Income Tax Department Preparing A New Set of ITR Forms? Here's What We Know So Far

In order to tighten the net around underreported incomes, the Income Tax Department is now preparing to tweak the income-tax return (ITR) forms. According to a report by The Economic Times, the Central Board of Direct Taxes (CBDT) is working on forms that would not just simplify tax filing but also make it harder for individuals to conceal their real income.

As part of this overhaul, the new ITR forms are set to require taxpayers to provide more detailed information on exemptions and reliefs they enjoy. The proposal is to eliminate loopholes by which fraudulent claims of deductions and underreported incomes manage to fly under the radar of tax departments.

The report further states that the taxpayers may also have to declare certain high-end expenditures, such as luxury holidays, which will help the department spot cases where spending habits do not match declared earnings.

While the new set of forms is planned for the next financial year, some changes might still show up as early as the current assessment year. "There is a need to revamp tax return forms which are easier to file and at the same time must make evasion difficult for those who are not declaring their real income," a senior government official told the Economic Times.

Forms To Bring Broader Improvement

This overhaul of ITR forms is also being aligned with broader improvements in the Annual Information Statement (AIS), a system that consolidates various financial transactions of a taxpayer, including income from dividends, interest, and Tax collected at source.

Much of this data is already pre-filled in ITRs, a step that aims to make filing less cumbersome and more transparent. Efforts to catch unreported income are already underway through an expanded scope of Tax Collected at Source (TCS), which now covers luxury purchases to better capture expenditure data.

As the official pointed out, the Income Tax Department is aiming to bring some of the new disclosure requirements into the current year's filing cycle itself. This could also be the reason why there has been a slight delay in the release of the forms for this assessment year (AY 2025-2026).

Over the years, the CBDT typically has managed to notify the forms by the 1st of April every year. However, given the extent of changes under consideration, the forms for the current assessment year are expected to be notified shortly.

Taxpayers who will be sticking to the old tax regime might face more detailed questions about their exemptions and deductions.

This change would be part of a larger shift in the department's strategy, moving on from the traditional scrutiny-based methods to a more data-driven and non-intrusive system.

The new approach might also ensure that any demand raised on a taxpayer is backed by solid evidence, including transaction records and instances of misreporting.

Increased Scrutiny By Tax Officials

The speculation of new ITR forms to curb misreporting is not surprising since, just last month, the tax authorities had initiated a verification drive targeting cases where claims of tax exemptions were higher than permissible under the law.

Communications were sent to individuals who had wrongly claimed house rent allowances (HRA) or failed to submit their details in relation to Tax Deducted at Source (TDS) on rent payments.

Such scrutiny also extended to claims that were made in relation to tuition fees, medical expenses, and other deductions, urging taxpayers to file updated returns where discrepancies were found.

As the tax framework is shifting towards a more transparent and accountability-driven system, taxpayers can expect a stricter yet more streamlined ITR filing process in the near future.