Recent key updates in Income tax in filing tax return for the A.Y 2024-25

Recent key updates in Income tax in filing tax return for the A.Y 2024-25

For the Financial Year 2024-25 (Assessment Year 2025-26), the Income Tax Department has introduced several updates to the ITR forms, aiming to simplify filing for many taxpayers while also requiring more detailed disclosures in specific areas.

Here are the key changes and updates to be aware of:

1. Key Changes Across ITR Forms (especially ITR-1 and ITR-4):

• Relaxed Eligibility for ITR-1 and ITR-4 (Capital Gains): This is a significant change. Previously, individuals with any capital gains had to file more complex forms like ITR-2 or ITR-3. Now, if you have long-term capital gains (LTCG) up to ₹1.25 lakh from listed equity shares and mutual funds, you can use the simplified ITR-1 (for salaried individuals) or ITR-4 (for presumptive taxation). This simplifies filing for many small investors.
• Mandatory TDS Section Details: If you have income (other than salary) from which Tax Deducted at Source (TDS) has been made, you will now need to specify the exact TDS section code (e.g., 194J, 194C) when claiming tax credit. This applies to ITR-1, ITR-2, ITR-3, and ITR-4.
• Detailed Disclosure for Opting Out of New Tax Regime (ITR-4): For business owners who switch from the new to the old tax regime, the ITR-4 now requires more detailed disclosures, including past filings of Form 10-IEA and confirmation of their intent to continue opting out.
• Aadhaar Enrolment ID No Longer Accepted: You can no longer use your Aadhaar Enrolment ID for PAN applications or ITR filings. An actual Aadhaar number is now mandatory.
• Asset and Liability Reporting Threshold Increased (ITR-2 & ITR-3): The requirement to disclose assets and liabilities in Schedule AL now applies only if your gross total income exceeds ₹1 crore, up from the previous limit of ₹50 lakh.

1. Specific Updates in Other Forms:

• ITR-2 and ITR-3 Updates for Capital Gains:
  • New Capital Gains Rules (effective July 23, 2024): The forms now require you to report capital gains by splitting them into two periods: before and after July 23, 2024. Different tax calculations and reporting formats will apply based on this date. For instance, LTCG on listed equities/mutual funds earned before this date will attract 10% tax, while those after will be 12.5%. Indexation benefits for long-term property gains may also vary based on this date.
  • Separate Reporting for Gains on Unlisted Bonds/Debentures: If unlisted debentures and bonds are redeemed or sold on or after July 23, 2024, the gains will be treated as short-term, regardless of the holding period, and taxed at slab rates. This needs separate reporting in ITR-2, ITR-3, or ITR-4.
  • Buyback Proceeds as Deemed Dividends (from Oct 1, 2024): Proceeds from buybacks by domestic listed companies will now be treated as deemed dividends in the shareholder’s hands. ITR-2, ITR-3, and ITR-4 have been updated to reflect this, requiring the buyback amount under “Income from Other Sources” and zero sale consideration under capital gains.
• Disability Deduction Requires Certificate Acknowledgement (ITR-2 & ITR-3): For deductions under Section 80DD or 80U, taxpayers must now provide the acknowledgement number of the disability certificate in addition to Form 10-IA.

III. Important Dates for AY 2025-26 (FY 2024-25):

• ITR Filing Due Date (Non-Audit Cases): The deadline has been extended from July 31, 2025, to September 15, 2025. This extension was granted to accommodate the structural and technical modifications in the ITR forms and the late release of some utilities.
• Businesses Subject to Audit: The due date remains October 31, 2025.
• Businesses Involved in International/Specified Domestic Transactions: The due date remains November 30, 2025.
• Belated or Revised Returns: The last date to file a belated or revised return is December 31, 2025.

1. General Points:

• New Tax Regime is Default: For AY 2025-26, the new tax regime remains the default. If a taxpayer wishes to opt for the old tax regime to claim various deductions and exemptions (like HRA, Section 80C, 80D, etc.), they must explicitly select this option in their ITR form. For businesses and professionals, filing Form 10-IEA is required to opt out of the new regime.
• Utilities Release: The Income Tax Department has progressively released the Excel-based and online utilities for ITR-1, ITR-2, ITR-3, and ITR-4. It’s advisable to use the latest versions available on the e-filing portal.
• Pre-filled Data: The e-filing portal will continue to provide pre-filled data based on your Form 26AS, Annual Information Statement (AIS), and Taxpayer Information Summary (TIS). It is crucial to verify this pre-filled data with your records (Form 16, bank statements, investment statements, etc.) before submitting your return.

These updates aim to streamline the filing process in specific areas, especially concerning capital gains. It’s crucial for taxpayers and tax professionals to be aware of these changes to ensure accurate and timely compliance.