The Income Tax Department has activated the online and Excel utilities for filing Income Tax Returns (ITR-1, ITR-2, and ITR-4) for Assessment Year (AY) 2026-27, covering the Financial Year (FY) 2025-26. This year's tax season introduces several crucial modifications that taxpayers, including landlords, investors, salaried individuals, and small business owners, must be aware of to ensure accurate compliance.
These changes range from new disclosure requirements to simplified reporting procedures, impacting how various types of income and deductions are declared. Understanding these updates is vital to avoid processing delays or discrepancies.
Key ITR Changes for AY 2026-27
1. New Field for Unrealised Rent
For landlords, a significant addition has been made to ITR-1 and ITR-4 forms: a dedicated field for "The amount of rent which cannot be realized." This new provision improves transparency for rental income reporting, allowing taxpayers to clearly disclose rent that could not be recovered from tenants during the financial year. Previously, reporting such amounts was less straightforward.
2. Simplified Reporting for Two House Properties
A major relief comes for individuals owning two residential properties. Taxpayers can now report income from up to two house properties using the simpler ITR-1 and ITR-4 forms, provided they meet other eligibility criteria. This change is particularly beneficial for salaried individuals who own both a self-occupied home and an additional residential property, as it removes the previous requirement to switch to more complex return forms.
3. Streamlined Old Capital Gains Reporting
Capital gains reporting has been simplified in the latest ITR forms. The requirement to separately report capital gains from transactions executed before and after July 23, 2024, has been removed. This simplifies the process for investors, as different tax rates that applied during those distinct periods are no longer relevant for FY 2025-26 reporting. Specific fields related to these older rates for listed equity shares (15% for STCG and 10% for LTCG) have been eliminated.
4. Mandatory Disclosures for Presumptive Taxpayers (ITR-4)
Taxpayers opting for the presumptive taxation scheme under ITR-4 now face new mandatory disclosure requirements. They must provide details of their investments and bank balances. This measure aims to enhance transparency, offering tax authorities a clearer insight into the financial standing of those utilizing the presumptive tax regime. It is crucial for these taxpayers to maintain updated financial records.
5. Section 89A Relief Shifted
The option to claim relief under Section 89A for income accrued in specified foreign retirement benefit accounts has been removed from ITR-1 and ITR-4. This relief, which helps eligible Indian residents avoid double taxation, can now only be claimed through ITR-2 and ITR-3. This adjustment simplifies the ITR-1 and ITR-4 forms while ensuring that individuals with more complex foreign income scenarios use the appropriate, comprehensive return forms.
6. Enhanced Reporting for 80G Donations
Individuals claiming deductions for charitable donations under Section 80G must now furnish additional information. The new requirements include providing the Transaction Reference Number and the IFSC Code of the bank used for the donation. These enhanced disclosure norms are designed to improve verification processes and minimize incorrect deduction claims, urging taxpayers to keep all payment receipts and banking records.
7. Stricter Rules for Political Party Donations
Donations made to political parties, for which deductions are claimed, also come under stricter reporting. Taxpayers must now disclose the Name of the Political Party and its PAN. This change aims to bolster transparency and create more robust audit trails for such deductions.
8. Identification of Representative Assessee Filings
All ITR forms now include a new reporting field to indicate whether the return is being filed by a representative assessee. This applies to situations where a return is filed on behalf of another taxpayer, such as minors, deceased persons, non-residents, or individuals unable to file themselves. This addition will improve the identification and tracking of such filings.
What Taxpayers Should Do
With the ITR utilities now live, taxpayers are advised to carefully review the revised forms and disclosure requirements. Landlords, investors, those under presumptive taxation, and individuals claiming various deductions should pay particular attention to the changes relevant to their specific financial situations. Filing with complete documentation and verifying eligibility under the correct ITR form are essential steps to prevent notices, processing delays, or mismatches in deduction claims.