LTCG up to ₹1.25 lakh? You can now skip ITR-2 and file using Sahaj or Sugam forms

Taxpayers earning modest gains from stocks and equity mutual funds can now file their returns more easily. For the Assessment Year 2025–26, the Central Board of Direct Taxes (CBDT) has allowed individuals with long-term capital gains (LTCG) up to ₹1.25 lakh — from listed equity shares, equity-oriented mutual funds, or business trusts — to use the simplified ITR-1 (Sahaj) or ITR-4 (Sugam) forms.

Until now, even a small amount of LTCG required filing ITR-2. This change makes tax filing simpler and less time-consuming for small investors, especially salaried individuals.

To be eligible, the total income must not exceed ₹50 lakh, and LTCG must be solely under Section 112A. Taxpayers must not have any other capital gains, carried-forward or brought-forward capital losses, or disqualifying factors such as being a company director or holding unlisted shares.

This update comes in tandem with a key policy shift — the exemption limit for LTCG under Section 112A has been raised from ₹1 lakh to ₹1.25 lakh, effective July 23, 2024.

The simplified filing route is not available if LTCG exceeds ₹1.25 lakh, if there are short-term capital gains, capital gains from immovable property, or any intention to carry forward losses. In these cases, ITR-2 remains mandatory.

The tax department’s move is expected to ease compliance, reduce the paperwork burden, and improve voluntary filing among small investors and salaried taxpayers. According to tax professionals, such changes help make the filing process more accessible and efficient without compromising accuracy or scrutiny.

In summary: If your only capital gains are under ₹1.25 lakh from listed equity sources and you meet all other conditions, you’re now eligible to file using ITR-1 or ITR-4 — a simpler and faster option for the upcoming tax season.