Tax Season 2025: Key ITR changes taxpayers must track for AY2025-26 filing
The Income Tax Department has rolled out significant changes for the financial year 2024-25 (assessment year 2025-26), updating validation rules for income tax returns and introducing new Excel-based filing utilities for ITR-1 and ITR-4. Alongside these procedural updates, taxpayers will face revised capital gains tax rates and several other policy changes, signalling a major shift in tax compliance and reporting for the coming year.
- Jun 27, 2025,
- Updated Jun 27, 2025 2:05 PM IST
The Income Tax Department has introduced significant updates to the income tax return (ITR) forms and rules for the financial year 2024-25 (Assessment Year 2025-26). The department has released Excel-based ITR filing utilities for ITR-1 and ITR-4, affecting salaried individuals and those with electric car loans, home loans, or house rent obligations. However, the e-filing utilities have not yet been released, potentially reducing the time available to taxpayers for filing returns before the due date of September 15, 2025. These updates incorporate measures from the Budget 2024, reflecting shifts in tax policies and compliance requirements.
Form 10-IEA
In 2025, a notable change involves Form 10-IEA, which taxpayers with business and professional income must submit if they wish to switch from the new tax regime to the old one. This form applies to individuals, Hindu Undivided Families (HUF), Associations of Persons (AOP), Bodies of Individuals (BOI), and Artificial Judicial Persons (AJP). Additionally, revised capital gains tax rates in Budget 2024 will impact transactions after July 23, 2024. Short-term capital gains (STCG) under section 111A are now taxed at 20%, while long-term capital gains (LTCG) under Sections 112 and 112A are taxed at 12.5% without indexation.
Share buybacks
The treatment of share buybacks has also changed. Proceeds from share buybacks will now be considered dividends in the hands of shareholders, effective from October 1, 2024. Previously, companies paid tax on share buybacks under Section 115QA. Now, buyback gains are reported as dividends in Schedule OS of the ITR forms. Additionally, unlisted bonds are included under Section 50AA for treatment as STCG. The threshold for reporting assets and liabilities in Schedule AL has increased from Rs 50 lakh to Rs 1 crore.
Capital Gains Tax
Compliance for small taxpayers has been simplified. Taxpayers, including salaried and non-salaried individuals and businesses with long-term capital gains up to ₹1.25 lakh under Section 112A, can now file ITR-1 or ITR-4. This simplification means there is no tax on LTCG up to ₹1.25 lakh from equity mutual funds and equity stocks, allowing these taxpayers to report such income in ITR-1 and ITR-4 without a capital gains tax liability. However, only valid Aadhaar numbers will be accepted for ITR filings in ITRs 1, 2, 3, and 5.
New sections
The revised ITR forms for 2025 include features such as new fields for cruise ship operators to report income under Section 44BBC and mandatory reporting of disability certificates under Sections 80DD and 80U. A new Schedule TDS captures the section under which TDS is deducted, and the Schedule-Capital Gain section reflects gains split before and after July 23, 2024. Taxpayers filing ITR-3, 4, and 5 must confirm whether they are opting out of the new tax regime and whether they filed Form 10-IEA in previous years.
These changes signify a major shift in the regulatory framework for ITR filings in 2025, aiming to streamline compliance, enhance reporting accuracy, and adjust tax policy to reflect economic changes. As taxpayers prepare for the upcoming filing season, these updates will demand attention to detail and timely action to comply with the new requirements.
The Income Tax Department has introduced significant updates to the income tax return (ITR) forms and rules for the financial year 2024-25 (Assessment Year 2025-26). The department has released Excel-based ITR filing utilities for ITR-1 and ITR-4, affecting salaried individuals and those with electric car loans, home loans, or house rent obligations. However, the e-filing utilities have not yet been released, potentially reducing the time available to taxpayers for filing returns before the due date of September 15, 2025. These updates incorporate measures from the Budget 2024, reflecting shifts in tax policies and compliance requirements.
Form 10-IEA
In 2025, a notable change involves Form 10-IEA, which taxpayers with business and professional income must submit if they wish to switch from the new tax regime to the old one. This form applies to individuals, Hindu Undivided Families (HUF), Associations of Persons (AOP), Bodies of Individuals (BOI), and Artificial Judicial Persons (AJP). Additionally, revised capital gains tax rates in Budget 2024 will impact transactions after July 23, 2024. Short-term capital gains (STCG) under section 111A are now taxed at 20%, while long-term capital gains (LTCG) under Sections 112 and 112A are taxed at 12.5% without indexation.
Share buybacks
The treatment of share buybacks has also changed. Proceeds from share buybacks will now be considered dividends in the hands of shareholders, effective from October 1, 2024. Previously, companies paid tax on share buybacks under Section 115QA. Now, buyback gains are reported as dividends in Schedule OS of the ITR forms. Additionally, unlisted bonds are included under Section 50AA for treatment as STCG. The threshold for reporting assets and liabilities in Schedule AL has increased from Rs 50 lakh to Rs 1 crore.
Capital Gains Tax
Compliance for small taxpayers has been simplified. Taxpayers, including salaried and non-salaried individuals and businesses with long-term capital gains up to ₹1.25 lakh under Section 112A, can now file ITR-1 or ITR-4. This simplification means there is no tax on LTCG up to ₹1.25 lakh from equity mutual funds and equity stocks, allowing these taxpayers to report such income in ITR-1 and ITR-4 without a capital gains tax liability. However, only valid Aadhaar numbers will be accepted for ITR filings in ITRs 1, 2, 3, and 5.
New sections
The revised ITR forms for 2025 include features such as new fields for cruise ship operators to report income under Section 44BBC and mandatory reporting of disability certificates under Sections 80DD and 80U. A new Schedule TDS captures the section under which TDS is deducted, and the Schedule-Capital Gain section reflects gains split before and after July 23, 2024. Taxpayers filing ITR-3, 4, and 5 must confirm whether they are opting out of the new tax regime and whether they filed Form 10-IEA in previous years.
These changes signify a major shift in the regulatory framework for ITR filings in 2025, aiming to streamline compliance, enhance reporting accuracy, and adjust tax policy to reflect economic changes. As taxpayers prepare for the upcoming filing season, these updates will demand attention to detail and timely action to comply with the new requirements.