Now, You Can File Capital Gains in ITR-1

The Income Tax Department has rolled out a significant update for taxpayers in India with the notification of income tax return (ITR) forms for the Assessment Year 2025-26 (Financial Year 2024-25). One of the key changes introduced this year is the provision to disclose certain long-term capital gains (LTCG) directly within ITR-1 and ITR-4 forms, a move aimed at simplifying the filing process for millions of taxpayers.

What’s New in ITR-1 and ITR-4?

Until now, taxpayers who had any capital gains income were required to use the more detailed ITR-2 form, even if their gains were minimal. With this new provision, individuals with only long-term capital gains under Section 112A—up to a limit of Rs 1.25 lakh—can now file their returns using ITR-1 (Sahaj) or ITR-4 (Sugam), provided they don’t have any carried forward or brought forward capital losses.

Who Can Use ITR-1 and ITR-4?

ITR-1 can be filed by resident individuals with income up to Rs 50 lakh from salary, one house property, other sources (like interest), and now also long-term capital gains under Section 112A up to Rs 1.25 lakh, along with agricultural income up to Rs 5,000.

Section 112A deals with LTCG arising from the sale of listed equity shares, equity-oriented mutual funds, or units of business trusts, where the holding period exceeds 12 months. This gain is taxable at 10% if it exceeds Rs 1 lakh, but small gains are exempt under the Rs 1.25 lakh limit for simplified filing.

Similarly, ITR-4 is meant for individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with total income up to Rs 50 lakh from business or profession, and who meet the same LTCG threshold under Section 112A.

Additional Disclosure Requirements

The ITR forms for AY 2025-26 also include mandatory fields for high-value transactions. Taxpayers must now report:

Expenditure exceeding Rs 2 lakh on foreign travel. Electricity bills over Rs 1 lakh during the year. Deposits of Rs 1 crore or more in current accounts.

Importance of AIS and Form 26AS

To facilitate accurate filing, the taxpayer can cross-verify income and financial transactions through the Annual Information Statement (AIS) and Form 26AS. These tools offer a consolidated summary of income sources such as interest, dividends, stock market transactions, and TDS/TCS records. Taxpayers have the option to confirm or dispute any discrepancies through feedback.