The government has notified Income Tax Return (ITR) forms for Financial Year 2025–26, effective from 1 April 2026, with certain updates to the old forms. The new Income Tax Act also took effect on 1 April, bringing major changes.
While the overall structure of the ITR forms remains largely unchanged, the updated versions come with several incremental changes aimed at simplifying the filing process and improving transparency. These adjustments make it easier for taxpayers to report income accurately and reduce the risk of errors and mismatches.
Notable updates include expanded eligibility for ITR-1 (Sahaj) and more detailed disclosure requirements. Salaried individuals, small investors, and other taxpayers who opt for ITR-1 should also take note of these changes ahead of the 31 July 2026 filing deadline.
Here’s what changed in ITR Form 1
The ITR Form-1 has undergone several major changes. These are as follows:
— Inclusion of limited capital gains: Earlier, reporting capital gains in ITR-1 was not allowed at all. However, after the changes, long-term capital gains (LTCG) from listed equity and equity-oriented mutual funds can be reported in it, given that your total LTCG is up to ₹1.25 lakh.
“Retail investors no longer need to shift to ITR-2 for small equity gains and simplification for salaried people with minor gains,” said Suraj Singh, Founder of S D Singh & Associates, Chartered Accountants.
— Alignment with new capital gains rate: Earlier, LTCG was taxed at two different rates — 10% and 12.5%. In Budget 2024-25, the rates for LTCG on all assets were standardised at 12.5% without indexation, and 20% with indexation. These rates will apply when you file for ITR-1 in FY 2025-26.
— ITR eligibility expanded: Previously, only taxpayers with income from one house property could use ITR 1. Now, those with income from two house properties can also file using this form.
What new fields could lead to errors if overlooked?
The new Income Tax Act has made tax filing much more detail-oriented than before, with the shift to the new “tax year” concept replacing the earlier system, said Ritika Nayyar, Partner at Singhania & Co.
“One of the key areas where taxpayers should be mindful is in the reporting of capital gains. These now must be carefully mentioned with specific dates in Schedule CG to reflect mid-year rate changes. Missing this detail can easily lead to scrutiny or notices,” she added.
She also noted that under the new income tax rules, transparency has significantly increased. “The AIS (Annual Information Statement) will now reflect consolidated TDS codes, which must align exactly with what is reported in the return. Even regular claims like HRA have become stricter, requiring landlord PAN details and bank-verified rent evidence,” Nayyar said.
“Additionally, certain items such as foreign retirement income or political donations are no longer accommodated in simpler forms, pushing many taxpayers toward ITR-2,” she added.
Overall, experts advise taxpayers to ensure that their approach is more careful and precise, as missing details or not reconciling with AIS can result in the return being flagged as defective.
Why should a taxpayer move from ITR-1 to ITR-2?
Taxpayers must upgrade to ITR-2 if their income exceeds ₹50 lakh or if they have any capital gains, though a small exception exists for long-term gains under ₹1.25 lakh, the experts said.
Nayyar also noted that if an individual has a directorship, own unlisted shares, or have agricultural income over ₹5,000 , then they must change the ITR Form. The same rule applies to anyone owning more than one house or possessing foreign assets and income.
“Additionally, those claiming treaty-based tax relief or carrying forward losses must use ITR-2’s more detailed schedules. For taxpayers reporting lottery winnings or specialized foreign retirement benefits, you may not use ITR-1,” she added.
Common mistakes taxpayers must avoid while filing ITR‑1 this year?
According to Singh, there are several measures a taxpayer can take to avoid errors and scrutiny by the Income Tax Department. He advised individuals to take note of the following:
— Selecting the wrong ITR form. Choosing ITR-1 blindly because it is simple. ITR-1 is strictly conditional. Even one violation makes the return defective under Section 139(9).
— Ignoring AIS / TIS: Taxpayers are advised not to file a return by solely relying on Form 16, Form 26AS and a bank statement. They must refer to AIS.
— Under-reporting income: Individuals should ensure that they correctly report FD/RD interest, dividend income, and small freelance/side income, as under-reporting or misreporting can attract a penalty of 200% as per section 270A.
— Incorrect capital gains reporting: Treating STCG as LTCG, and ignoring the broker capital gain report are considered major red flags, as the CG report is the most important document.
— Wrong deduction claims: Claiming deductions and donations such as 80C and 80D, even though you did not actually pay it, can attract tax department scrutiny. One should also not claim extra amounts on their income tax return.
— Bank account errors: Not pre-validating a bank account and selecting the wrong account for the refund can also cause issues for the taxpayer.
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