Significant ITR Form Changes in FY 2024-25 (AY 2025-26) Which You Should Be Aware Of
The Income Tax Department has issued notifications to make changes in the Income Tax Return (ITR) forms for 2024-25 (Assessment Year 2025-26) in line with the amendments in tax laws announced in the Union Budget 2024. Although taxpayers are still unable to file their returns, they can expect some major changes to ease the process. Here are nine significant changes that all taxpayers need to know before filing their ITR this year.
1. Extended Eligibility for ITR-1 and ITR-4
For this year, the Income Tax Department has extended the eligibility requirements for taxpayers seeking to file ITR-1 and ITR-4. Previously, these simplified forms could not be used by taxpayers who have long-term capital gains (LTCG) from equities and equity-oriented mutual fund investments in excess of Rs. 1 lakh. But the new regulations permit taxpayers with LTCG as high as Rs. 1.25 lakh to file ITR-1 or ITR-4, subject to there not being carry-forward capital losses. This step has been taken to reduce compliance for small taxpayers, providing them with an easier filing process.
2. Aadhaar Enrolment ID Removed
A big shift has been made here as the Aadhaar enrolment ID would no longer be used for PAN application or while submitting ITR. Taxpayers are now required to use their actual Aadhaar number in order to submit their returns. ITR 1, ITR 2, ITR 3, and ITR 5 forms have been modified to delete the column in which Aadhaar enrolment ID is to be filled.
3. New Small Business Owners Opting Out of New Tax Regime Rules
Small business owners have definite rules for the option to use the old or new tax regimes. Earlier, taxpayers with business income had the option to change between the two tax regimes every financial year. But the updated ITR-4 for FY 2024-25 mandates them to acknowledge their previous filings of Form 10-IEA and specify if they prefer to continue to opt out of the new tax regime in the current year. The change makes the process clear for small business persons.
4. TDS Section Reporting
In this year’s ITR forms, taxpayers are now required to indicate the section under which tax was deducted at source (TDS) on non-salary income. Previously, there was no need to state the TDS section when claiming the tax credit. The new forms for FY 2024-25 will now request taxpayers to state the TDS section so that the tax deducted can be credited properly.
5. New Capital Gains Rules
Budget 2024 has brought new rules for capital gains, which are applicable from July 23, 2024. Taxpayers who receive capital gains on listed or unlisted shares, equity mutual funds, property, or other capital assets will have to provide the date of transfer to determine the tax applicable. If the transfer is made prior to July 23, 2024, the previous tax provisions will be applicable. If it is done on or after July 23, 2024, the new tax provisions will be applicable.
6. Unlisted Bond and Debenture Separate Reporting
Starting July 23, 2024, the tax incidence on unlisted bonds and debentures was altered. All gains on unlisted debentures or bonds that are redeemed, matured, or transferred on or after this date will be treated as short-term capital gains. This will be irrespective of the holding period, with the gains falling under the income tax slab rates. The earlier tax regime will apply in case of a transaction before July 23, 2024.
7. Proceeds from Buy-back Treated as Deemed Dividend
From October 1, 2024, proceeds from the buy-back of shares by domestic listed companies will be considered as deemed dividends. Shareholders will mention this under “Income from other sources” in the ITR. The capital gains section will reflect zero as sale proceeds, and any capital loss can be carried over to set off future long-term capital gains.
8. Disability Certificate for Deductions under Sections 80DD and 80U
Individuals who claim deductions under Section 80DD or 80U for expenditure incurred on disabled persons have to furnish the acknowledgment number of the disability certificate. This is yet another requirement for them to claim such deductions, making the process more transparent and trackable. This will apply to ITR-2 and ITR-3, but not ITR-1.
9. Reporting Assets for Income over Rs. 1 Crore
Taxpayers with a gross total income in excess of Rs. 1 crore will have to report their assets and liabilities this year. This is an increase from the existing limit of Rs. 50 lakh. Taxpayers with a gross total income of over Rs. 1 crore will have to complete Schedule AL in ITR-2 or ITR-3 to report their assets and liabilities.
The revision of the ITR forms for FY 2024-25 (AY 2025-26) mirrors the recent tax law changes, streamlining the filing process and increasing transparency. With eased eligibility for ITR-1 and ITR-4, new capital gains provisions, and special disclosures on buy-back proceeds and assets, taxpayers need to familiarize themselves with these changes before they file their returns. Although these changes intend to make compliance easier, more detailed disclosures are still needed, making the filing process more transparent and accurate.
