AY 2025-26 ITR Forms Out: Easier Capital Gains Reporting for Taxpayers

India's Income Tax Department officially released all seven income tax return forms for the Assessment Year (AY) 2025–26, instituting significant changes to streamline capital gain reporting and improve compliance.

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Key Highlights

Seven ITR forms notified: The Central Board of Direct Taxes (CBDT) has notified all seven ITR forms, with the ITR-1 and ITR-4 being released on April 29 and the ITR-7 for trusts and charitable organizations notified on May 11.

Simplified reporting of capital gains: One of the significant changes is considered in and through different ITR forms in splitting the reporting of capital gains, whether on account of the transaction date. Accordingly, the Union Budget 2024 has made it necessary to report a capital gain separately for transactions entered into before and after July 23, 2024.

Eligibility has been increased for ITR-1 and ITR-4: ITR-1 (Sahaj) and ITR-4 (Sugam) eligibility has been enlarged. Taxpayers with long-term capital gains from equity and equity-oriented mutual funds up to ₹1.25 lakh may avail of these simpler forms, where there is no carry-forward of capital loss. 

Revised Capital Gains Tax Rates: From July 23, 2024, the tax on LTCG shall be increased from 10% to 12.5% and STCG from 15% to 20%. The taxpayers shall have to report gains separately about sales effected before and after this date to charge the tax at the proper rate.

Introduction of Schedule VDA: ITR-3 has a new Schedule VDA (Virtual Digital Assets) added for reporting income arising from cryptocurrencies and NFTs in accordance with Section 115BBH, which levies a 30% tax.

Improved Reporting in ITR-2: From now on, there is a dedicated section for reporting capital gains in the ITR-2 form, and the facility of reporting capital losses arising on account of share buybacks has become available from October 1, 2024. The reporting assets and liabilities limit has also increased to ₹1 crore.

Implications for Taxpayers

These changes seek to make tax filing more efficient, particularly for small investors and salaried individuals with small equity gains. The bifurcation of reporting capital gains ensures proper imposition of tax rate applicability, and the inclusion of virtual digital assets accounts for the increased usage of cryptocurrencies and NFTs.

To comply with the new requirements, it is recommended that taxpayers read the new forms carefully and seek the assistance of tax professionals if necessary.