Income tax returns for the assessment year 2025–26 are to be filed a little differently because of new guidelines, forms, and an extended date.
The Central Board of Direct Taxes (CBDT) has released updated versions of all seven income tax return forms, making changes particularly in the manner capital gains have to be disclosed. It has also officially extended the deadline for filing ITR from July 31 to September 15, 2025.
CBDT, in a press release, stated, “CBDT has decided to extend the due date of filing of ITRs, which are due for filing by 31st July 2025, to 15th September 2025.” The deadline extension comes as a relief raised by taxpayers and stakeholders and ensures that there is extra time for compliance.
The due date was postponed due to the need for system upgrades in order to support the new forms. While the forms have been published, the e-filing tools are not yet live, so online submission is not yet available.
New ITR Forms and ITR-U Introduced
The CBDT has launched forms ITR-1 to ITR-7 and the verification form ITR-V. On May 19, there has been an introduction of new form ITR-U (Income Tax Updated Return), through which taxpayers can update or file returns for a period of 48 months due to changes in the Finance Act, 2025.
Previously, taxpayers had 24 months to file an updated return. Now, returns for AYs 2021–22 through 2024–25 can be updated. However, ITR-U comes with restrictions: it cannot be used to claim refunds, carry forward losses, or lower previously declared income.
In addition, it cannot be filed when a show-cause notice under Section 148A has been served more than 36 months from the concerned year. However, when the assessing officer concludes under Section 148A(3) that reassessment is not required, ITR-U may still be filed within 48 months.
Significant Change: Reporting Capital Gains
One of the largest changes this year pertains to the reporting of long-term capital gains (LTCG). The exemption limit for LTCG on listed equities and mutual funds has been raised from ₹1 lakh to ₹1.25 lakh. This is intended to benefit retail investors.
With this, taxpayers earning LTCG of up to ₹1.25 lakh and having no capital loss to bring forward can now submit easier forms such as ITR-1 or ITR-4, rather than the more complex ITR-2 or ITR-3.
The updated ITR-1 and ITR-4 now have dedicated columns for reporting exempt LTCG under Section 112A, making the experience less tedious for salaried individuals and small business owners. But if taxpayers have short-term capital gains or wish to carry forward losses, they will continue to file ITR-2 or ITR-3.
After the Budget 2024 introduction of new tax rates on capital gains, the Capital Gains Schedule has also been amended. Taxpayers are now required to declare gains differently for income received prior to and after July 23, 2024, in order to use the appropriate rates.
Buyback Tax Shift to Investors
From October 1, 2024, the companies will no longer pay tax on share buybacks. Instead, investors will have to report the amount received as a deemed dividend under ‘Other Income’ in their ITR. Related capital losses should also be reported separately.
ITR-5 and ITR-6 have also been modified accordingly. ITR-5 will only accept real buyback-based losses, subject to the condition that the dividend is taxed. ITR-6 has new reporting categories for capital gains, cruise income, and diamond trading profits.
MSME Payment Disclosures
Firms and professionals now must report the number of days for realization of payments to Micro, Small, and Medium Enterprises (MSMEs), promoting timely payments and transparency.
Assets and Liabilities Threshold Raised
Threshold for disclosure of personal assets and liabilities in the AL Schedule has been raised from ₹5 million to ₹10 million. Though it gives relief, keeping proper records of assets, debt, and financial transactions during the year is still advised.
Don’t File Too Early, Experts Warn
Although forms have been made available, tax experts suggest that salaried taxpayers should not file their returns until June 15, 2025.
One main reason is Form 16, issued by the employer every year by June 15. It contains salary information, deductions under Sections such as 80C and 80D, and overall taxable income. Panticipating and filing first can result in errors or omissions.
Secondly, e-filing utilities are still not out, which again adds support to the contention that one should wait until mid-June for a less cumbersome and error-free experience of filing.
