CBDT notifies Revised ITR 1 & ITR 4 for AY 2025-26: Key amendments

The Central Board of Direct Taxes (CBDT), through Notification No. 40/2025 dated 29th April 2025, has introduced Revised Income Tax Return (ITR) Forms 1 (Sahaj) and 4 (Sugam) for the Assessment Year (AY) 2025–26. Effective from 1st April 2025, these changes are part of the 12th Amendment to the Income Tax Rules, 1962. Key amendments to ITR Form 1 include expanded eligibility for resident individuals with income up to ₹50 lakhs from specified sources like salary, one house property, and interest. New exclusions apply to directors, investors in unlisted shares, and individuals with foreign financial interests. Additionally, detailed reporting of exempt income, such as long-term capital gains (LTCG) under Section 112A, is now mandatory. Similar updates to ITR Form 4 extend its scope to individuals, HUFs, and partnership firms with total income up to ₹50 lakhs from specified business and professional sources. Both forms require disclosure of all active bank accounts, with one selected for refunds. These revisions aim to simplify filing for small taxpayers while enhancing transparency. Taxpayers are encouraged to review the changes and seek expert advice to ensure compliance.

 Let’s explore the key amendments that taxpayers should be aware of before finalizing and filing their income tax return:

A. Expanded Scope of ITR Form 1 (Sahaj)

Eligibility Criteria:

1. Type of Taxpayers: Individual who is Resident (other than Not Ordinarily Resident)

2. Total Income: Up to ₹50 Lakhs

3. Eligible Heads of Income:

• Income from Salary
• Income from One House Property
• Income from Other Sources (Interest, etc.)
• Long-Term Capital Gain up to ₹1,25,000 under Section 112A
• Agricultural income up to ₹5,000

4. Ineligible Taxpayers:

• Director in a company
• Investor in unlisted equity shares
• Individuals with TDS under Section 194N
• Individuals with foreign assets or financial interests abroad
• Individuals with deferred ESOP income

5. Bank Account Disclosure:

• All bank accounts (except dormant) must be reported
• At least one account must be selected for refund
• In case of multiple selections, CPC will decide which account to use for refund processing

6. New Disclosure Requirement: Detailed reporting of exempt income, including exempt LTCG under Section 112A

B. Expanded Scope of ITR Form 4 (Sugam)

Eligibility Criteria:

1. Type of Taxpayer: Individual, Hindu Undivided Family (HUF), or Partnership Firm (excluding LLPs)

2. Total Income: Up to ₹50 Lakhs

3. Eligible Heads of Income:

• Income from Business or Profession under Sections 44AD, 44ADA, or 44AE
• Long-Term Capital Gain up to ₹1,25,000 under Section 112A

4. Ineligible Taxpayers:

• Director in a company
• Investor in unlisted equity shares
• Agricultural income exceeding ₹5,000
• Individuals with foreign assets or financial interests abroad
• Individuals with deferred ESOP income

5. Bank Account Disclosure: Same as ITR-1: all accounts except dormant must be reported; one must be chosen for refund

6. New Disclosure Requirement: Detailed reporting of exempt income, including exempt LTCG under Section 112A

C. Impact of Amendments in ITR 1 & ITR 4 for AY 2025-26 :

These changes aim to simplify tax compliance for honest taxpayers, especially salaried individuals and small business owners. The expanded scope allows more taxpayers to use simplified forms, while also enhancing transparency with detailed exempt income reporting.

We’d love to hear your thoughts on these amendments. If you have any questions, feel free to leave a comment or consult your tax advisor.

Disclaimer: This article is for informational purposes only. Before making any financial decisions, conduct thorough research or consult a qualified tax consultant.