The income-tax department has officially notified all Income Tax Return (ITR) forms for the 2025-26 filing season earlier this month. This early notification allows taxpayers, especially salaried individuals, to prepare for filing their tax returns well ahead of time, even though official Form 16s from employers will only be issued in June.

Filing income tax returns is often seen as a tedious and time-consuming process, but understanding the right forms to use can simplify the experience. Recent changes introduced in the July 2024 Budget regarding tax slabs and rationalisation of capital gains tax have resulted in modifications to ITR forms that every salaried taxpayer should know before starting their filing process.

What’s New in ITR-1 for FY 2025?

Previously, the ITR-1 (Sahaj) form was available only for individuals with income from salary or pension, one house property, interest income from savings or fixed deposits, dividends, and agricultural income up to Rs 5,000. However, this year, the form’s scope has expanded.

Now, even taxpayers with long-term capital gains (LTCG) up to Rs 1.25 lakh from the sale of listed equity shares or equity mutual fund units (which are taxed at 12.5%) can use ITR-1. This inclusion makes it easier for many salaried individuals who also invest in the stock market to file their returns using the simpler Sahaj form.

The term “Sahaj” means simple or uncomplicated, and true to its name, the ITR-1 form is designed for ease of filing. It comes pre-filled with personal details, income, and financial transaction data sourced from tax department records, allowing taxpayers to verify this information against their Form 16, bank statements, Form 26AS, and the Annual Information Statement (AIS) before submitting returns online.

Who Can Use ITR-1?

The ITR-1 form can be filed only by:

• Resident individuals (ordinarily resident) with total income up to Rs 50 lakh

• Income sources limited to salary/pension, one house property (excluding brought forward losses), agricultural income up to Rs 5,000

• Income from savings/fixed deposits, dividends, and family pension

• LTCG on listed equity shares or equity mutual funds up to Rs 1.25 lakh under Section 112A

When to Use ITR-2 Instead?

Not all salaried taxpayers qualify for the simpler ITR-1. The income tax department has specified conditions that make taxpayers ineligible for ITR-1, requiring them to use ITR-2, a form designed for individuals with more complex financial situations but without business or professional income.

You must use ITR-2 if:

• Your total income exceeds Rs 50 lakh

• LTCG under Section 112A exceeds Rs 1.25 lakh

• You are a director of a company

• You own unlisted equity shares

• You have earned foreign income or hold foreign assets/accounts

• You have deferred tax on Employee Stock Option Plans (ESOP)

• You carry forward losses under any head of income

Why This Distinction Matters

Choosing the correct ITR form is critical to avoid rejection of your tax return and possible penalties. The ITR-2 form captures more detailed disclosures and requires additional information related to assets, foreign income, and capital gains. While it’s more complex than ITR-1, it is essential for accurate tax reporting for those with diverse income sources.

Preparing for Tax Filing: What Salaried Individuals Should Do Now

Though Form 16 will only be available in June, taxpayers can begin by:

• Reviewing the changes in ITR forms and assessing their income sources

• Collecting relevant documents such as bank statements, dividend proofs, and investment statements

• Checking pre-filled data in ITR forms online once available

• Consulting with tax advisors if they have complex financial situations or investments

Conclusion

The tax-return filing season for 2025-26 brings significant changes with the expansion of the Sahaj form to include LTCG income up to Rs 1.25 lakh, offering relief to many salaried taxpayers. However, those with income complexities must carefully choose to file with ITR-2. Early preparation and understanding of these forms can make the tax filing process smooth and hassle-free.

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