ITR Filing 2025: What Last-Minute Filers Must Keep In Mind

As the extended income-tax filing deadline of September 15 approaches, many last-minute filers are rushing to gather documents and avoid penalties. While the basic method of filing income tax returns (ITRs) stays the same, there are a few changes you should note when filing your returns for financial year 2024-25

(FY25) or assessment year 2025-26 (AY26). These include changes in ITR forms, revised Form 16 disclosures, and expanded reporting requirements for crypto assets and foreign income. For instance, deduction disclosures under Sections, such as 80C and 80D, have become more detailed. Also, the tax deducted at source (TDS) schedule has been updated and requires you to mention the exact section under which tax was deducted. It’s important for taxpayers to pay closer attention this year.

Changes in ITR forms

ITR-1 and ITR-4: ITR-1 is used by salaried individuals earning up to Rs 50 lakh, whereas ITR-4 is intended for professionals and small company owners, resident individuals, Hindu Undivided Families (HUFs), and firms (other than limited liability partnerships or LLPs) with business or individuals with professional income under the presumptive taxation scheme, if their total income does not exceed Rs 50 lakh.

Both forms now allow reporting of long-term capital gains (LTCG) up to Rs 1.25 lakh, if there are no carry-forward capital losses.

ITR-2: This is meant for individuals, including salaried taxpayers and HUFs who have income from capital gains above Rs 1.25 lakh, who own multiple properties, or have foreign assets, but no income from business or profession.

For AY26, capital gains must be split between transactions before and after July 23, 2024. Share buyback losses can be claimed only for transactions on or after October 1, 2024, if related dividend income is reported under “other sources”. The threshold for reporting assets and liabilities under Schedule AL has been raised to Rs 1 crore for taxpayers with income from salary, capital gains, or other sources, but no business or professional income.

Taxpayers filing ITR-2 can claim indexation benefit on long-term capital gains from sale of land or buildings only if the asset was acquired before July 23, 2024.

A new Schedule VDA (virtual digital assets) requires reporting of each crypto or non-fungible token (NFT) transaction separately, including date, cost, sale value, and gain or loss made on the digital asset.

ITR-3: This is meant for individuals and HUFs having income from business or profession (not under presumptive taxation), as well as income from salary, capital gains, house property, or other sources.

For AY26, the same rules as ITR-2 apply on capital gains split, buyback loss claims, and VDA transaction reporting.

In ITR-3 as well, the indexation benefit on LTCG from land or building sales is applicable only for assets acquired before July 23, 2024. The threshold for disclosing assets and liabilities under Schedule AL has been increased to Rs crore for those having income from business or profession.

A new section, Section 44BBC, has been introduced under the Income-tax Act, 1961 for non-resident operators of cruise ships.

What’s Unchanged?

a. New tax regime (NTR) remains the default tax regime, but you can opt out of it, too. NTR offers lower slab rates, but has fewer exemptions and deductions. If you are a salaried individual, you can opt out of NTR and shift to the old tax regime (OTR) without any extra paperwork. However, if you have business or professional income, you will need to submit Form 10-IEA before the due date to revert to NTR.

b. The Section 87A rebate remains unchanged this year, too. Under the new regime, individuals with taxable income up to Rs 7 lakh (after standard deduction) are eligible for a rebate of up to Rs 25,000, resulting in nil tax liability. Under the old tax regime, the rebate continues to apply for taxable income up to Rs 5 lakh.

Don’t Forget to Report Crypto Investments

A new Schedule VDA has been introduced in ITR‑2 and ITR‑3 for AY26. Taxpayers must now report each crypto or NFT transaction individually, including details such as the date of acquisition and sale, cost of acquisition, sale value, and resulting gain or loss, even if there is no profit. These transactions continue to be taxed at 30 per cent under Section 115BBH.

Says Ashish Niraj, partner, ASN & Company, a CA firm: “Even if your VDA transaction amount is as little as Rs 1, you cannot use ITR‑1 or ITR‑4. Instead, you must fill out the new Schedule VDA in ITR‑2 or ITR‑3, reporting each transaction separately. Reporting it under ‘income from other sources’ could lead to a defective return notice from the income tax department.”

Foreign Asset Reporting Remains Essential

Schedule FA (foreign assets) requires resident taxpayers to disclose details of their foreign assets and income, regardless of taxability in India.

For AY26, the reporting threshold for foreign assets under this schedule has been raised from Rs 10 lakh to Rs 20 lakh, while the asset/liability reporting threshold in ITR‑2 has also been increased to Rs 1 crore.

Naveen Wadhwa, vice president, research and advisory, Taxmann, a tax advisory firm, says: “A recent ruling by the Mumbai Tribunal in the case of Shobha Harish Thawani vs Joint CIT upheld penalties of Rs 10 lakh per assessment year for non-disclosure. This shows that missing or misreporting such details can lead not only to heavy fines, but, in some cases, can also lead to prosecution under the Black Money Act.”

Note Updates in Form 16

Form 16, the TDS certificate provided by employers to salaried individuals, has undergone modifications for AY26, due to changes introduced under NTR.

One, under NTR, the standard deduction under the new tax system has been increased from Rs 50,000 to Rs 75,000. This is reflected in Form 16. Two, NTR now allows a higher deduction on the employer’s contribution to the National Pension System (NPS) under Section 80CCD (2) of the Income-tax Act, 1961, and this will appear in the revised Form 16 for the relevant financial year. Three, if the employee submits Form 12BBA, Form 16 will also show tax deducted on other income sources (such as interest or rent) and tax collected at source (TCS) on specified high-value spends. Without Form 12BBA, only salary-related TDS is reflected.

Also, Form 16 has been updated for better clarity and reporting. Part B of Form 16 now clearly indicates whether the employee has opted for OTR. A new column (388A) has also been introduced to capture TDS and TCS figures in greater detail, ensuring improved alignment with Form 26AS.

Be Careful About LTCG in Equities

When it comes to LTCG in equities in the financial year, which means profits from selling listed shares or equity mutual funds held for over a year, there’s an important update to keep in mind.

From AY26, the exemption limit has been raised to Rs 1.25 lakh, and gains beyond this will now be taxed at 12.5 per cent.

Wadhwa of Taxmann advises taxpayers to cross-check their total LTCG with broker statements and the annual information statement (AIS) before filing their ITRs. “If the gain exceeds Rs 1.25 lakh, it must be reported in ITR-2 or ITR-3 to avoid notices from the Income Tax Department for defective return. Also, keep in mind this exemption applies only to Indian listed shares. Gains from foreign listed stocks are fully taxable at 12.5 per cent and should be declared correctly.”

manas.malhotra@outlookindia.com

Quick Tips For Smooth Last-Minute Filing

Choose the correct ITR form based on your income sources.

Keep all documents handy: Permanent Account Number (PAN), Aadhaar, Form 16, bank statements, and investment proofs.

Recheck pre-filled data and reported income to spot any missing details.

Avoid waiting until the deadline—aim to finish slightly in advance.

Confirm your bank account details to ensure faster credit of refund.

e-verify your return right after filing to complete the process.

Common Mistakes To Avoid

Don’t miss out reporting interest earned from fixed deposits or savings accounts, or capital gains from the sale of shares and mutual funds.

Don’t forget to include income from a previous employer, or misclassify income under the wrong head.

Carefully reconcile income details with figures reflected in Form 26AS, Annual Information Statement (AIS) or Taxpayer Information Summary (TIS), as mismatches can cause delays. Form 26AS is your tax credit statement, summarising tax deducted at source (TDS), tax collected at source (TCS) and certain high-value transactions. AIS goes a step further, and captures details, such as interest earned on savings account, and dividends and capital gains as a simplified summary.

Make sure you mention any property sales details too, as it often appears in AIS. “It is important to reconcile all income shown in AIS and Form 26AS so your return matches what the tax department has on record; missing these details could result in a notice,” says Ashish Niraj, partner, ASN & Co., a CA firm.

Don’t forget to disclose your foreign income or investments in cryptocurrencies and other digital assets.

Ensure there are no high-value transaction that is not in sync with the declared income.

Cash withdrawals or deposits exceeding Rs 10 lakh from a savings account and Rs 50 lakh from a current account can raise suspicion if it’s not in sync with the declared income.

Enter correct information such as PAN, bank account numbers or contact details. Never use PAN that is not linked to your Aadhaar.