Understanding the Newly Updated Income Tax Return Forms for FY 2024-25

Overview of ITR Forms

The Central Board of Direct Taxes (CBDT) has released the updated income tax return (ITR) forms numbered from 1 to 7. Taxpayers can utilize these forms to file their returns for the financial year 2024-25 and the assessment year (AY) 2025-26. Significant modifications have been introduced in the ITR forms, aligning with the recent changes in the Finance Act.

The Income Tax Department has provided substantial relief to taxpayers by implementing changes such as raising the threshold for capital gains reporting and asset disclosure. Although the forms have been announced, many taxpayers may still be uncertain about which ITR form is appropriate for their income tax filing. Below are the essential updates regarding the ITR forms and guidance on selecting the right one.

Details of ITR Forms

ITR Forms Explained

ITR-1 (Sahaj): According to the latest CBDT update, taxpayers can now report long-term capital gains of up to Rs 1.25 lakh from listed equity shares or equity mutual funds under Section 112A. This form is available for resident individuals with a total income of up to 50 lakh, including those with other income sources such as salary, pension, income from a single house property, and agricultural income (limited to Rs 5,000).

ITR-2: Significant changes have been made to this form, including the rationalization of capital gains tax. Individuals with income from capital gains, multiple properties, or foreign assets can use this form. Additionally, it now requires reporting of buyback proceeds after October 1, 2024, under 'Income from Other Sources' and as 'Nil' consideration in the capital gains section.

ITR-3: Those using the ITR-3 form must now disclose their choice of tax regime (old or new) along with Form 10-IE or 10-IEA. This form has been simplified with a new schedule for capital gains, allowing for tax calculations both before and after July 23, 2024. Taxpayers can report capital losses on share buybacks if dividend income is included under 'income from other sources'. This form is suitable for individuals and HUFs with business or professional income.

ITR-4 (Sugam): There are minimal changes for this form in the financial year 2025. However, the CBDT has updated the reporting of long-term capital gains under Section 112A to Rs 1.25 lakh. Individuals, HUFs, and firms (excluding LLPs) under presumptive taxation schemes can file using ITR-4.

ITR-5 (Return Verification): This form is designated for those who do not e-verify their returns.

Forms 6 and 7 Explained

ITR-6 and ITR-7

ITR-6: Updates to ITR-6 include a schedule for splitting capital gains for transactions occurring before and after July 23, 2024, and allowing capital losses on buybacks if dividend income is declared after October 1, 2024. This form is applicable to companies that are not required to file ITR-7.

ITR-7: This form is intended for charitable or religious trusts, political parties, research institutions, and other exempt entities under Sections 139(4A), 139(4B), 139(4C), or 139(4D). The CBDT has made changes to this form, including the requirement to split capital gains into pre- and post-July 23, 2024, and to disclose losses related to buybacks.