The Income Tax Department has introduced a significant change in the tax filing process, allowing individuals and entities to file simplified Income Tax Return (ITR) forms for the assessment year (AY) 2025-26. The most notable change is the introduction of ITR Form 1 (Sahaj) for individuals and entities with a total annual income of up to ₹50 lakh, including income from business and profession.
- Key Changes:
- ITR Form 1 (Sahaj) is now applicable to individuals with LTCG up to ₹1.25 lakh.
- Individuals can now file the simpler ITR-1 (Sahaj) form if they have accrued long-term capital gains (LTCG) of up to ₹1.25 lakh within a financial year.
These simplified forms are designed to ease the tax filing burden for a significant portion of the taxpayer base. The new notification applies to individuals, Hindu Undivided Families (HUFs), and firms (excluding Limited Liability Partnerships – LLPs) earning up to ₹50 lakh, including income from business and profession in the fiscal year 2024-25 (April-March).
Who Can Use These Simplified Forms?
- ITR Form 1 (Sahaj): Resident individuals with an annual income of up to ₹50 lakh, deriving income from salary, ownership of a single house property, other sources (such as interest), and agricultural income not exceeding ₹5,000 per year.
- ITR Form 4 (Sugam): Individuals, HUFs, and firms (excluding LLPs) with a total annual income of up to ₹50 lakh and income generated from business and profession.
On the other hand, ITR Form 2 is now specifically for individuals and HUFs who do not have income from profits and gains in business or profession, or those with LTCG exceeding ₹1.25 lakh or capital losses to carry forward.
Tax Experts Weigh In
“The Central Board of Direct Taxes (CBDT) has introduced significant changes to the Income Tax Return (ITR) forms for Assessment Year (AY) 2025-26, particularly benefiting salaried taxpayers with long-term capital gains (LTCG) from equity shares and mutual funds.” – Sandeep Sehgal, Partner-Tax at AKM Global
Sandeep Sehgal, Partner-Tax at AKM Global, a prominent tax and consulting firm, stated, “With the latest amendments, individuals can now utilize the simpler ITR-1 (Sahaj) or ITR-4 (Sugam) forms if their LTCG under Section 112A does not exceed ₹1.25 lakh and they have no capital losses to carry forward or set off.”
He emphasized that “this change streamlines the tax filing process, making it more accessible and less burdensome for small investors and salaried individuals, thereby encouraging timely and accurate compliance.”
Simplified Forms: A Game-Changer for Taxpayers
The introduction of ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) is a significant move towards simplifying the tax filing process for a large segment of taxpayers, especially those with modest investment gains. The ability to use simpler forms will likely save time and reduce the complexity associated with tax compliance. The I-T department’s decision is expected to have a positive impact on the tax filing process, making it more accessible and user-friendly for individuals and entities with a total annual income of up to ₹50 lakh.
Key Highlights
| ITR Form 1 (Sahaj) | Applicable to: Resident individuals with an annual income of up to ₹50 lakh |
| ITR Form 4 (Sugam) | Applicable to: Individuals, HUFs, and firms (excluding LLPs) with a total annual income of up to ₹50 lakh |
| ITR-2 | Specifically for individuals and HUFs with income from profits and gains in business or profession or LTCG exceeding ₹1.25 lakh or capital losses to carry forward |
In conclusion, the Income Tax Department’s decision to introduce simplified ITR forms for individuals and entities with a total annual income of up to ₹50 lakh is a significant move towards simplifying the tax filing process. The introduction of ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) is expected to make tax compliance more accessible and user-friendly for a large segment of taxpayers.