ITR 1–4 Updates for FY 2025-26 (AY 2026-27): Key Changes for Individuals & HUFs

The Central Board of Direct Taxes (CBDT) has rolled out significant revisions to the Income Tax Return (ITR) forms for AY 2026-27. These updates go beyond cosmetic tweaks—they introduce deeper compliance requirements, broaden disclosure norms, and align with evolving tax laws. Let’s break down the changes in ITR 1, ITR 2, ITR 3, and ITR 4, with clear explanations to help taxpayers and professionals navigate the new landscape.

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🏠 ITR 1 (Sahaj)

Designed for salaried individuals and pensioners, ITR 1 has traditionally been the simplest form. For FY 2025-26, however, it has been expanded:

· Secondary Contact Information Taxpayers must now provide a secondary address, mobile number, and email ID. This ensures better communication and helps track multiple residences.

· Representative Assessee Disclosure If the return is filed by a representative (e.g., for minors, deceased, or incapacitated taxpayers), their details—name, email, and phone number—must be reported.

· Two House Properties Allowed Unlike earlier years, taxpayers can now declare up to two house properties in ITR 1.

· Detailed Property Reporting Full disclosure is required, including property address, tenant details (PAN/Aadhaar if TDS is claimed), housing loan interest, and co-ownership share.

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📈 ITR 2

ITR 2 applies to individuals and HUFs without business or professional income. Key changes include:

· Capital Gains Schedule Simplified Outdated questions and tax rates (like 111A–15%, 112A–10%, LTCG at 10%/20%) have been removed, leaving only current applicable rates.

· New Section for Non-Residents Section 115A(1)(a)(iiaa) introduced:

o Covers specific interest income under section 194LC(1).

o Tax rate fixed at 9%.

· Enhanced Deduction Reporting

o 80G (Donations): Transaction reference numbers and IFSC codes must be provided.

o 80GGC (Political Contributions): Name and PAN of the political party must be disclosed.

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💼 ITR 3

For individuals and HUFs with business or professional income, ITR 3 has seen the most extensive changes:

· MSME Act Compliance Interest disallowable under section 23 of the MSME Act must be reported separately, ensuring adherence to payment timelines.

· Business/Profession Updates

o Section 44BBD added for presumptive taxation of foreign companies providing services related to mineral oil exploration (10% of gross receipts).

· Tax Audit Simplification Questions on audit applicability have been streamlined.

· F&O Transactions Turnover and income from Futures & Options must be disclosed separately.

· Profit & Loss Account Enhancements Presumptive income under sections 44B, 44BB, 44BBA, 44BBC, 44BBD must be shown distinctly. Income credited but not taxable must also be reported.

· Expanded Deductions More disability categories under 80DD & 80U; Sikkim added under 80IE for tax holiday benefits.

· Income from Firms Interest and remuneration received from firms must be separately disclosed.

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📊 ITR 4 (Sugam)

ITR 4, meant for presumptive taxpayers under sections 44AD, 44ADA, or 44AE, has been refined:

· Financial Particulars Investments must now be reported separately in the financial details section.

· Tax Regime Switching Questions updated to capture cases where taxpayers opt in and out of the new regime (via Form 10IEA) multiple times.

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✨ Key Highlights

· ITR 1: Two house properties allowed, with detailed tenant and loan disclosures.

· ITR 2: Simplified capital gains, new non-resident income section, stricter donation reporting.

· ITR 3: MSME Act compliance, presumptive taxation for foreign service providers, F&O segregation, expanded deductions.

· ITR 4: Separate investment reporting and refined regime-switching disclosures.

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📌 Conclusion

The revised ITR forms for AY 2026-27 emphasize transparency, accountability, and stricter compliance. Taxpayers must prepare for more detailed disclosures, while professionals need to exercise greater diligence in verifying documents and ensuring accuracy. Even the “simpler” forms now demand comprehensive reporting, underscoring the government’s push toward a more robust tax ecosystem.