The Central Board of Direct Taxes (CBDT) has released revised ITR forms 1-5 for the financial year 2024-25. These forms reflect changes made to the budget 2024, including an increase in the capital gains threshold and presumptive tax limits. Let’s explore the key changes.
ITR 1 (Sahaj)
For resident individuals and Hindu Undivided Families (HUF) with annual income up to ₹50 lakhs from salary, pension, interest, dividend and single house rent.
Long-term capital gains (LTCG) relief: The budget hike increases the tax-exempt limit for LTCG on securities from ₹1 lakh to ₹1.25 lakh. The updated ITR now allows these gains to be reported on a simple form, whereas previously even exempt gains required filers to use the more detailed ITR 2.
ITR 4 (Sugam)
The form covers resident individuals and HUF holders. The business turnover cap has increased from ₹2 crore to ₹3 crore, and professional receipts have risen from ₹50 lakhs to ₹75 lakhs. Sugam also allows reporting LTCG up to ₹1.25 lakhs.
ITR 2 – For individuals and HUF with income above ₹50 lakhs for any capital gains.
ITR 3 – Caters to those with business or professional income
ITR 5 – For limited liability partnership and business trusts
Capital gains reset: From 23 July 2024, several key changes in capital gain taxation take effect. The holding period for determining whether an investment is long term or short term has been redefined.
Long term capital gains
| Security Type | Long-Term Holding Period | Previous Tax
Rate |
Revised Tax Rate |
| Listed Securities, Bonds & Mutual Funds | More than 1 year | 10% | 12.5% |
| Unlisted Securities | More than 2 years | 20% | 12.5% |
Short term capital gains
For short term capital gains on specified securities the rate is up from 15% to 20%.
To facilitate accurate reporting, the revised ITR 2 and ITR 3 now include separate fields to report gains before and after this change. Tax payers must distinguish gains in the pre amendment window (1st April- 22 July 2024) from those in the post amendment period (23 July 2024 – 31 March 2025)
Buyback change
Effective from October 1, 2024, shares buyback proceeds will be subject to taxation as deemed dividend income. This income will be levied at the applicable slab rate of the individual taxpayer. Previously, such proceeds were either exempt or taxed differently; however, under the new regulations, they fall within the broader scope of dividend taxation, thereby closing a previously existing loophole.
Asset and Liabilities (AL) Schedule
The income threshold for the requirement to file the AL schedule has been elevated from ₹50 lakhs to ₹1 crore. Consequently, only those with a total annual income exceeding ₹1 crore will now be obligated to report their assets and liabilities in their tax return.
Tax Regime Choice
The newly introduced ITR form necessitates more comprehensive disclosures pertaining to the selection of personal tax regime. Taxpayers who choose to opt out of the default new regime are required to submit Form 10-IEA. If this form is completed after the due date, taxpayers must now specify the reason for the delay in a newly introduced column. This additional step ensures that the option to continue under the previous regime is not denied due to technical delays, provided the taxpayer provides a valid explanation.
Other important changes
- Deduction Claim Breakdown: Taxpayers must provide section and subsection wise breakdowns for deduction claims under chapter VI A, such as PPF, ELSS etc.
- TDS Claim Details: Taxpayers must provide precise details of TDS claims, including the applicable TDS section, subsection, and PAN or TAN of the deductor.
Conclusion
The newly notified ITR form for the financial year 2025 demonstrates a significant step towards transparency and data precision. By capturing detailed information on income, capital gains deductions, and tax credits, the form aims to enhance compliance and enforcement. CBDT appears to be pioneering the use of artificial intelligence and advanced data analytics to streamline these processes.