The Income Tax Department has released the updated Income Tax Return (ITR) forms for Assessment Year (AY) 2026-27 (Financial Year 2025-26), incorporating several important changes aimed at simplifying compliance, improving transparency, and strengthening data validation mechanisms. Many of these revisions arise from proposals introduced in the Union Budget 2025 and are expected to impact salaried individuals, professionals, business owners, and other taxpayers.
A clear understanding of these modifications is essential to ensure accurate return filing and avoid processing delays, notices, or mismatches.
One of the most significant changes for AY 2026-27 is the restructuring of income tax slabs under the New Tax Regime.
Under the revised framework:
The revised slab structure is designed to provide additional relief to individual taxpayers and further encourage migration towards the New Tax Regime.
To complement the revised tax slabs, the Government has substantially enhanced the rebate available under Section 87A.
Key change:
This enhancement can potentially eliminate tax liability for eligible taxpayers within the prescribed income threshold, resulting in substantial tax savings.
The scope of simplified return forms has been expanded.
Earlier, taxpayers with income from only one house property could file ITR-1 or ITR-4. From AY 2026-27, individuals having income from up to two house properties can also use these forms, subject to fulfillment of other eligibility conditions.
This change will benefit a large number of salaried individuals and small taxpayers.
The revised return forms now contain a dedicated field for reporting unrealised rent.
Taxpayers can specifically disclose:
“Amount of rent which cannot be realized”
This separate reporting mechanism improves accuracy in computing income from house property and provides greater clarity during assessment.
To strengthen data matching and verification processes, tenant-related details must now be disclosed in specified situations.
Where applicable:
These disclosures were not mandatory in earlier versions of the return forms.
A taxpayer-friendly amendment has been introduced for individuals holding retirement benefit accounts outside India.
For AY 2026-27:
This reduces compliance burden for eligible taxpayers.
Earlier, taxpayers could claim exemption under Section 10 by selecting an “Others” category and specifying the allowance.
The updated forms have removed this option.
As a result, exemption claims can now be made only for allowances specifically listed in the return forms, thereby standardizing reporting practices.
The personal information section has been expanded.
Taxpayers are now required to provide:
The objective is to improve communication and ensure that taxpayers remain reachable for departmental correspondence.
Taxpayers filing ITR-4 under presumptive taxation schemes will now be required to furnish additional financial information.
Important updates include:
These changes indicate a gradual shift toward greater financial transparency even for presumptive taxpayers.
The disclosure requirements relating to Form 10-IEA have been significantly expanded.
Taxpayers must now disclose:
This enhanced reporting will help maintain a complete history of tax regime selections.
The compliance burden relating to representative assessees has been reduced.
Earlier, detailed information such as PAN and capacity of the representative assessee was required.
Now, only the following need to be disclosed:
This simplification eases the filing process.
Budget 2025 has provided additional time for correcting errors in filed returns.
The due date for filing a revised return has been extended from:
31 December → 31 March of the relevant Assessment Year
However, a new fee under Section 234I applies to revised returns filed during the extended period:
| Total Income | Fee |
|---|---|
| Up to ₹5 lakh | ₹1,000 |
| Above ₹5 lakh | ₹5,000 |
Taxpayers should therefore ensure timely corrections while considering the additional cost implications.
The transitional reporting requirements introduced during AY 2025-26 have now been removed.
Previously, separate reporting was required for transactions subject to different capital gains tax rates before and after 23 July 2024.
For AY 2026-27:
This significantly simplifies capital gains reporting.
ITR-2 now includes a separate reporting field for certain interest income taxable at a concessional rate of 9%.
This applies to eligible interest income earned from:
The separate disclosure is intended to improve TDS matching and facilitate accurate tax computation.
Taxpayers claiming deductions for donations made to political parties or electoral trusts under Section 80GGC must provide additional information.
Apart from existing details, the revised forms now require:
These disclosures strengthen verification and improve transparency of deduction claims.
Taxpayers claiming deductions for charitable donations under Section 80G must now furnish additional transaction details.
The revised forms require disclosure of:
The objective is to improve traceability and validation of donation claims.
The updated forms provide specific guidance regarding interest income reporting under Schedule OS (Income from Other Sources).
Interest earned from:
should generally be reported under the “Other” category of Schedule OS, provided the taxpayer is not engaged in the business of money lending.
This clarification promotes uniformity in reporting practices.
The revised ITR forms for AY 2026-27 reflect the Government’s continued focus on balancing taxpayer convenience with stronger compliance and data-driven verification. While taxpayers benefit from revised tax slabs, a higher Section 87A rebate, expanded eligibility for simplified return forms, and extended timelines for filing revised returns, they must also adapt to increased disclosure requirements across rental income, donations, tax regime selections, and financial information.
As return filing becomes increasingly technology-driven, maintaining proper documentation, transaction records, donation receipts, bank details, and supporting evidence is more important than ever. A proactive understanding of these changes will help taxpayers file accurate returns, avoid notices, and ensure smooth processing of their income tax returns.
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