The income tax filing (ITR) season is now underway, with the Income Tax Department enabling online filing and releasing Excel utilities for ITR-1 (Sahaj), ITR-2 and ITR-4 (Sugam). This allows many taxpayers to start filing their returns, though taxpayers are advised to wait until mid-June as Form 16 from employers usually arrives by that time.
This assessment year’s tax filing season comes with several important changes as reporting requirements have been revised in multiple areas. While the filing process may appear largely similar, filing your return for income earned in financial year 2025-26 may not exactly be the same last year.
Additionally, this will be the final cycle under the old Income Tax Act, 1961. Although the new Income Tax Act, 2025 has already been introduced, its provisions will be applicable from the next filing season onwards. Income earned during FY 2025–26 (AY 2026-27) will still be assessed under the older law.
Major changes for ITR filing this year
Here are five major changes that could affect how you file your ITR in the assessment year 2026-27:
— Expanded Scope of ITR-1 (Sahaj): ITR-1, which is filed by most salaried taxpayers and individuals, has been significantly expanded to simplify filing for more taxpayers. These changes include:
- Two house properties: You can now report income from up to two house properties (earlier it was capped at one house property) using ITR-1.
- Long-term capital gains: Taxpayers with Section 112A LTCG (from listed equity or mutual funds) can now use ITR-1 to report this income, provided their total capital gains doesn’t exceed ₹1.25 lakh and they do not have brought-forward capital losses.
— New capital gains tax categories: The old capital gains tax categories and indexation rules for assets were abolished and replaced effective July 23, 2024. The Union Budget 2024 simplified and rationalised the tax framework. Key changes include:
- No more indexation: The benefit of for calculating long-term capital gains has been removed for most assets, while the tax rate has been reduced to (12.5%).
- Unified holding periods: The holding periods to determine long-term and short-term capital gains were streamlined into just two categories (1 year for listed securities, 2 years for all other assets)
— New disclosure for unrealised rent: The Income Tax Department has introduced a dedicated field titled “The amount of rent which cannot be realised” in ITR forms, including ITR-1 and ITR-4. Previously, taxpayers filing these forms did not have a separate place to report unrealised rent. This update improves transparency and prevents taxpayers from inflating taxable rental income by clearly separating uncollected rent from the gross annual value.
— Mandatory reporting of bank balance: For taxpayers filing ITR-4 under schemes, an extra disclosure has become mandatory. Individuals covered under Sections 44AD, 44ADA and 44AE will now have to report the total closing balance of all active bank accounts as of March 31, 2026.
— Opting out of the new tax regime: In the previous assessment years, opting in and out of the new tax regime using Form 10-IEA was a confusing part. The notified forms for FY 2025-26 contain detailed disclosure requirements for opting in and out of the new tax regime, facilitating seamless choice of regime for business income taxpayers.