Summary: The article explains the key changes introduced by the CBDT in the ITR-1 and ITR-2 forms for Assessment Year 2026-27 (Financial Year 2025-26) that salaried taxpayers should understand before filing their income tax returns. A major relief is that taxpayers with Long-Term Capital Gains under section 112A up to ₹1.25 lakh, without any brought-forward or carry-forward capital loss, can now file the simpler ITR-1 instead of ITR-2. ITR-1 has also been expanded to allow reporting of income from up to two house properties, while requiring disclosure of unrealised rent and tenant PAN, Aadhaar or TAN where TDS has been deducted. In ITR-2, the earlier split in capital gains reporting based on 23 July 2024 has been removed, but deduction disclosures have become more stringent. The article also reminds taxpayers that the New Tax Regime is the default option, section 10 exemption claims have been restricted, and timely filing before 31 July 2026 is important to avoid fees, interest and loss of certain benefits.
Arjuna (Fictional Character): Krishna, the due date of 31st July is approaching and salaried people are busy filing their Income Tax Return for FY 2025-26. But CBDT has brought some changes in the ITR-1 and ITR-2 forms this year. What are these changes that a salaried person must understand before filing his return?
Krishna (Fictional Character): Yes, Arjuna. The CBDT has notified the new ITR forms for AY 2026-27 (FY 2025-26). The biggest relief is in ITR-1 (Sahaj). Earlier, a salaried person who had even a small amount of capital gain was forced to file the heavier ITR-2. Now, a salaried taxpayer can file the simple ITR-1 even if he has Long Term Capital Gain (LTCG) under section 112A from listed shares or equity mutual funds, provided such LTCG does not exceed Rs. 1.25 lakh and there is no brought-forward or carry-forward loss under the capital gains head. So many small investors can now use the easier form.
Arjuna (Fictional Character): Krishna, many salaried people also earn rent from a house. Has anything changed for them?
Krishna (Fictional Character): Yes Arjuna. Earlier ITR-1 could be filed only if a person had income from one house property. From this year, a salaried person owning up to two house properties can also file the simple ITR-1. Along with this, a new field for ‘the amount of rent which cannot be realised’ (unrealised rent) has been added. Also, where TDS has been deducted on rent, the tenant’s PAN or Aadhaar (in case of section 194-IB) or the tenant’s TAN (in case of section 194-I) must now be reported. So disclosure of house property income has become more detailed.
Arjuna (Fictional Character): Krishna, what should a person filing ITR-2 keep in mind?
Krishna (Fictional Character): Arjuna, in ITR-2 the good news is that the earlier complicated split of capital gains into ‘before 23rd July 2024’ and ‘on or after 23rd July 2024’ has now been removed, since there is no mid-year rate change this year. But the disclosure of deductions has become stricter. Even for donations, section 80G now needs the reference number and IFSC, and for political donations under section 80GGC the name and PAN of the political party must be given. So bogus or unsupported deduction claims will easily get caught.
Arjuna (Fictional Character): Krishna, anything else a salaried person should be careful about?
Krishna (Fictional Character): Arjuna, remember three things. First, the New Tax Regime is now the default a salaried person who wants the Old Regime must choose it carefully in the return itself. Second, the ‘Others’ option for claiming exemptions under section 10 has been removed; only the specifically listed allowances can be claimed now. Third, file before the due date of 31st July 2026, because late filing attracts a fee under section 234F and interest under section 234A, and a belated return also loses the benefit of carrying forward certain losses.
Arjuna (Fictional Character): Krishna, what should taxpayers learn from this?
Krishna (Fictional Character): Arjuna, just as in the Mahabharata Arjuna won not by haste but by aiming at the right target with full preparation, the salaried taxpayer too must aim at the correct ITR form, claim only genuine deductions with proper proof, choose the right tax regime, and file well before 31st July. The forms have become simpler in some places and stricter in others – so this year, file with honesty and accuracy, and they will stay free from any future notice.
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