ITR-1 and ITR-4 Forms Updated for AY 2025–26: Easier Tax Filing for Small Investors and Salaried Individuals

The Income Tax Department has notified revised ITR-1 (Sahaj) and ITR-4 (Sugam) forms for Assessment Year (AY) 2025–26. These updated forms aim to simplify the return filing process for small taxpayers, particularly salaried individuals and retail investors with limited capital gains. The move is widely seen as an effort to streamline tax compliance and improve the overall taxpayer experience.

What’s New: Small Investors Get Relief

One of the most significant updates in the new ITR forms is the relaxation granted to small investors earning long-term capital gains (LTCG). Individuals with annual LTCG of up to ₹1.25 lakh from listed equity shares or mutual funds can now file their returns using the simpler ITR-1 or ITR-4 forms.

Previously, these taxpayers had to opt for the more detailed and complex ITR-2 or ITR-3 forms—even if their LTCG income was within the tax-exempt threshold—resulting in a disproportionate compliance load.

Additional Enhancements in ITR Forms

Alongside the changes for capital gains filers, several updates have been introduced to improve form usability:

• Drop-down menus: New drop-down options for deductions under key sections like 80C (investments), 80GG (rent paid), and others help reduce errors and confusion.

• Detailed TDS reporting: Section-wise TDS (Tax Deducted at Source) disclosures are now required, increasing transparency and clarity in claiming tax credits.

These changes are designed to make filing smoother and ensure accurate reporting without needing deep technical knowledge.

Timeline and Availability

The updated return utility is expected to be made available shortly on the official Income Tax Department portal. The last date for filing returns (without audit requirements) remains July 31, 2025.

Notably, ITR forms are typically released before the end of the financial year. However, this year’s notification came later, reportedly due to the Revenue Department’s focus on a new Income Tax Bill introduced in Parliament in February.

Read More: ITR Filing FY 2024-25: A Complete Guide to Using the Offline Utility.

Who Can File Sahaj (ITR-1) and Sugam (ITR-4)?

ITR-1 (Sahaj)

Suitable for resident individuals with:

• Total income up to ₹50 lakh

• Income from salary, one house property, and other sources, such as interest

• Agricultural income up to ₹5,000

ITR-4 (Sugam)

Applicable for individuals, Hindu Undivided Families (HUFs), and firms (except LLPs) with:

• Income up to ₹50 lakh

• Business or professional income under the presumptive taxation scheme (Sections 44AD, 44ADA, or 44AE)

Clarifying the Terminology: AY vs FY

Understanding the basic distinction between Assessment Year and Financial Year is crucial for accurate filing:

• Financial Year (FY): This is the year in which the income is actually earned, running from April 1 to March 31.

• Assessment Year (AY): This is the year immediately following the financial year, during which the earned income is assessed and taxed. For example, income earned in FY 2024–25 is assessed in AY 2025–26.

Conclusion

The newly notified ITR-1 and ITR-4 forms represent a move towards a more taxpayer-friendly regime. By reducing complexities for small investors and salaried individuals, these changes underscore the government’s commitment to making compliance simpler and more accessible.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.