New ITR Forms 1 and 4 notified for FY 2024-2025, Here are big changes

After much anticipation, the Central Board of Direct Taxes (CBDT) has notified the new ITR-1 (Sahaj) and ITR-4 (Sugam) forms for Assessment Year 2025–26 (Financial Year 2024–25) on 29th April 2025. These forms cater primarily to salaried individuals, pensioners, and small business owners or professionals. The due date for filing returns for non-audit cases is 31st July 2025.

While the structure of these forms remains largely familiar, there are several important updates in line with recent policy changes. From new disclosures related to deductions and the new tax regime to improved clarity in reporting income sources, these changes aim to make compliance easier and more transparent.

To help taxpayers navigate these updates, Tarun Kumar, Lead – Business Advisory at Coherent Advisors, decodes the key changes introduced in ITR-1 and ITR-4 for AY 2025–26—and highlights what individuals need to keep in mind while filing their returns this year.

1.      Expanded Eligibility for Simplified ITR Forms

For AY 2025–26, taxpayers having long-term capital gains under Section 112A up to Rs. 1.25 lakh can now file ITR-1 or ITR-4. This is a significant change, as earlier, the presence of any capital gains required filing ITR-2 or ITR-3.

These simplified forms can now be used if:
The total long-term capital gains under Section 112A do not exceed Rs. 1.25 lakh, and

There is no brought forward or carry forward loss under this head.

Section 112A applies to long-term capital gains arising from the transfer of Equity shares, Units of equity-oriented mutual funds, or Units of a business trust, provided Securities Transaction Tax (STT) has been paid at the time of transfer.

Gains up to Rs. 1.25 lakh are exempt from tax. Any excess amount is taxable at 12.5%, plus applicable surcharge and health & education cess.

This change provides relief to small investors by enabling them to file their returns through the simpler ITR-1 or ITR-4 instead of the more detailed ITR-2 or ITR-3.

2.      New Reporting Requirements for Section 112A Gains

A new section, “Income on which no tax is payable,” has been introduced to capture details of exempt long-term capital gains under Section 112A. Taxpayers must now disclose:
Total sale consideration,
Total cost of acquisition, and
Long-term capital gains as per Section 112A.

3.      Clarification on Form 10BA for Claiming Rent Deduction under Section 80GG

Another important clarification relates to the filing of Form 10BA. Individuals (resident or non-resident) who pay rent for a furnished or unfurnished residence may claim a deduction under Section 80GG. This benefit applies to both salaried and self-employed taxpayers. If an employee is claiming exemption for House Rent Allowance (HRA) under section 10(13A), he is not allowed to claim deduction under this provision
However, the deduction is allowed only if Form 10BA is electronically filed. It must now be submitted along with the return of income. Importantly, taxpayers who opt for the new tax regime under Section 115BAC are not eligible to claim this deduction.

4.      New Requirement: Reporting TDS Sections in Schedule TDS/TCS

In the TDS/TCS Schedule, taxpayers are now required to specify the section under which TDS has been deducted. For example, TDS on dividends (Section 194), TDS on bank deposit interest (Section 194A).
These details can be checked from Form 16A or Form 26AS.

5.      Clarity on Section 115BAC (Old vs New Regime Opt-Out)

ITR-4 for AY 2025–26 includes detailed prompts regarding the taxpayer’s tax regime selection. It asks whether Form 10-IEA was filed in AY 2024–25, and whether the option to opt out of the new regime is being continued or exercised for the first time.

If Form 10-IEA was not filed earlier, for instance, if ITR-1 or ITR-2 was filed in AY 2024–25, then the taxpayer must now file Form 10-IEA for AY 2025–26 to opt out of the new regime.
This option under Section 115BAC(6) must be exercised on or before the due date for filing the return under Section 139(1).