The Central Board of Direct Taxes (CBDT) has released Income Tax Return (ITR) Forms 1 to 5 for Assessment Year (AY) 2025–26. Naveen Wadhwa, Vice President at Taxmann, highlights the key updates every taxpayer should know:

Easier Filing for Small Taxpayers with Capital Gains

Salaried individuals and small business owners earning long-term capital gains (LTCG) up to ₹1.25 lakh under Section 112A can now file ITR-1 or ITR-4, even if they report such gains.

“This simplifies compliance for taxpayers with limited capital gains,” says Wadhwa.

Capital Gains Tax Rates Revised

For transactions made on or after July 23, 2024:

• Short-Term Capital Gains (STCG) under Section 111A will be taxed at 20% (earlier 15%).
• Long-Term Capital Gains (LTCG) under Sections 112 and 112A will now be taxed at 12.5%, without indexation benefits.

Buyback Income Now Taxable as Dividend

Effective October 1, 2024, income from share buybacks will be taxed as deemed dividend in the hands of shareholders.

• The buyback tax paid by companies under Section 115QA has been eliminated.

New Tax Regime Declarations in ITR Forms

• ITR Forms 3, 4, and 5 now require taxpayers to confirm if they are opting out of the new tax regime.
• You must also declare whether Form 10-IEA was submitted in previous years.

Aadhaar Enrolment ID No Longer Valid

Taxpayers can no longer use Aadhaar Enrolment ID while filing returns. A valid Aadhaar number is now mandatory.

Key Takeaway

With simplified processes for small capital gains earners, new capital gains tax rates, and changes in buyback and Aadhaar policies, it’s essential to stay informed and file correctly to avoid penalties or scrutiny.

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