Everything You Need to Know About ITR-1 and ITR-4 for AY 2025-26

Great News for Indian Taxpayers!
The Income Tax Department has initiated the new tax filing season much earlier than typical. As noted in recent updates, the Central Board of Direct Taxes (CBDT) has officially launched the Income Tax Return (ITR) forms ITR-1 (Sahaj) and ITR-4 (Sugam) for the Assessment Year (A.Y.) 2025-26.
This premature announcement is a welcome advancement, particularly for the numerous taxpayers who utilize these simplified forms.

What are ITR-1 (Sahaj) and ITR-4 (Sugam)?

ITR-1 (Sahaj)

Who is eligible to file?
• Resident individuals (not ordinarily resident)
• Total income must not exceed ₹50 lakh

Permissible Income Sources:
• Salary or Pension
• One House Property (except when there is a loss carried forward)
• Other Sources (such as interest income)
• Agricultural income (limited to ₹5,000)

Who is ineligible to file?
• Directors of companies
• Individuals owning more than one house property
• Income from capital gains, business, or profession
• Income derived from foreign assets or foreign income
• Income taxed at special rates

ITR-4 (Sugam)

Who is eligible to file?
• Resident Individuals, HUFs, and Firms (excluding LLPs)
• Total income must not exceed ₹50 lakh

Permissible Income Sources:
• Presumptive income under:
 o Section 44AD (Business)
 o Section 44ADA (Profession)
 o Section 44AE (Transport/Goods Carriage)
• Also encompasses income that qualifies for ITR-1 (Salary, One House Property, Other Sources)

Who is ineligible to file?
• The same restrictions as ITR-1
• Additionally, those with turnover exceeding the limits of the presumptive scheme

 Update: New LTCG Reporting Relaxation in ITR-1 and ITR-4 (AY 2025-26)

In a noteworthy update for small investors, the CBDT has now permitted the reporting of Long-Term Capital Gains (LTCG) under Section 112A in ITR-1 and ITR-4—with specific conditions:

 What's Permissible?
• LTCG up to ₹1.25 lakh from listed equity shares or mutual fund units
• Securities Transaction Tax (STT) must have been paid on the transaction

What Remains Prohibited?
• Set-off of capital losses
• Carry forward of any losses
• LTCG from the sale of land/building or business assets is not allowed in ITR-1 or ITR-4

Important Tax Rate Clarification:
• 10% tax if sold before 23 July 2024
• 12.5% tax if sold on or after 23 July 2024

 Required Disclosure in Return (Once Utility is Made Available):
• Sale Consideration
• Cost of Acquisition
• Amount of LTCG under Section 112A

Why Is This Early Notification Significant?

• More Preparation Time – Taxpayers now have extended time to comprehend the requirements and gather documents.
• Promotes Early Filing – While awaiting utilities, early information facilitates better readiness.
• Smoother Experience – Reduces last-minute stress on the e-filing portal.
• Encourages Compliance – Early notification acts as a prompt to organize financial matters.

What’s Next? Awaiting the Release of Filing Utilities!

Please remember the difference:
• Form Notification – The structure and eligibility criteria for ITR-1 and ITR-4 have been established and published.
• Utility Release – Actual filing can begin only once the Income Tax Department publishes the online and offline tools on incometax.gov.in.
 As many users are expressing on social media – “Please release utilities now @IncomeTaxIndia.”

A Quick Reminder: AY 2025-26 vs. FY 2024-25

• Assessment Year (AY) 2025-26 – The year during which returns are filed and tax is assessed (April 2025–March 2026).
• Fiscal Year (FY) 2024-25 – The year in which the income was generated (April 2024–March 2025).
Thus, the ITR-1 and ITR-4 announced now pertain to income earned throughout FY 2024-25.

 Begin Organizing Your Documents Now!

If you qualify to submit ITR-1 or ITR-4, here’s a brief checklist to get started:
• Form 16 (issued by employer)
• Form 16A / Interest Certificates (provided by banks or post office)
• Bank statements
• Evidence of deductions claimed under Chapter VI-A (Sections 80C, 80D, etc.)
• Rent Receipts (for HRA claims)
• Details of presumptive income (for ITR-4 filers)
• Records of capital gains (if declaring LTCG under Section 112A)

Final Thoughts

This timely release of ITR forms, alongside the new LTCG relaxation, is excellent news for many small taxpayers and salaried individuals. As soon as the utilities are available, don’t procrastinate until the deadline (typically 31st July unless extended). File promptly to steer clear of last-minute rushes!
Keep an eye on incometax.gov.in and seek guidance from a reliable tax expert or CA for filing support.

Leave a reply