owners, Professionals, and Freelancers

ITR-3 is for:

• Individuals/HUFs earning income from business or profession
• Partners in firms, consultants, and professionals

What’s New:

1. Option Between Tax Regimes:

   • You must select the old or new tax regime via Form 10-IE/10-IEA before filing.
   • The choice must be consistent with previous returns (unless allowed to switch).

2. High-Value Transaction Reporting:
   The government is focusing more on data matching. You now need to report:

   • Cash deposits > ₹1 crore
   • Foreign travel expenses > ₹2 lakh
   • Electricity bills > ₹1 lakh
   • Credit card payments > ₹10 lakh

   This is intended to detect tax evasion and cross-verify with your AIS (Annual Information Statement).

3. Detailed Business Data:

   • Breakdown of turnover
   • Gross profit ratios
   • Net profit margins
   • Inventory disclosures

This change increases transparency for professionals and consultants using presumptive or actual income computation methods.

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Section 5: ITR-4 (Sugam) – Easier Filing for Presumptive Taxpayers

ITR-4 is applicable to:

• Individuals, HUFs, and Firms (excluding LLPs)
• Those opting for Section 44AD (business) or Section 44ADA (profession) with income up to ₹50 lakh

New Provision:

Taxpayers filing ITR-4 can now also report LTCG up to ₹1.25 lakh under Section 112A. Previously, even minor capital gains required switching to ITR-2. This will benefit:

• Shopkeepers
• Freelancers
• Independent contractors
• Doctors, architects, and small consultants

This change removes a key complexity and encourages accurate capital gains disclosures.

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Section 6: ITR-5 – For LLPs, AOPs, and Firms

ITR-5 is for partnership firms, LLPs, AOPs (Association of Persons), BOIs (Body of Individuals), and others not filing under ITR-6 or ITR-7.

E-Verification Reminder:

If you don't verify your ITR electronically, you must:

• Send a signed physical ITR-V to the CPC Bengaluru within 30 days.

This continues from earlier years, but with more emphasis on timely e-verification through Aadhaar OTP, net banking, or pre-validated accounts.

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Section 7: ITR-6 – For Companies Not Claiming Section 11 Exemption

ITR-6 is used by companies not claiming exemption under Section 11 (charitable or religious trust income).

Major Changes:

1. Buyback Disclosures:
   Companies must now report buyback-related losses only if such dividends are declared after October 1, 2024.

2. LTCG Splits:
   Just like ITR-2, companies need to split capital gains reporting before and after July 23, 2024.

3. New Sections for Specific Businesses:

   • Cruise operators under Section 44BBC
   • Diamond traders: Need to disclose minimum 4% of gross receipts as profit

4. Mandatory TDS Code Disclosure:
   Detailed tax deducted at source (TDS) code and linkages in Schedule BP (Business Profits) are now compulsory.

This reflects the growing push toward complete tax reconciliation by authorities.

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Section 8: ITR-7 – For Charitable Trusts, Research Institutions & Political Parties

ITR-7 is for organizations that file under:

• Section 139(4A) to 139(4D)

This includes:

• Trusts
• Political entities
• Universities
• Research institutions

New Compliance Requirements:

• Enhanced transparency in donations
• Segregation of business and exempt income
• More audit disclosures if gross receipts exceed limits

These measures are aimed at preventing misuse of tax exemptions.

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Section 9: Long-Term Capital Gains (LTCG) – Key Focus Area in AY 2025–26

A recurring theme in this year's ITR updates is the tightened LTCG disclosure framework.

Key Changes in LTCG Reporting:

• Segregated reporting before and after July 23, 2024 (likely due to expected mid-year changes in tax policy)
• Capital gains from listed securities, mutual funds, and ULIPs (unit-linked insurance plans) need to be disclosed with ISINs or folio numbers
• Buyback-related capital gains and losses have stricter timelines and computation rules

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Section 10: Compliance Tips for AY 2025–26

To file your returns smoothly this year, follow these best practices:

1. Verify AIS and Form 26AS early
2. Track credit card spending—report if it crosses thresholds
3. Keep travel and luxury expenses documented
4. Match capital gains data with broker/demat accounts
5. Use the pre-filled ITR utility provided by the income tax portal
6. Consult a CMA or tax advisor for form selection and compliance

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Section 11: Benefits of Early Filing

Filing your ITR early is not only a compliance requirement but also offers several advantages:

• Faster refunds
• Early rectification of errors
• Less stress during the deadline rush
• Higher credibility for loan applications and visa processes

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Section 12: Conclusion – Stay Compliant, Stay Informed

The ITR filing landscape for AY 2025–26 introduces smarter integration of financial data, more transparency for capital gains, and simplified provisions for small taxpayers. These changes indicate the government’s progressive shift toward data-driven tax administration.

At CMA Knowledge, we strongly advise all taxpayers—especially salaried individuals, small investors, freelancers, and businesses—to:

• Understand their applicable ITR form
• Keep documents ready
• Disclose all high-value transactions accurately
• Consult professionals if necessary

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FAQs on ITR Filing AY 2025–26

Q1. Which ITR form should I file if I earned salary and LTCG below ₹1.25 lakh?
You can now file ITR-1 if the LTCG is under ₹1.25 lakh and you don’t have capital losses to carry forward.

Q2. What happens if I don’t e-verify my ITR within 30 days?
Your return will be treated as invalid, and you may face penalties or denial of refunds.

Q3. Can I switch between old and new tax regimes every year?
Yes, but with conditions. Business taxpayers must file Form 10-IEA and are restricted from switching more than once.

Q4. Is reporting of credit card transactions above ₹10 lakh mandatory?
Yes, if your aggregate payments exceed ₹10 lakh, you must disclose them in your ITR.

Q5. What are the penalties for not reporting high-value transactions?
Non-disclosure may result in scrutiny, penalties under Section 271FAA, or denial of exemptions.

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