ITR Filing for AY 2025–26: Which ITR Form from 1 to 5 Should You Use?

The Central Board of Direct Taxes (CBDT) has officially notified Income Tax Return (ITR) forms 1 through 5 for the Assessment Year 2025–26. These forms, applicable for income earned during the financial year ending March 2025, reflect several updates in eligibility criteria, disclosure requirements, and form structure. With each form tailored to specific taxpayer categories, understanding their purpose and applicability is critical for compliant and timely filing.

ITR-1 (Sahaj): For Salaried Individuals with Simple Tax Profiles

The ITR-1 form is a simplified return designed for resident individuals (other than not ordinarily resident) earning:

• Salary or pension

• One house property income

• Income from other sources (excluding winnings from lottery or racehorses)

This form is available only if the total income does not exceed ₹50 lakh. Notably, individuals with long-term capital gains up to ₹1.25 lakh can also file ITR-1, thanks to a recent relaxation, provided all other conditions are met.

ITR-2: For Individuals and HUFs with Capital Gains or Higher Income

ITR-2 is applicable to individuals and Hindu Undivided Families (HUFs) who:

• Do not earn income from business or profession.

• Have income from more than one house property, capital gains, or foreign income.
• Have total income exceeding ₹50 lakh.

It is not suitable for those with business income. The expanded use of this form includes those who are ineligible for ITR-1 due to income complexity or asset disclosures.

ITR-3: For Business or Professional Income

This form caters to individuals and HUFs earning income from:

• Profits and gains of business or profession.

• Partnerships in firms (though firms themselves cannot file ITR-3).

A significant change this year is the increase in the threshold for reporting assets and liabilities under ‘Schedule AL’ from ₹50 lakh to ₹1 crore. This eases compliance for middle-income taxpayers. Additionally, those who purchased property before 23 July 2024 can now choose between paying 12.5% tax on long-term capital gains without indexation or the standard 20% with indexation.

ITR-4 (Sugam): Presumptive Income and Simpler Returns

ITR-4 is for individuals, HUFs, and firms (excluding LLPs) with:

• Total income up to ₹50 lakh.

• Income from business or profession computed under the presumptive taxation scheme (Sections 44AD, 44ADA, or 44AE).

This form is preferred for taxpayers with straightforward income structures who opt for a simplified method of computing profits and taxes.

ITR-5: For Firms, LLPs, AOPs and BOIs

ITR-5 is designed for:

• Firms.

• Limited Liability Partnerships (LLPs).
• Associations of Persons (AOPs).

• Bodies of Individuals (BOIs).

Among the most notable updates this year is a new structure within the Schedule-Capital Gain, requiring separate disclosures of gains earned before and after 23 July 2024. It also introduces the ability to report capital loss on share buybacks, provided the corresponding dividend income is disclosed under “income from other sources” for transactions after 1 October 2024. The form now references Section 44BBC and mandates disclosure of the TDS section code within Schedule-TDS.

Read More: Know Documents Required for ITR Filing. 

Conclusion

As tax compliance frameworks evolve, staying informed about which ITR form to use is essential for all taxpayers. The early notification of these forms gives filers ample time to assess their financials and make informed submissions. Further forms and updates are expected soon, bringing more clarity for companies and other entities.

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.