As the Income Tax Department has notified the Income Tax Return (“ITR”) Forms for the Assessment Year (“AY”) 2025–26, applicable for income earned during the Financial Year (“FY”) 2024–25 (i.e. 01-04-2024 to 31-03-2025), professionals are also gearing-up to kick start the season. Forms are notified but filing of the same is not enabled on income tax portal.
This year forms are notified bit late, the Government has attempted to make life simpler for its taxpayers, and rationalized certain disclosure requirements, ultimately achieving its objective of enhancing compliance. We have outlined below some of the crucial changes in the ITR Forms:
1. Promotion of the simplest ITR Form 1 & ITR 4:
For taxpayers earning income from salaries and small business owners offering their income under the presumptive regime, who have also earned small long-term capital gains (“LTCG”) from listed equity shares, equity oriented mutual funds, etc. up to an aggregate of Rs. 1.25 lakhs during the year can now file Sahaj ITR 1/ ITR 4, respectively and no need to file more complex ITR-2.
Objective: Easing compliance burden.
2. Option to put Aadhaar Enrolment ID is removed:
Now, only the 12-digit Aadhaar number is accepted for filing the ITR and for PAN applications. Taxpayers are now required to provide their Aadhaar number/ the Aadhaar number of partners, members, settlors, trustees, beneficiaries and executors, as the case may be.
Objective: Streamlined disclosure requirement preventing PAN misuse/ duplication.
3. Detailed disclosure on concessional tax regime:
Now the form will require details of past filings of Form 10-IEA for opting out of concessional tax regime. Further the form will ask for confirmation on whether the assessee wishes to continue opting in or out of the said regime.
Objective: Streamlined disclosure requirement ensuring compliance with legal provision.
4. Transition in Capital Gains Tax Rates:
As tax rates on capital gain transactions up to and after 23 July 2024 are now standardized, the ITR forms are modified to enable taxpayers to fill the ITR appropriately. For crux of applicable tax rates on various capital gains, refer below:
- The tax rate on short-term capital gains covered under Section 111A will be 20% instead of 15%
- The tax rate on long-term capital gains covered under Section 112A will be 12.5% rather than 10%
- A uniform tax rate of 12.5% will apply to long-term capital gains under Section 112, and no indexation benefit will be available on such gains (except for the resident individuals/HUF in case of sale of and or buildings acquired before 23rd July 2024 wherein option of indexation is available if it is more beneficial).
- Unlisted debentures or bonds were issued on or before 22.07.2024 but redeemed on or after 23.07.2024 the entire gain will be taxed as short term capital gains, regardless of the holding period. If the transfer occurs before 23rd July 2024, the resulting gain will be classified as long-term and taxable according to the old provision. (Tax Rate – 20%)
- Even though there is no change in tax rate for short term capital gain from sale of land or building or both, additional requirement of providing date of purchase and sale is added in Schedule of Capital Gain
Objective: Accommodating amendments by Finance Act, 2024, that aimed to simplify life of a taxpayer.
5. Income and Loss on Buy-back of shares:
The consideration received by shareholders of a domestic company under buy-back of shares on or after 01 October 2024 is taxable as Dividend Income in India. Accordingly, Schedule OS – Income from Other Sources is modified to accommodate disclosure of buy-back amount as Dividend Income. On the other hand, to book the cost of acquisition of these shares as capital loss, Schedule CG – Capital Gains is amended.
Objective: Accommodating amendments by Finance Act, 2024, preventing tax avoidance through share buy-backs and ensure equitable taxation.
6. Disclosure of Assets & Liabilities:
Disclosure of assets and liability is now mandatory only if total income exceeds Rs. 1 crore (erstwhile threshold was Rs. 50 lakh) in the Schedule AL
Objective: Rationalization of disclosure requirement thereby reducing the compliance burden on salaried class.
7. Disclosure of TDS section under which tax is deducted:
The schedule of TDS is now to be prepared along with the section of TDS under which tax is deducted.
Objective: Streamlining disclosure requirements resulting into easy reconciliations of TDS as per books viz-a-viz Form 26AS thereby reducing TDS mismatch cases.
8. Exemptions & Deductions:
Exemptions & Deductions such as life insurance u/s 80C, home loan interest u/s 24b, etc. will be required to provide specific details like policy number. More details awaited until ITR utility is made available at portal.
Objective: Streamlining disclosure requirements aimed at better tracking of claims.
