R. Suryamurthy
The taxpayers have been granted a significant extension for filing their Income Tax Returns (ITRs) for Assessment Year (AY) 2025-26. The Central Board of Direct Taxes (CBDT) today announced that the original deadline of July 31, 2025, has been pushed back to September 15, 2025.
The extension is a direct response to “extensive changes” in the recently notified ITR forms, which have undergone substantial structural and content revisions. These changes, intended to simplify compliance and enhance transparency, necessitate additional time for the Income Tax Department to develop, integrate, and thoroughly test the corresponding software utilities.
Adding to the complexity, credits from Tax Deducted at Source (TDS) statements, due for filing by May 31, 2025, are not expected to reflect in taxpayer accounts until early June. This limited window for reconciliation would have posed a significant challenge for accurate return filing without the extension. The CBDT anticipates that this extra time will alleviate concerns raised by stakeholders and ensure a smoother and more accurate filing experience for all. A formal notification is expected soon.
Sonu Iyer, Partner and National Leader, People Advisory Services-Tax, EY India, lauded the move. “The ITR forms notified for FY 2024-25 (AY 2025-26) incorporate the amendments introduced by the Finance Act 2024 and have enhanced reporting requirements relating to deductions being claimed, requirement to report TDS section codes, provide the bifurcation of capital gains for pre and post 23 July 2024, etc.,” Iyer explained. “If you recall, Finance Act 2024 has rationalized capital gains taxation on specific transactions on or after 23 July 2024. Given the requirements of these new ITR forms, the e-filing utility (both online and offline) needs to be updated by the Government. Therefore, it is a very welcome move from the government to extend the ITR filing deadline from 31 July 2025 to 15 Sep 2025, allowing taxpayers the time required to comply with these enhanced reporting requirements and legislative changes.”
Key Changes in New ITR Forms
The Income Tax Department recently notified all seven ITR forms for AY 2025-26, introducing several notable changes:
Simplified Filing for Small Taxpayers with Capital Gains: A significant change in ITR-1 (Sahaj) and ITR-4 (Sugam), notified on April 29, now permits salaried individuals and those under the presumptive taxation scheme to file these simpler forms even if they have long-term capital gains (LTCG) from listed equities of up to ₹1.25 lakh in a financial year. Previously, such individuals were required to file the more complex ITR-2. Under existing I-T law, LTCG up to ₹1.25 lakh from the sale of listed shares and mutual funds is exempt from tax, with gains exceeding this threshold subject to a 12.5% tax.
Rationalization of Capital Gains Tax: ITR forms 2, 3, 5, 6, and 7 now require taxpayers to split capital gains based on whether they arose before or after July 23, 2024. This change aligns with the government’s proposal in the July 24, 2024 Budget to lower the long-term capital gains tax on real estate to 12.5% (without indexation benefit) from the previous 20% (with indexation). This provides individuals or HUFs who purchased houses before July 23, 2024, the option to pay the new 12.5% rate without indexation, or opt for the 20% rate with the benefit of indexation.
Reduced Disclosure Burden for Businesses: For ITR-3, filed by individuals and Hindu Undivided Families (HUFs) with business or professional income, the threshold for reporting assets and liabilities under ‘Schedule AL’ has been doubled from ₹50 lakh to ₹1 crore. This move aims to reduce the compliance burden on middle-income taxpayers.
Understanding the ITR Forms
ITR Form 1 (Sahaj): Designed for resident individuals with an annual income up to ₹50 lakh, deriving income from salary, one house property, other sources (like interest), and agricultural income up to ₹5,000.
ITR Form 4 (Sugam): Caters to individuals, HUFs, and firms (excluding LLPs) with a total annual income up to ₹50 lakh and income from business and profession.
ITR-2: Filed by individuals and HUFs who do not have income from profits and gains in business or profession but do have income from capital gains.
ITR-3: Used by individuals and HUFs with income from profits and gains of business or profession.
ITR-5: Applicable to firms, Limited Liability Partnerships (LLPs), and Cooperative Societies.
ITR-6: Filed by companies registered under the Companies Act.
ITR-7: Filed by trusts and charitable institutions.
The CBDT’s timely intervention with this extension aims to provide taxpayers with ample time to navigate the updated forms and ensure accurate compliance, especially given the significant structural and content changes introduced this year.