Which ITR Form to Select for AY 2025–26 (FY 2024–25)? |New Rules 2025

Choosing the correct ITR form is the first and most critical step when filing your Income Tax Return. With new changes introduced for AY 2025–26, including reporting of Long-Term Capital Gains (LTCG) up to ₹1.25 lakh under section 112A in ITR-1 (Sahaj) and ITR-4 (Sugam), it’s crucial to understand eligibility, restrictions, and suitability of each ITR form.

🔍 Key Change for FY 2024–25

From this year onwards, LTCG up to ₹1.25 lakh under Section 112A (on sale of listed equity shares or mutual funds) can now be reported in ITR-1 and ITR-4, provided:

• There is no carry forward or brought forward capital loss.
• The LTCG falls under Section 112A only (i.e., STT-paid equity shares and equity-oriented mutual funds).
• LTCG amount does not exceed ₹1.25 lakh.

This change simplifies return filing for small retail investors and salaried individuals.

📄 Form-wise Guide to Choosing the Right ITR

✅ ITR-1 (Sahaj) — For Salaried Individuals with Simple Incomes

Eligible If:

• You are a Resident Individual (Not for HUF or NRI)
• Total Income ≤ ₹50 lakh
• Income includes:
  • Salary or Pension
  • One House Property (no brought-forward loss)
  • Income from Other Sources (excluding lottery/race horses)
  • Agricultural income ≤ ₹5,000
  • LTCG under section 112A up to ₹1.25 lakh (new provision)

Cannot Use If:

• Total income > ₹50 lakh
• More than one house property
• Any taxable capital gains (other than the new ₹1.25 lakh u/s 112A)
• Business/professional income
• Director in a company / unlisted shares
• Foreign income or assets
• RNOR or NRI
• Brought forward/carry-forward losses
• Deferred tax on ESOPs

Best For: Salaried individuals with minimal investments and no complex tax situations.

✅ ITR-2 — For Individuals/HUFs with Capital Gains, Foreign Assets, or Multiple Properties (Other than Business & Profession)

Eligible If:

• Individual or HUF
• No income from business/profession
• Any income type under:
  • Salary/Pension
  • Multiple house properties
  • Capital Gains (short-term or long-term of any amount)
  • Foreign income or assets
  • Agricultural income > ₹5,000
  • Other Sources (including lottery, race horses)
  • Director in a company / unlisted shares

Cannot Use If:

• You have income from business or profession (except capital gains)

Best For: Individuals with stock trading gains, mutual fund redemptions, or holding foreign assets.

✅ ITR-3 — For Business or Professional Income (Non-Presumptive)

Eligible If:

• You are an Individual/HUF with:
  • Business income (not under presumptive scheme)
  • Professional income
  • Income from being a partner in a firm
  • Capital gains, multiple properties, salary, other sources

Best For: Professionals (like doctors, CAs, consultants) not using presumptive scheme; small business owners maintaining books.

✅ ITR-4 (Sugam) — For Presumptive Business or Profession + Simple Income Sources

Eligible If:

• Resident Individual, HUF, or Firm (other than LLP)
• Total Income ≤ ₹50 lakh
• Income from:
  • Presumptive business u/s 44AD, 44AE
  • Presumptive profession u/s 44ADA
  • Salary/Pension
  • One house property
  • Other sources (excluding lottery/races)
  • LTCG up to ₹1.25 lakh u/s 112A (new rule)
  • Agricultural income ≤ ₹5,000

Cannot Use If:

• Total income > ₹50 lakh
• More than one house property
• Foreign assets/income
• RNOR / NRI
• Director in a company / unlisted shares
• Deferred ESOP tax
• Any carried forward losses

Best For: Freelancers, small traders, professionals opting for presumptive tax scheme.

✅ ITR-5 to ITR-7 — For Entities Like Firms, LLPs, Trusts, Companies

📊 Quick Comparison Table: ITR Forms at a Glance

🧩 Confused Between ITR-1 and ITR-4? Here’s the Deciding Factor

Both forms now allow LTCG reporting up to ₹1.25 lakh u/s 112A. So how do you choose?

• If your income is only from salary, pension, or simple interest and LTCG ≤ ₹1.25 lakh → ITR-1
• If you are a freelancer, small trader, or professional under presumptive taxation → ITR-4

⚠️ Points to Remember

• Don’t select ITR-1 or ITR-4 if you have foreign assets, are non-resident, or a company director.
• Disclose all capital gains properly, even if exempt up to ₹1 lakh. Ensure STT is paid and conditions of section 112A are satisfied.
• If unsure, always choose a higher form (ITR-2 or ITR-3) to avoid defective return notices.

You can contact team of Tax Experts to file Your ITR at 9150010300 or visit www.legalsahayak.com

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