India's ITR-1 Form Now Covers Long-Term Capital Gains Up to Exemption Limit, Other Changes Take Effect

Tax Filing Season Begins: Key Changes in ITR Forms for Assessment Year 2026-27

The government has notified Income Tax Return (ITR) forms for Assessment Year 2026-27, marking the beginning of the filing season for taxpayers. With the deadline set for July 31, 2026, taxpayers can now file their returns for the financial year 2025-26, taking into account the updated forms that reflect a mix of continuity and incremental changes aimed at simplifying filing and improving transparency.

The updated ITR forms, particularly ITR-1, have undergone significant changes. The most notable update is the inclusion of long-term capital gains (LTCG) under Section 112A, up to Rs 1.25 lakh from listed equity shares or equity-oriented mutual funds, within the scope of this simplified form. This change expands eligibility for ITR-1, benefiting salaried individuals and small retail investors participating in equity markets.

Changes in ITR Form 1

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A key change in ITR-1 is the inclusion of LTCG up to Rs 1.25 lakh from listed equity shares or equity-oriented mutual funds. This update makes ITR-1 more inclusive, allowing taxpayers to report LTCG within the specified exemption limit. Earlier, any capital gains income disqualified taxpayers from using ITR-1, requiring them to file ITR-2. This change enables those with small equity investments to continue using the simpler form instead of shifting to more complex return forms.

Another key change is the removal of reporting of income from retirement benefit accounts maintained in notified and non-notified foreign countries under Section 89A from ITR-1 starting AY 2026-27. Taxpayers having such income will now be required to file ITR-2 or ITR-3 from AY 2026-27 onwards.

Common Changes in ITR Forms 1 and 2

Taxpayers filing ITR-1 are now allowed to provide both primary and secondary mobile numbers and email addresses. Earlier, the form captured only one mobile number and one email ID. Additionally, taxpayers can now furnish both primary and secondary address details in the ITR forms. Previously, only a single address could be reported.

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Taxpayers claiming deductions under Section 80GGC must now disclose the name and PAN of the political party to which the contribution is made. This move aims to improve transparency and ensure accurate reporting of political donations.

Points to Keep in Mind for a Smooth Filing Process

To ensure a smooth and error-free filing process before the deadline, taxpayers should:

• Download their AIS and Form 26AS early to check if their employer and bank have correctly reported their TDS.
• Choose their regime wisely, as the New Tax Regime is now the default. If they want to claim 80C or Home Loan interest for a self-occupied property (Old Regime), they must explicitly opt in while filing.
• Report all savings interest, as many forget to add interest from Savings Accounts. Remember, under the Old Regime, they get a deduction up to Rs 10,000 (80TTA), but the income must still be reported first.
• Update their mobile and email addresses to ensure their Aadhaar is linked to their current mobile number for seamless OTP-based e-verification.
• Declare foreign assets, as even if a foreign bank account has a minimal balance, if they are an ROR (Resident), they must declare it in Schedule FA to avoid heavy penalties under the Black Money Act.