The Income Tax Department has updated ITR forms for FY 2025-26, expanding the use of ITR-1 for more taxpayers while requiring detailed disclosures for traders. The deadline for non-audit filings (ITR-3 and ITR-4) is now August 31, 2026. These changes aim to simplify tax compliance for individuals while increasing data transparency for capital gains and trading activities.
What Happened
The Income Tax Department has introduced updated Income Tax Return (ITR) forms for the financial year 2025-26 (Assessment Year 2026-27). A key update for the current season is the extension of the filing deadline for ITR-3 and ITR-4, specifically for non-audit cases, to August 31, 2026. This move provides taxpayers and tax professionals an additional month beyond the standard July 31 date to prepare and file their returns. The updates to the forms themselves are aimed at balancing ease of filing for common taxpayers with higher data transparency for those involved in active trading and capital market transactions.
Simpler ITR-1 for More Taxpayers
Taxpayers who file using the simplified ITR-1 (Sahaj) form will see more flexibility this year. The form has been expanded to include income from up to two residential properties, whereas previously, owning more than one property often forced taxpayers to switch to the more complex ITR-2 form. Additionally, individuals who earn long-term capital gains (LTCG) from listed equities and equity-oriented mutual funds—capped at Rs 1.25 lakh—can now report this income directly via ITR-1. These changes reduce the compliance burden for many salaried individuals and retail investors with straightforward financial portfolios.
Higher Scrutiny for Traders and Investors
While ITR-1 has been simplified, the reporting requirements for more complex forms like ITR-2 and ITR-3 have become more granular. The ITR-2 form now asks for transaction-level data for capital gains. This means taxpayers must report specific details for each asset class, including acquisition dates, sale dates, purchase costs, and the resulting tax treatment. A new field has also been added to specifically disclose losses from share buyback transactions, an area that often lacked clarity in past filings.
For ITR-3, which is typically used by those with business or professional income, the tax department has established distinct reporting categories. Taxpayers must now separately disclose income from futures and options (F&O), intraday trading, commodity trading, and foreign exchange. This restructuring suggests a move toward tighter monitoring of trading-related income streams.
What Investors Should Track
The shift toward granular reporting means that the data provided in ITR forms will be more closely aligned with the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS). Investors may track how well their personal records align with these official statements before filing. The requirement for detailed transaction-level data means that maintaining a clean record of contract notes and trade confirmations is more important than ever to avoid discrepancies. As the August 31 deadline approaches, ensuring all trading and investment data is reconciled with the tax department's records remains the most critical task for taxpayers.