ITR 1 (Sahaj) is meant for resident individuals and Hindu Undivided Families (HUFs) with total annual income up to ₹50 lakh from sources like salary, pension, interest, dividends, and rent from one house.
LTCG relief
This year’s Budget raised the tax-exempt limit for long-term capital gains (LTCG) on securities from ₹1 lakh to ₹1.25 lakh. The updated ITR 1 form for FY 2024-25 now allows taxpayers with LTCG income up to ₹1.25 lakh to file using this simpler form. Earlier, they had to use the more complex ITR 2 form even for exempt gains.
ITR 4 (Sugam) is for resident individuals and HUFs using the presumptive taxation scheme. Budget 2024 raised the business turnover limit from ₹2 crore to ₹3 crore, and the professional receipts limit from ₹50 lakh to ₹75 lakh for declaring income under presumptive tax rates (6%, 8% for business; 50% for profession).
The updated ITR 4 form now reflects these higher limits. It also allows those with LTCG income up to ₹1.25 lakh to report it in this form itself.
ITR 2 is for individuals and HUFs with income above ₹50 lakh and capital gains.
ITR 3 is for those with business or professional income.
ITR 5 is for limited liability partnerships (LLPs) and business trusts.
Forms 2, 3, and 5 have all been updated with key changes to reflect new tax rules, especially around capital gains and reporting thresholds.
Also read: After the Budget, updating ITR may cost you more than a reassessment
Capital gains reset
From 23 July 2024, several key changes in capital gains taxation take effect. The holding period for determining whether an investment is long-term or short-term has been redefined. Listed securities, bonds, and mutual funds will now be considered long-term if held for more than one year, while unlisted securities must be held for more than two years to qualify as long-term.
Additionally, the indexation benefit, which allowed inflation-adjusted cost while computing long-term capital gains (LTCG), has been withdrawn for securities.
The tax rates on capital gains have also been revised. For listed securities, the LTCG tax rate has been increased from 10% to 12.5%. In contrast, for unlisted securities, gold, and immovable property, the rate has been reduced from 20% to 12.5%.
For short-term capital gains (STCG) on specified securities, the tax rate has gone up from 15% to 20%. To facilitate accurate reporting, the updated ITR forms 2 and 3 now include separate fields to disclose gains earned before and after these changes. Taxpayers must differentiate between the pre-amendment period of 1 April to 22 July 2024, and the post-amendment period of 23 July 2024, to 31 March 2025.
Also read: Mint Explainer: Can capital gains make you ineligible for a tax rebate?
Starting 1 October 2024, share buyback proceeds will be taxed as deemed dividend income. This income will be taxed at the applicable slab rate of the individual taxpayer. Earlier, such proceeds were either exempt or taxed differently, but under the new rule, they fall under the broader scope of dividend taxation, closing a previously existing loophole.
Another significant change is in the mandatory disclosure of the Assets and Liabilities (AL) Schedule in the ITR. The income threshold triggering the requirement to file the AL schedule has been increased from ₹50 lakh to ₹1 crore. This means only those with a total annual income exceeding ₹1 crore will now need to report their assets and liabilities in the tax return.
Tax regime choice
The new ITR forms also require more detailed disclosures related to the choice of personal tax regime. Taxpayers who opt out of the default new regime must file Form 10-IEA. If this form is filed after the due date, they must now specify the reason for the delay in a new column introduced in the form. This additional step ensures that the option to continue under the old regime is not denied due to technical delays, provided the taxpayer has a valid explanation.
Further, taxpayers must now provide section-wise and subsection-wise breakdowns of deduction claims under Chapter VI-A, such as under section 80C for investments in instruments like PPF, ELSS, etc. The forms also call for precise details of TDS claims, including the applicable TDS section, subsection, and the PAN or TAN of the deductor. These changes ensure that credit for TDS is claimed correctly and transparently.
Also read: ₹1 crore & above till March 31″>Filing ITR: Over 3.24 lakh individuals filed tax returns for income of ₹1 crore & above till March 31
Overall, the newly notified ITR forms for financial year 2024-25 reflect a move toward greater transparency and data precision. They aim to capture detailed information on income, capital gains, deductions, and tax credits. CBDT appears to be laying the groundwork for smarter compliance and enforcement using artificial intelligence and advanced data analytics.
Mayank Mohanka is founder, TaxAaram India, and a partner at S.M. Mohanka & Associates.
