ITR Filing 2025: What Last-Minute Filers Need To Keep In Mind

Changes in ITR forms

ITR-1 and ITR-4: ITR-1 is used by salaried individuals earning up to ₹50 lakh, whereas ITR-4 is intended for professionals and small company owners, resident individuals, Hindu undivided families (HUFs) and firms (other than limited liability partnerships or LLPs) with business or individuals with professional income under the presumptive taxation scheme, if their total income does not exceed ₹50 lakh.

Both forms now allow reporting of long-term capital gains (LTCG) up to ₹1.25 lakh, if there are no carry-forward capital losses.

ITR-2: This is meant for individuals, including salaried taxpayers and HUFs who have income from capital gains above ₹1.25 lakh, who own multiple properties, or have foreign assets, but no income from business or profession.

For AY26, capital gains must be split between transactions before and after July 23, 2024. Share buyback losses can be claimed only for transactions on or after October 1, 2024, if related dividend income is reported under “other sources”. The threshold for reporting assets and liabilities under Schedule AL has been raised to ₹1 crore for taxpayers with income from salary, capital gains, or other sources, but no business or professional income.

Taxpayers filing ITR-2 can claim indexation benefit on long-term capital gains from sale of land or buildings only if the asset was acquired before July 23, 2024.

A new Schedule virtual digital assets (VDA) requires reporting of each crypto or non-fungible token (NFT) transaction separately, including date, cost, sale value and gain or loss made on the digital asset.

ITR-3: This is meant for individuals and HUFs having income from business or profession (not under presumptive taxation), as well as income from salary, capital gains, house property or other sources.

For AY26, the same rules as ITR-2 apply on capital gains split, buyback loss claims and VDA transaction reporting.

In ITR-3 as well, the indexation benefit on LTCG from land or building sales is applicable only for assets acquired before July 23, 2024. The threshold for disclosing assets and liabilities under Schedule AL has been increased to ₹1 crore for those having income from business or profession.

A new section, Section 44BBC, has been introduced under the Income-tax Act, 1961 for non-resident operators of cruise ships.

What’s Unchanged?

a. New tax regime (NTR) remains the default tax regime, but you can opt out of it, too. NTR offers lower slab rates, but has fewer exemptions and deductions. If you are a salaried individual, you can opt out of NTR and shift to the old tax regime (OTR) without any extra paperwork. However, if you have business or professional income, you will need to submit Form 10-IEA before the due date to revert to NTR.

b. The Section 87A rebate remains unchanged this year, too. Under the new regime, individuals with taxable income up to ₹7 lakh (after standard deduction) are eligible for a rebate of up to ₹25,000, resulting in nil tax liability. Under the old tax regime, the rebate continues to apply for taxable income up to ₹5 lakh.

Don’t Forget to Report Crypto Investments

A new Schedule VDA has been introduced in ITR‑2 and ITR‑3 for AY26. Taxpayers must now report each crypto or NFT transaction individually, including details such as the date of acquisition and sale, cost of acquisition, sale value and resulting gain or loss, even if there is no profit. These transactions continue to be taxed at 30% under Section 115BBH.

“Even if your VDA transaction amount is as little as ₹1, you cannot use ITR‑1 or ITR‑4. Instead, you must fill out the new Schedule VDA in ITR‑2 or ITR‑3, reporting each transaction separately. Reporting it under ‘income from other sources’ could lead to a defective return notice from the income tax department,” says Ashish Niraj, partner, ASN & Company, a CA firm.

Foreign Asset Reporting Remains Essential

Schedule foreign assets (FA) requires resident taxpayers to disclose details of their foreign assets and income, regardless of taxability in India.

For AY26, the reporting threshold for foreign assets under this schedule has been raised from ₹10 lakh to ₹20 lakh, while the asset/liability reporting threshold in ITR‑2 has also been increased to ₹1 crore.

Naveen Wadhwa, vice-president, research and advisory, Taxmann, a tax-advisory firm, says: “A recent ruling by the Mumbai Tribunal in the case of Shobha Harish Thawani vs Joint CIT upheld penalties of ₹10 lakh per assessment year for non-disclosure. This shows that missing or misreporting such details can lead not only to heavy fines, but in some cases, can also lead to prosecution under the Black Money Act.”

Note Updates in Form 16

Form 16, the TDS certificate provided by employers to salaried individuals, has undergone modifications for AY26, due to changes introduced under NTR.

One, under NTR, the standard deduction under the new tax system has been increased from ₹50,000 to ₹75,000. This is reflected in Form 16. Two, NTR now allows a higher deduction on the employer’s contribution to the National Pension System (NPS) under Section 80CCD (2) of the Income-tax Act, 1961, and this will appear in the revised Form 16 for the relevant financial year. Three, if the employee submits Form 12BBA, Form 16 will also show tax deducted on other income sources (such as interest or rent) and tax collected at source (TCS) on specified high-value spends. Without Form 12BBA, only salary-related TDS is reflected.

Also, Form 16 has been updated for better clarity and reporting. Part B of Form 16 now indicates whether the employee has opted for OTR. A new column (388A) has also been introduced to capture TDS and TCS figures in greater detail, ensuring improved alignment with Form 26AS.

Be Careful About LTCG in Equities

When it comes to LTCG in equities in the financial year, which means profits from selling listed shares or equity mutual funds held for over a year, there’s an important update to keep in mind.

From AY26, the exemption limit has been raised to ₹1.25 lakh, and gains beyond this will now be taxed at 12.5%.

Wadhwa of Taxmann advises taxpayers to cross-check their total LTCG with broker statements and the annual information statement (AIS) before filing their ITRs. “If the gain exceeds ₹1.25 lakh, it must be reported in ITR-2 or ITR-3 to avoid notices from the Income Tax Department for defective return. Also, keep in mind this exemption applies only to Indian-listed shares. Gains from foreign-listed stocks are fully taxable at 12.5% and should be declared correctly.”