ITR-2 Form Update for AY 2025-26: Eligibility and Key Changes

ITR-2

ITR-2 Form Update for AY 2025-26: Eligibility and Key Changes

ITR-2

The Central Board of Direct Taxes (CBDT), through Notification No. 43/2025 dated May 5, 2025, has officially released the updated Income Tax Return Form ITR-2 for the Assessment Year (AY) 2025–26. This revised form incorporates several important updates and expanded disclosure requirements for individual taxpayers and Hindu Undivided Families (HUFs).

Who Can File ITR-2?

ITR-2 is applicable to individuals and HUFs whose total income does not include income from profits and gains of business or profession. Specifically, ITR-2 can be filed by those who:

  • Are not eligible to file ITR-1 (Sahaj).

  • Do not earn income under the head “Profits and Gains from Business or Profession”.

  • Do not receive income in the nature of interest, salary, bonus, commission, or remuneration from a partnership firm.

  • Have clubbed income (such as from a spouse or minor child), provided such clubbed income also does not fall under the above business-related categories.

Not Eligible to File ITR-2

Any individual or HUF whose total income includes profits and gains from business or profession, or income received from a partnership firm, cannot file ITR-2.

Key Updates in the Revised ITR-2 Form

The revised ITR-2 form reflects important changes in line with amendments made through the Finance Act, 2024. Here are the notable updates:

1. Capital Gains Segregation

In Schedule-Capital Gains, taxpayers are now required to separately report gains accrued before and after July 23, 2024, aligning with recent legislative changes.

2. TDS Code Disclosure

The revised form mandates reporting of the relevant TDS section code in Schedule-TDS to improve clarity in tax credit claims.

3. Asset and Liability Schedule

Individuals with total income exceeding ₹1 crore are now required to disclose their assets and liabilities, providing a more comprehensive view of their financial position.

4. Capital Gains on Unlisted Securities

Gains arising from the transfer of unlisted bonds and debentures must now be reported as either short-term or long-term capital gains, based on the date of acquisition and transfer.

5. Buy-back Proceeds as Deemed Dividend

Effective from October 1, 2024, buy-back proceeds are to be reported as deemed dividend income under the head “Income from Other Sources”.

6. Disability Deduction Documentation

To claim deductions under Sections 80DD and 80U, it is now mandatory to report valid disability certificates.

7. Expanded Deduction Reporting

There are enhanced disclosure requirements for claiming deductions under:

  • Section 80C (e.g., LIC, PPF, ELSS),

  • Section 10(13A) (House Rent Allowance), and

  • Other relevant provisions.

Read More: New ITR Forms for AY 2025–26: ITR-1 & ITR-4 Now Allow Reporting of LTCG under Section 112A

8. Capital Loss Adjustment on Buy-back

Capital losses incurred on buy-back of shares can now be adjusted, provided the deemed dividend portion is correctly reported as income. This applies to buy-back transactions post-October 2024.

The revised ITR-2 form reflects the government’s continued push for greater transparency, accurate reporting, and comprehensive income disclosure. Taxpayers who fall under the eligible category should carefully review these changes and ensure timely and accurate filing for AY 2025–26.

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ITR-3 Form Update for FY 2024-25: Key Changes Taxpayers Need to Know

ITR-3 Form

ITR-3 Form Update for FY 2024-25: Key Changes Taxpayers Need to Know

ITR-3 Form

Income Tax Return Filing for FY 2024-25 has undergone notable changes with the notification of the revised ITR-3 form by the Income Tax Department. The Central Board of Direct Taxes (CBDT) announced this update via its official handle on the X platform on April 30, 2025. The updated ITR-3 is applicable for Assessment Year (AY) 2025-26 and is intended for individuals and Hindu Undivided Families (HUFs) who earn income from business or professional sources.

Here’s a breakdown of what’s new in ITR-3 and how it impacts taxpayers.

📌 Major Highlights of the New ITR-3 for AY 2025-26

1. Asset and Liability Reporting Threshold Doubled

One of the most taxpayer-friendly updates is the increase in the threshold for mandatory disclosure of assets and liabilities under Schedule AL.

  • Previous Threshold: Rs 50 lakh

  • New Threshold: Rs 1 crore

This change is expected to provide relief to middle-income taxpayers, who will now face fewer compliance requirements if their total assets fall below the revised limit.

2. Capital Gains Reporting: More Granular Disclosures

The Schedule Capital Gains section has been revamped to capture capital gains transactions based on their timing—specifically, whether they occurred before or after July 23, 2024.

This new bifurcation follows the Union Budget 2024 announcement on July 24, which proposed a major change in the tax treatment of long-term capital gains (LTCG) from the sale of immovable property.

ITR-3 Form

3. Optional LTCG Tax Regime for Property Sales

As per the budget proposals:

  • New LTCG Rate: 12.5% without indexation (for property sold after July 23, 2024)

  • Existing Option: 20% with indexation benefit (remains available)

Taxpayers now have the flexibility to choose between the new flat rate of 12.5% without indexation or stick with the current method involving 20% with indexation. This flexibility is especially useful for those who acquired property before July 23, 2024.

4. Improved Transparency Through Dropdowns

The updated form introduces dropdown menus for claiming deductions under various sections (like Section 80C) and more structured section-wise reporting of TDS (Tax Deducted at Source).

This update is designed to enhance:

  • Transparency in disclosures

  • Accuracy in reporting

  • User-friendliness of the filing process

📋 Simplified Filing for Small Taxpayers: ITR-1 and ITR-4 Also Notified

Prior to this, on April 29, the CBDT had also notified ITR-1 and ITR-4 for AY 2025-26. These simplified forms now allow individuals with long-term capital gains up to Rs 1.25 lakh from listed equity shares to use ITR-1 or ITR-4, making compliance easier for small investors.

Read More:New ITR Forms for AY 2025–26: ITR-1 & ITR-4 Now Allow Reporting of LTCG under Section 112A

The new ITR-3 form is part of the government’s broader strategy to modernize and streamline tax compliance for professionals and business owners. With enhanced flexibility, reduced disclosure burdens, and improved reporting tools, the Income Tax Department is clearly moving toward a more transparent and taxpayer-friendly regime.

Taxpayers and professionals are advised to review the new form carefully and consult a tax expert if needed, especially if they are dealing with capital gains or asset disclosures.

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New Tax Regime: A 7-Point Checklist for Taxpayers Filing ITR

New Tax Regime

New Tax Regime: A 7-Point Checklist for Taxpayers Filing ITR

New Tax Regime

As the deadline for filing income tax returns for FY 2024-25 (AY 2025-26) approaches, it’s important for taxpayers to understand the implications of choosing between the old and new tax regimes. The Income Tax Department has released ITR Forms 1 and 4, and the last date for individual taxpayers (not subject to audit) to file their returns is July 31, 2025.

Under the new tax regime, taxpayers are offered concessional rates of tax but are not eligible for most exemptions and deductions. Here’s a detailed look at the seven most critical aspects you should be aware of before filing your ITR under the new tax regime:

1. New Tax Regime is Now the Default Option

The new tax regime, introduced under Section 115BAC, has become the default regime starting FY 2023-24. This means that unless you explicitly choose to opt for the old regime while filing your return, your income will be taxed under the new regime by default.

2. Lower Tax Rates Under the New Regime

The new regime offers reduced tax rates compared to the old regime. For FY 2024-25 (AY 2025-26), the applicable tax slabs are:

New Regime Slabs:

Income Slab (₹)Tax Rate
0 – 3 lakhNil
3 – 7 lakh5%
7 – 10 lakh10%
10 – 12 lakh15%
12 – 15 lakh20%
Above 15 lakh30%

Also, under Section 87A, individuals earning up to ₹7 lakh annually are eligible for a full rebate, resulting in zero tax liability under the new regime.

⚠️ Note: Rates announced in Budget 2025 (exempting income up to ₹12 lakh) will apply from April 1, 2025, i.e., FY 2025-26. For the current ITR filing (FY 2024-25), the above slab rates apply.

3. Old vs. New Regime – Know the Difference

Under the old tax regime, taxpayers can claim various deductions (like Section 80C, 80D, and HRA exemption) but are subject to higher tax rates:

Old Regime Slabs:

Income Slab (₹)Tax Rate
0 – 2.5 lakhNil
2.5 – 5 lakh5%
5 – 10 lakh20%
Above 10 lakh30%

Taxpayers need to compare both regimes and select the one that offers a lower liability based on their eligible deductions and overall income.

4. Notify Employer About Your Chosen Regime

If you’re a salaried employee, it’s important to intimate your employer at the beginning of the financial year about your chosen tax regime. If no intimation is provided, the employer will assume that you have opted for the default (new) regime and deduct TDS accordingly.

5. No HRA Exemption Under New Regime

Under the new tax regime, House Rent Allowance (HRA)—which is a significant tax-saving component for salaried individuals—is not exempted. This could result in a higher tax outgo for those who pay rent but cannot claim HRA exemption.

6. Limited Deductions Permitted

The new regime disallows most deductions under Chapter VIA such as:

  • Section 80C (Investments like PPF, ELSS, LIC)

  • Section 80D (Health insurance)

  • Section 80G (Donations)

However, certain deductions are still permitted under the new regime:

  • Section 80CCD(2): Employer’s contribution to NPS

  • Section 80CCH: Contributions to Agniveer Corpus Fund

  • Section 80JJAA: Deduction for new employment generation

Additionally, from FY 2023-24, a standard deduction of ₹50,000 is allowed for salaried individuals and pensioners under the new regime.

7. Flexibility to Switch Regimes

Individual taxpayers without business income can switch between the old and new regimes every financial year. However, those with business or professional income can opt in or out only once, and the option, once withdrawn, cannot be opted for again unless the business ceases.

Read More: New ITR Forms for AY 2025–26: ITR-1 & ITR-4 Now Allow Reporting of LTCG under Section 112A

Final Takeaway

Choosing the right tax regime can have a significant impact on your tax liability. While the new regime offers simplified tax compliance and lower rates, it may not benefit those who rely heavily on deductions and exemptions. Therefore, it’s advisable to compare both regimes carefully—either using the Income Tax Department’s calculator or by consulting a tax professional—before filing your ITR.

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