ITR Form Changes for FY 2024-25: A Complete Overview

ITR Form

ITR Form Changes for FY 2024-25: A Complete Overview

ITR Form

The Income Tax Department has notified revised Income Tax Return (ITR) forms for the Assessment Year (AY) 2025-26, reflecting significant changes aimed at improving transparency, compliance, and user experience. From capital gains reporting to revised tax regime disclosures and new deductions, taxpayers across different income categories and entity types need to pay close attention to the updates.

Common Highlights Across Multiple ITR Forms

  • New Tax Regime as Default: The new tax regime is now the default selection across most forms. Taxpayers choosing the old regime must file Form 10-IEA and specify a valid reason (except ITR-2, which provides a checkbox option).

  • New Deduction – Section 80CCH: A new deduction under Section 80CCH has been introduced for contributions made to the Agniveer Corpus Fund, applicable across ITR-1 to ITR-4.

  • Reporting of Interest on Income Tax Refunds: All major forms (ITR-2, 3, 4, and 6) now require disclosure of interest received on income tax refunds under the “Income from Other Sources” (IFOS) head.

  • Pass-Through Income Reporting: Forms ITR-2, 3, 5, and 6 now feature a dedicated section to disclose pass-through income from REITs, InvITs, and Category I & II AIFs.

  • RNOR Specifics: Taxpayers with the “Resident but Not Ordinarily Resident” (RNOR) status must report the number of days stayed in India during the current and preceding four years (in ITR-2, 3, and 4).

ITR Form

Form-Wise Changes:

ITR-1 (Sahaj)

  1. Capital Gains Reporting: Allows declaration of long-term capital gains (LTCG) from listed shares and equity mutual funds up to ₹1.25 lakh.

  2. Tax Regime Selection: New regime is default. To opt for the old regime, filing Form 10-IEA with reasons is mandatory.

  3. Standard Deduction Enhanced: Increased from ₹50,000 to ₹75,000.

  4. Section 80CCH Deduction: Available for contributions to the Agniveer Corpus Fund.

  5. Refined Exempt Income Disclosure: Enhanced categorization of exempt income, especially agricultural income (alerts triggered for amounts above ₹5,000).

  6. Detailed Disclosure Requirements: Income types such as clubbed income, family pension, PF withdrawals, gratuity, leave encashment, and dividend income require clearer reporting.

ITR-2

  1. LTCG Exemption Limit Raised: Increased from ₹1 lakh to ₹1.25 lakh.

  2. New Regime is Default: Old regime can be selected via a checkbox (no Form 10-IEA required).

  3. RNOR Disclosure Mandate: Number of days in India to be disclosed for RNOR classification.

  4. Section 80CCH Deduction applicable.

  5. Pass-Through Income: New section for REITs, InvITs, and AIFs.

  6. IFOS Income: Interest on tax refunds must be reported.

ITR-3

  • Tax Regime: Default is the new regime; opting for the old one requires Form 10-IEA and reason.

  • Cash Receipts: A new field captures cash receipts from business/profession.

  • RNOR Disclosure and Section 80CCH Deduction.

  • Mandatory for VDA Income: Taxpayers earning from Virtual Digital Assets (VDA) must file ITR-3 only.

  • IFOS Interest & Pass-Through Income Reporting.

ITR-4 (Sugam)

  1. Section 44ADA Restriction: Now applicable only to individuals; HUFs excluded.

  2. Tax Regime: Default is the new regime; opting for old regime mandates Form 10-IEA and reason.

  3. Schedule BP Update: Must report cash receipts.

  4. Section 80CCH Deduction applicable.

  5. RNOR Disclosure required.

  6. Restriction for Foreign Ties: Taxpayers with foreign company associations cannot file ITR-4.

ITR-5

  • Disclosure of Chosen Regime: Sections 115BA, 115BAA, 115BAB, 115BAD, and 115BAE now included. Relevant forms like 10-IB/10-IC/10-IF/10-IFA must be furnished.

  • Pass-Through Income Reporting for REITs, InvITs, and AIFs.

ITR-6

  • Pass-Through Income: Separate section for REITs, InvITs, and AIFs.

  • Interest on Refund: To be reported under IFOS.

ITR-7 (for Trusts, Charitable Institutions, Political Parties, etc.)

  • FCRA Compliance: Mandatory reporting of FCRA registration number and foreign contributions.

  • Expense Breakup: Religious/charitable expenditure bifurcated into India-based and overseas.

  • Corpus Utilization Tracking: New schedule for utilization of corpus funds and loans.

  • Exemption Section Clarity: Taxpayers must specify the section under which exemption is claimed (e.g., 10(23C), 11, 12A, 13A) and provide supporting forms like Form 10 or 9A if applicable.

Read More: NRI Taxation in India: Myths, Realities & Benefits of Filing Tax Returns

The ITR forms for AY 2025-26 reflect the Income Tax Department’s push for greater compliance, detailed disclosures, and seamless alignment with the new tax regime. Taxpayers—especially those with complex income streams, capital gains, foreign associations, or special entity status—should carefully evaluate their applicable form and prepare the required documentation well in advance.

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NRI Taxation in India: Myths, Realities & Benefits of Filing Tax Returns

NRI

NRI Taxation in India: Myths, Realities & Benefits of Filing Tax Returns

NRI

No, NRIs Are Not Exempt from Income Tax in India

A widely circulated misconception on social media claims that from April 1, 2025, all Non-Resident Indians (NRIs) will be exempt from paying income tax in India if their Indian income is below ₹12 lakhs. This is completely inaccurate.

The zero-tax benefit for income up to ₹12 lakhs introduced in the Union Budget 2025 is exclusively for Resident Individuals who opt for the New Tax Regime. It is not applicable to NRIs, Hindu Undivided Families (HUFs), or non-resident taxpayers.

What Has Actually Changed?

Under the New Tax Regime, effective from April 1, 2025, resident individuals earning up to ₹12 lakhs annually can avail a rebate of ₹60,000 under Section 87A, effectively reducing their tax liability to zero. However, this rebate is not available to NRIs.

On the contrary, NRIs will now be required to file their Income Tax Return (ITR) in India if their total Indian income exceeds ₹4 lakhs in a financial year starting April 1, 2025. Until FY 2024–25, this threshold was ₹3 lakhs under the new regime.

When Is an NRI Required to File a Tax Return in India?

As per Indian tax laws:

  • NRIs must file a return if their total taxable income in India exceeds ₹4 lakhs from FY 2025–26 onward (₹3 lakhs for FY 2024–25).

  • They are taxed only on income earned or accrued in India, not on their global income.

Common Reasons NRIs Avoid Filing Tax Returns

Despite being liable, many NRIs fail to file returns due to:

  • Misunderstanding the legal requirement.

  • Perception of income being too small.

  • Dependence on Tax Deducted at Source (TDS) as full and final tax.

  • Lack of time or documentation.

  • Belief that TDS eliminates the need for return filing.

Why NRIs Should File Their Tax Returns in India

Even if not mandatorily required, filing a return offers several benefits:

✅ Claim Refund for Excess TDS

Most of an NRI’s income in India — including interest on NRO accounts, dividends, rental income, and capital gains — is subject to TDS at flat rates. Often, the actual tax liability is lower than the TDS deducted. Filing a return is the only way to claim a refund for such excess deduction.

✅ Avoid Future Tax Notices or Litigation

Non-filing may lead to scrutiny assessments, reopening of cases, or notices for source of funds (especially in property transactions). Filing a return prevents avoidable litigation and establishes a clear record with the Income Tax Department.

✅ Helpful for Overseas Tax Reporting

Indian tax returns act as a supporting document while reporting Indian income in the home country. This ensures compliance with global tax laws and transparency.

✅ Claim Foreign Tax Credit (FTC)

Filing a return enables NRIs to claim credit in their home country for taxes paid in India, thus avoiding double taxation.

NRI

✅ Ease of Financial Transactions and Loan Processing

Having a regular tax filing history in India is helpful when applying for loans, buying property, or conducting high-value transactions in India.

Read More: Preparing for a GST Department Audit: Key Steps and Focus Areas

It is important to stay informed and compliant, especially with evolving tax laws. The new rebate of ₹60,000 under Section 87A is a welcome move—but it benefits only Resident Individuals, not NRIs.

Regardless of income thresholds, NRIs are strongly advised to file their Income Tax Return in India to claim refunds, stay compliant, and avoid potential legal complications in the future.

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Preparing for a GST Department Audit: Key Steps and Focus Areas

GST

Preparing for a GST Department Audit: Key Steps and Focus Areas

GST

Receiving a GST audit notice from the department can be an intimidating experience for any business. However, with timely preparation and a systematic approach, it is possible to handle the audit process efficiently and avoid penalties. This guide outlines the essential steps to take upon receiving a GST audit notice, key reconciliation tasks, common audit focus areas, and best practices to ensure compliance.

1. Understand the Audit Notice

The first and most crucial step is to thoroughly review the audit notice. It typically contains vital information such as the scope of the audit, audit period, the legal provision under which it is initiated (usually Section 65 or 66 of the CGST Act), and the details of the audit officer. Businesses should also take note of any deadlines for document submission or meetings.

2. Verify GST Returns and Conduct Reconciliations

Before the audit begins, businesses must ensure that all GST returns—GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C (if applicable)—are filed and reconciled with their financial records. Key reconciliation areas include:

  • Sales and purchase ledgers vs. GST returns

  • Input Tax Credit (ITC) claimed vs. GSTR-2B

  • Output tax liability vs. sales registers

  • E-invoice and E-way bill data vs. GSTR-1 and sales registers

Maintaining an accurate stock register and general ledger is also essential, as discrepancies here are common triggers for scrutiny.

GST

3. Organize Required Documents

Proper documentation is critical during a GST audit. Businesses should organize and keep ready the following:

  • GST registration certificate

  • All filed GST returns (monthly and annual)

  • Tax invoices and e-way bills

  • Purchase and sales registers

  • Input and output tax ledgers

  • Stock and expense registers

  • Trial balance, profit & loss statement, and balance sheet

  • Bank statements

  • All reconciliation workings and justifications for past entries

Digital organization of these files by GSTIN, financial year, and document type can significantly ease the audit process.

4. Key Areas of Focus for GST Auditors

Audit officers often focus on common areas of non-compliance. Businesses should proactively verify:

  • Excess ITC claimed or mismatch with GSTR-2B

  • Non-payment to suppliers within 180 days and reversal of ITC, if applicable

  • Undisclosed or under-reported outward supplies

  • Valuation discrepancies or under-valuation of supplies

  • Reverse Charge Mechanism (RCM) compliance

  • Tax liability on advances and time of supply

  • Transactions with related parties

  • Apportionment of ITC between taxable, exempt, and non-GST supplies

5. Specific Compliance Checks That Attract Penalties

Even in the absence of major discrepancies, auditors frequently verify smaller compliance points that carry direct penalties. Businesses should review:

  • Filing of ITC-04 for goods sent to job workers

  • Declaration of all bank accounts linked to the business in the GST portal (failure to declare can attract a penalty of ₹25,000 per undeclared account)

  • HSN code reporting: Ensure the top five HSNs are updated and match invoices and returns

  • GSTR-1 summaries: Ensure document summaries and HSN tables are correctly filed

  • Updated business addresses: Any change in the principal or additional place of business must be updated within 30 days

  • E-invoice and e-way bill data: Must match GSTR-1; any mismatch can lead to per-invoice penalties

6. Voluntary Correction and DRC-03

If any past errors or shortfalls are discovered during pre-audit checks, businesses can voluntarily pay the differential tax using Form DRC-03. This proactive step is often viewed positively and may help in mitigating penalties or interest.

7. Representation and Legal Awareness

While a business owner may choose to appear before the officer, it is advisable to nominate a knowledgeable person such as the accounts head or GST consultant for representation. All submissions must be in written form and duly acknowledged by the officer.

It also helps to be familiar with the key legal provisions related to audits:

  • Section 65 – Departmental Audit

  • Section 66 – Special Audit by Chartered Accountant or Cost Accountant

  • Section 70 – Power to summon documents or persons

  • Rule 101 – Procedure of audit

GST

8. Importance of Professional Assistance

Engaging a Chartered Accountant or GST expert can prove invaluable. They can conduct a pre-audit review, simulate likely questions, and help in preparing reconciliations and documentation. Their support ensures that the business is well-prepared and compliant, significantly reducing audit risks.

Read More: Claiming Delayed Income Tax Refunds: Relief Through CBDT’s Special Provisions

A GST audit is not just a compliance exercise—it is a test of the accuracy, transparency, and discipline of your tax practices. Being proactive, meticulous, and professionally guided can ensure a smooth audit experience and protect your business from unnecessary financial and legal exposure.

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