Income Tax Return 2025: Here Are Key Changes Introduced In ITR Forms This Year

The season of filing income tax returns is here, this time with some new and key upgrades. For the financial year (FY) 2024-25, the Central Board of Direct Taxes (CBDT) has released all the income tax return (ITR) forms with a fresh set of changes - some minor, and others that might need you to take a closer look.

Let’s take a review of what has changed and what the changes could mean for you:

ITR-1 (Sahaj) and ITR-4 (Sugam)

Sahaj and Sugam are seen as the simpler forms for salaried individuals and small business owners. This year they come with a bit more flexibility of reporting your ITRs.

The big shift? Taxpayers can now file these forms even if they have long-term capital gains (LTCG) under Section (u/s) up to Rs 1.25 lakh, provided there is no carry forward or brought-forward capital loss. This opens the door for more taxpayers to stay within the simpler forms despite modest investment gains.

Other than this, the ITR filing now requires more detailed disclosure:

- More granular deduction reporting under various sections like 80C, 80D, etc.

- TDS (Tax Deducted at Source) schedules will now capture the exact section under which TDS was deducted. That means less ambiguity and more precision.

ITR 2 Changes

The changes in the ITR 2 forms are particularly more significant for investment-heavy taxpayers.

Here’s how: If you are an individual with capital gains, especially from shares or property, this form is for you. It now reflects changes introduced in the Finance Act 2024:

- Capital gains will be reported separately for transactions before and after July 23, 2024. So if you have sold stocks or real estate this year, expect to split your data accordingly.

- One interesting inclusion is that capital loss on share buyback can now be claimed if the corresponding dividend income has been reported under "income from other sources", but this only applies to transactions post October 1, 2024.

- In addition to the above, asset and liability reporting limit has also been hiked to Rs 1 crore of total income.

Taxpayers can also expect enhanced reporting for deductions, especially under Section 80C and Section 10(13A) (think HRA and related exemptions).

ITR-3: Capital Gains Get A Cleanup

For taxpayers who earn business income along with capital gains, ITR-3 sees more of a clean-up than a complete overhaul.

The tax department has gone in for:

- Rationalisation of the holding period for capital assets,

- Adjustments in LTCG and STCG rates, and

- Tweaks in indexation benefits, the mechanism used to adjust the purchase price of assets for inflation.

Most of these changes in the forms are a backend streamlining meant to align reporting with the latest tax rules. The actual tax outgo may or may not change depending on your transaction type.

ITR-5: For LLPs, AOPs, and Others

This form, meant for partnerships, LLPs, AOPs and similar entities, mirrors some of the changes from ITR-2:

- Like ITR-2, capital gains must now be reported before and after July 23, 2024.

- The capital loss on share buyback gets the same post-October 1 eligibility.

A new addition is the reference to Section 44BBC, which relates to cruise shipping businesses, suggesting an effort to make tax filings more sector-specific.

In this form too, TDS reporting has become more granular with section-wise classification.

ITR-6: For Companies, More Sector Focus

ITR-6, the go-to form for companies (except those claiming exemption under Section 11), has a mix of technical and industry-specific updates.

Besides the now-familiar capital gains split and share buyback loss provision, notable additions include:

- A special note for businesses dealing in raw diamonds, as per Rule 10TIA, profits from raw diamond sales must be 4 per cent or more of gross receipts.

- Section-wise TDS reporting, again, makes a return.

- Companies can now also report deductions claimed under Section 24(b), typically interest on housing loans.

ITR-7: For Trusts and Institutions

Finally, the ITR-7, used by charitable trusts, political parties, and other institutions—has also been updated.

The same themes continue:

- Split capital gains reporting based on the July 23, 2024 cutoff.

- Buyback loss claim only if the related dividend is declared as income.

- A new section to report deductions under Section 24(b).

- And yes, more detailed TDS disclosure.

While most of the changes announced in new ITR forms are the government's broader effort to tighten the tax reporting and plug gaps, it is worth noting that nothing seems radically disruptive for an average taxpayer.

That being said, if you have capital gains, particularly those straddling the July 23 date, or if you are impacted by any sector specific provisions such as cruise or diamond businesses, it is best to read the fine print or talk to a tax expert.