New ITR Forms 1 and 4 notified for FY 2024-2025. Check key changes, who can file

The Income Tax Department has released ITR forms 1 and 4 for the assessment year 2025–26. These forms are meant for individuals, Hindu Undivided Families (HUFs), and firms (except LLPs) with total income of up to Rs 50 lakh. Taxpayers can start filing returns for the income earned between April 1, 2024 and March 31, 2025.

The last date to file an income tax return for the financial year 2024–25 is July 31, 2025, while late filing can attract a penalty.

WHAT ARE THE KEY CHANGES?

One key change this year is that now salaried taxpayers can report long-term capital gains of up to Rs 1.25 lakh arising on listed shares and equity mutual funds under Section 112A in ITR-1.

Previously, these taxpayers were required to file the more complicated ITR-2 form. This change simplifies the process and makes it easier for small investors.

According to Samir Kanabar, Tax Partner, EY India, “This move reflects a clear shift towards enhancing taxpayer services by allowing individual taxpayers to file simplified tax returns where they have long-term capital gains upto Rs 1.25 lacs. Therefore, it removes the burden of navigating more complex forms.”

“The change is expected to encourage greater voluntary compliance, reduce filing-related stress, and make the system more inclusive and user-friendly for small taxpayers. We hope that this is just the beginning towards better compliance and simplification and expect more to come,” he added.

WHO CAN FILE ITR-1?

ITR-1, or Sahaj, is for resident individuals who have an overall income of not more than Rs 50 lakh a year and the income is from a salary or pension, single house property, or income like interest from bank deposits or fixed deposits.

It also covers those who have a small amount of agricultural income, up to Rs 5,000. It’s one of the simplest forms to file and is best suited for individuals with basic income sources within India.

However, ITR-1 cannot be used by individuals who hold the position of a director in a company or those who have invested in unlisted equity shares.

It is also not meant for people who have income from sources outside India or own assets abroad. If you have deferred tax payments on employee stock options (ESOPs), you will need to choose a different form. Similarly, individuals who have had tax deducted under Section 194N, which applies to large cash withdrawals, are not eligible to file using ITR-1.

WHO CAN FILE ITR-4?

ITR-4, also known as Sugam, can be used by resident individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) whose total income does not exceed Rs 50 lakh in a financial year.

It is suitable for those who earn income from a business or profession that falls under the presumptive taxation schemes of Sections 44AD, 44ADA, or 44AE. This form can also be used by taxpayers who have long-term capital gains from the sale of listed shares or equity mutual funds under Section 112A, provided the gains do not exceed Rs 1.25 lakh. It is ideal for small business owners, freelancers, professionals, or transporters with straightforward income structures.

ITR-4 cannot be used by those who are company directors, hold unlisted equity shares, have foreign income or assets, or earn over Rs 5,000 from agriculture.