Details on rent, home loan, TDS: ITR forms seek more disclosures this year
Summary
Taxpayers should try to file their returns much in advance so that they get enough time to assess the ITR form applicable and file an error-free return, given the changes introduced this year.
NEW DELHI : This year, taxpayers will have to make more disclosures even as compliance has been eased in the new Income Tax Return (ITR) forms.
From Sahaj-1 to the more complex ITR-2 and ITR-3, all the forms released by the Central Board of Direct Taxes (CBDT) for the assessment year 2025-26 have seen major changes. They require more disclosures on tax-saving investments, house rent allowance (HRA), and tax deducted at source (TDS) on incomes other than salary. At the same time, they have eased compliance on assets and liabilities reporting, and allow those with long-term capital gains (LTCG) of up to ₹1.25 lakh from stocks and equity mutual funds to opt for the simpler ITR-1.
“Major changes in the ITR forms have been made to incorporate various aspects of reporting and disclosures arising from the amendments made in the Finance (No. 2) Act, 2024, enhancing the scope of Form ITR-1/ ITR-4," said Poorva Prakash, partner, Deloitte India.
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The due date to file the ITR is 31 July. However, taxpayers should try to file their returns in advance so that they get enough time to assess the ITR form applicable and file an error-free return, given the changes introduced this year.
Mint gives a breakdown of the major changes applicable to the majority of taxpayers
LTCG from listed equity up to ₹1.25 lakh
Applicable to: ITR-1, ITR-4
An individual who has LTCG up to ₹1.25 lakh from equity funds and stocks under Section 112A and does not have any brought-forward losses from the previous year or loss to be carried forward to subsequent years is now eligible to file ITR-1 or ITR-4. Earlier, LTCG under Section 112A, along with other capital gains, had to be reported in the complex ITR-2/ITR-3, which requires detailed disclosures. In ITR-1 and ITR-4, only the total sales consideration, the total cost of acquisition, and LTCG need to be filled in the ITR.
The limit of ₹1.25 lakh will apply after setting off losses made in the same year, said Sonu Iyer, partner and national leader, people advisory services, EY India. “To calculate net gains, only losses set off under Section 112A is to be considered, and no other loss. Say, if the taxpayer has LTCG of ₹2 lakh and LTCL of ₹1 lakh, both under Section 112A, he may file ITR-1 or 4, subject to other conditions being fulfilled."
This condition applies only if a taxpayer solely has LTCG under ₹1.25 lakh from assets under Section 112A–listed stocks and equity mutual funds. “Where there is LTCG from other assets, short-term gains, capital losses or aggregate LTCG exceeds ₹1.25 lakh, taxpayers cannot opt for ITR-1 and will need to file the return in ITR-2 or ITR-3 form," said Prakash.
Detailed disclosures of 80C, HRA, loans
Applicable to: ITR-1, ITR-2, ITR-3, ITR-4
ITR forms will now have new fields to disclose details related to deductions claimed on various tax-saving investments and expenditures (Chapter VI-A Section 80C, 80D, 80CCD, 80E,etc). Most of these deductions are available to taxpayers in the old tax regime.
“The ITR utilities may now include drop-down menus for selecting the specific clauses along with the relevant details–for e.g. contribution to PPF, contribution towards life insurance premium, investments towards tax saving fixed deposits and mutual funds, age, relationship, disability status, etc. under which deductions are being claimed under Chapter VI-A," said SanjoliMaheshwari, executive director, Nangia Andersen India.
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Those claiming deduction for interest on housing or education loan will also need to provide more details in their ITR.
“Detailed disclosure with regard to various exemptions, such as house rent allowance, leave travel allowance and other allowances claimed under Section10, will also need to be given," Maheshwari said. “It would be important for taxpayers to maintain robust documentation and correctly disclose the same as asked for in the ITR forms."
Report capital gains separately for transactions before and after 23 July 2024
Applicable to: ITR-1, ITR-2
The Finance Act 2024 brought about several changes in tax rates and indexation rules, which came into force from 23 July 2024. Earlier, the LTCG tax rate on equity was 10% and other assets were taxed at 20%. This rate was changed to a uniform 12.5% for all assets. For real estate properties acquired before 23 July 2024, taxpayers have been given the option to choose between 12.5% without indexation or 20% with indexation.
The ITR forms have been changed to report capital gains made before and after 23 July 2024.
Iyer said due to the split, calculating and reporting capital gains may be more complex, not just for immovable property but for any other capital asset. “The rate of tax, period of holding and indexation benefit, will be required to be calculated separately for each capital asset before 23 July 2024 and on or after 23 July 2024."
The split will also apply to unutilised amounts withdrawn from the capital gain account scheme (CGAS), where taxpayers park capital gains they intend to reinvest in real estate property to benefit under Section 54 and Section 54F. “In this regard, a separate column has been provided in the new ITR form to disclose whether the withdrawal was before or after July 23, 2024," said Maheshwari.
The department has not clarified which tax rate will be applicable on withdrawals after 23 July 2024, but the property was transferred before the said date. “The e-filing utility or the instructions to ITR may clarify and confirm the rate of tax applicable in such cases," Iyer said.
Disclosure of TDS on income other than salary
Applicable to: ITR-1, ITR-2, ITR-3 and ITR-4
The scope of TDS Section in the ITR forms has been widened to include specific columns where the different incomes on which tax at source has been deducted will be reported. “TDS is deducted under various sections like Salary (Section 192), Dividends (194), Interest (Section 194A), etc. In Schedule TDS, there are two separate schedules: (a) Details of TDS from Salary and (b) Details of TDS on Income. The field TDS Section code has been added in the Details of TDS on Income," said Iyer.
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The TDS Section code to be reported in Schedule TDS may be pre-filled. So, the taxpayers will need to carefully review and map the corresponding income under the respective heads of income with the TDS certificates and Form 26AS.
Maheshwari said this change will aid in improving the accuracy of TDS claims made by the taxpayers in the income tax returns. “Taxpayers may have to reconcile the same as reflected in Form 26AS/AIS (Annual Information Statement), which will help at the time of processing the ITR."
Disclose assets and liabilities if income exceeds ₹1 crore
Applicable to: ITR-2, ITR-3
This year onwards, the income threshold for individuals who have to report details of their assets and liabilities in Schedule AL has been increased from ₹50 lakh to ₹1 crore.
“The details include reporting of immovable property, financial assets like bank accounts (including deposits), shares and securities, insurance policies, jewellery, bullion, archaeological collections, drawings, paintings, sculpture or any work of art, vehicles, yachts, boats and aircrafts, loans and advances given, cash in hand and any loans (liabilities) in relation to the above assets," said Iyer.
