ITR Forms Sahaj and Sugam: All you need to know before you file your income tax return

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ITR Forms AY26: Income Tax Return (ITR) forms are an essential part of every year for different types of taxpayers.

The Income Tax Department has notified all the seven ITR forms (ITR-1 to ITR-7) for Assessment Year (AY) 2025-26, which will be applicable for income from Financial Year (FY) 2024-25 i.e. 1 April 2024 to 31 March 2025. Each form is designed for different types of taxpayers, including salaried individuals, businessmen, HUFs, firms, trusts and companies, etc. CBDT has also made some important changes in these forms this year, especially regarding capital gains, deductions and disclosure rules. Let us understand each form in detail and see what is new in AY 2025-26.

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ITR-1 (Sahaj): Simple form for small taxpayers

ITR-1, also called Sahaj, is for those whose annual income is up to Rs 50 lakh and are residents of India (i.e. those who stay in India for at least 182 days but are not ordinarily resident). This form is for those having income from salary, pension, income from one house property, interest (such as from bank deposits) and agricultural income up to Rs 5,000.

This year, a big change in this form is that now you can show Long-Term Capital Gains (LTCG) which are under section 112A, i.e. gains up to Rs 1.25 lakh from listed shares or equity mutual funds in this form. Earlier, if you had any capital gains, you had to fill ITR-2, which is more complex. Now this new change will bring relief to small investors, as they can show their income in a simple form. But keep in mind, if you have a capital loss which needs to be carried forward, then this form is not for you.

Also, ITR-1 is not for those who are directors in a company, invest in unlisted shares, or have any assets or income abroad. Another change is that you will now have to provide details of all your active bank accounts, except dormant accounts. Also, if you are claiming section 80GG (rent deduction if HRA is not received), you will be required to file Form 10BA electronically.

ITR-2: For salaried and capital gains individuals

ITR-2 is for individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession but have salary, more than one house property, capital gains (short-term or long-term) or foreign assets/income. This form can also be used by those who want to club the income of their wife or minor child, provided the income falls in the categories mentioned above. There are some important changes in ITR-2 this year. First, you will now have to show capital gains separately—for transactions before and after July 23, 2024. This is because Budget 2024 has reduced the long-term capital gains tax on property from 20% (with indexation) to 12.5% ​​(without indexation). If you purchased the property before July 23, 2024, you have the option to choose 12.5% ​​without indexation or 20% with indexation.

The second major change is that the loss on share buyback will now have to be shown in the capital gains section and the amount received from the buyback as dividend in ‘income from other sources’. This change is applicable from October 1, 2024 under the Finance Act 2024.

Third, you will have to give details of your assets and liabilities in Schedule AL only if your total income is more than Rs 1 crore. Earlier this limit was Rs 50 lakh, which has given relief to middle-income taxpayers. Also, now you will have to mention TDS section codes (like 194I, 194J), which will increase transparency.

ITR-3: For businesses and professionals

ITR-3 is for individuals and HUFs whose income is from business or profession, such as those running a proprietary business or professionals (doctors, lawyers, etc.). This can also include capital gains, lottery income or income from more than one house property. There have been some changes in ITR-3 this year as well.

First, the threshold for Schedule AL has been increased from Rs 50 lakh to Rs 1 crore, that is, if your income is less than Rs 1 crore, you will not be required to provide details of your assets and liabilities.

Second, capital gains must be bifurcated into before and after July 23, 2024, as in ITR-2.

Third, if you are a partner in a partnership firm, you will have to provide more details, such as the profit-loss details of the firm. Also, dropdown menus have been added for deductions like Section 80C, 80D, which will make filing easier.

ITR-4 (Sugam): For small businesses and professionals

ITR-4, called Sugam, is for resident individuals, HUFs and firms (except LLPs) whose total income is up to Rs 50 lakh and whose business or professional income is under the presumptive taxation scheme (sections 44AD, 44ADA, 44AE). In this form too, you can show income like salary, one house property and interest. The biggest change this year is that now you can show long-term capital gains (section 112A) up to Rs 1.25 lakh in this form, provided you do not have any capital loss.

Earlier, such taxpayers had to file ITR-2 or ITR-3. Apart from this, the turnover limit of section 44AD (for business) has been increased from Rs 2 crore to Rs 3 crore, provided 95% of the transactions are digital. For professionals, the limit of section 44ADA has been increased from Rs 50 lakh to Rs 75 lakh.

Also, if you want to opt-out of the new tax regime, you need to file Form 10-IEA, and its details need to be mentioned in ITR-4.

ITR-5: For firms and LLP

ITR-5 is for firms, limited liability partnerships (LLP), association of persons (AOP), body of individuals (BOI) and artificial juridical persons. In this form also the rule of separate reporting of capital gains (before and after 23 July 2024) is applicable.

Also, it is necessary to provide details of TDS section codes. If your income is more than 1 crore, then information about assets and liabilities will have to be given in Schedule AL.

ITR-6: For companies

ITR-6 is for companies registered under the Companies Act. This form also requires split reporting of capital gains and TDS codes. Apart from this, if the company has foreign income or assets, their details have to be given. There has been no major change in this form this year, but disclosures have been made more stringent keeping in mind the new tax rules.

ITR-7: For trusts and charitable institutions

ITR-7 is for those units which file returns under section 139(4A), 139(4B), 139(4C) or 139(4D). These mainly include charitable trusts, political parties, scientific research institutions and universities etc. This year, a rule has been added to show share buyback loss and dividend income separately. Also, if the trust has foreign retirement accounts, then their details will have to be given under section 89A.

All these changes are aimed at making tax filing easier and transparent. Taxpayers are advised to choose the right form as per their income and status and file the return before the deadline of 31 July 2025.

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