CBDT notifies ITR 1 and SUGAM (ITR-4) for FY 2025-26

Income Tax Rules Amended: ITR Forms & Capital Gains (AY 2025-26)

The Central Board of Direct Taxes issued Notification No. 40/2025 on April 29, 2025, which introduces the Income-tax (twelfth Amendment) Rules, 2025, effective from April 1, 2025. These rules further amend the Income-tax Rules, 1962. Key changes include substituting the year “2024” with “2025” in sub-rule (1) of rule 12 and “2023” with “2024” in sub-rule (5) of the same rule. Additionally, a new sub-clause (iv) is inserted in clause (a) of sub-rule (1) of rule 12, addressing assessees with only long-term capital gains under section 112A not exceeding ₹1,25,000 and no brought forward or carry forward losses under that head. Rule 12(ca) is also modified to include assessees with such capital gains along with income computed under sections 44AD, 44ADA, and 44AE for filing Form SUGAM (ITR-4). Furthermore, rule 11B is amended to require the furnishing of Form No. 10BA along with the return of income, and FORM ITR-1 in Appendix II is replaced with a new form.

Who Should file ITR-4 (Sugam)?

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)

Notification No. 40/2025- Income Tax | Dated: 29th April, 2025

G.S.R. 271(E).–– In exercise of the powers conferred by section 139 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. Short title and commencement. — (1) These rules may be called the Income-tax (twelfth Amendment) Rules, 2025.

(2) They shall come into force with effect from the 1^st day of April, 2025.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 12, ––

(a) in sub-rule (1), ––

i. for the figures “2024”, the figures “2025” shall be substituted;

ii. in clause (a), in sub-clause (iii), for the words “does not have any loss under the head, “the words “does not have any loss under the head; or” shall be substituted.

iii. in clause (a), after sub-clause (iii), the following sub-clause shall be inserted, namely, –– “(iv) “Capital gains”, where assessee has only long-term capital gains under section 112A not exceeding one lakh twenty-five thousand rupees and does not have any brought forward loss or loss to be carried forward under the head,”

iv. in clause (ca), for the words, figures and letters “in the case of a person being an individual or a Hindu undivided family, who is a resident other than not ordinarily resident, or a firm, other than limited liability partnership firm, which is a resident deriving income under the head “Profits or gains of business or profession” and such income is computed in accordance with special provisions referred to in section 44AD, section 44ADA and section 44AE of the Act for computation of such income, be in Form SUGAM (ITR-4) and be verified in the manner indicated therein:”, the words, figures and letters “in the case of a person being an individual or a Hindu undivided family, who is a resident other than not ordinarily resident, or a firm, other than limited liability partnership firm, which is a resident,––

i. deriving income under the head “Profits or gains of business or profession” and such income is computed in accordance with special provisions referred to in section 44AD, section 44ADA and section 44AE of the Act for computation of such income; and;

ii. has, “Capital gains”, if any, where assessee has only long-term capital gains under section 112A not exceeding one lakh twenty-five thousand rupees,

be in Form SUGAM (ITR-4) and be verified in the manner indicated therein” shall be substituted;

(b) in sub-rule (5), for the figures “2023”, the figures “2024” shall be substituted.

3. In the principal rules, in rule 11B, after the words, figures and letters “Form No. 10BA”, the words “and furnish the same along with the return of income” shall be inserted.

4. In the principal rules, in Appendix II,––

(a)        for FORM ITR-1, the following FORM shall be substituted, namely: –––

INDIAN INCOME TAX RETURN

FORM ITR-1 SAHAJ

[For individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh and having Income from Salaries, one house property, other sources (Interest etc.), long-term capital gains under section 112A up to Rs. 1.25 lakh, and agricultural income up to Rs.5 thousand]

[Not for an individual who is either Director in a company or has invested in unlisted equity shares or in cases where TDS has been deducted u/s 194N or if income-tax is deferred on ESOP or has assets (including financial interest in any entity) located outside India]

(b) for FORM ITR-4, the following FORM shall be substituted, namely: –––

FORM ITR-4 SUGAM

INDIAN INCOME TAX RETURN

[For Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE, and having long-term capital gains under section 112A upto Rs. 1.25 lakh]

[Not for an individual who is either Director in a company or has invested in unlisted equity shares or if income-tax is deferred on ESOP or has agricultural income more than Rs. 5000 or has assets (including financial interest in any entity) located outside India]

[F. No. 370142/3/2025-TPL]
SURBENDU THAKUR, Under Secy., Tax Policy and Legislation

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, SubSection (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 252(E), dated the 22nd April, 2025.

Explanatory Memorandum: – It is hereby certified that no person shall be adversely affected by giving retrospective effect to these rules.