With another tax return filing season round the corner, it is pertinent for taxpayers to plan. (AI image)<\/span><\/div>\n<\/section>\n<\/div><\/div>\n<\/div>\nIndia\u2019s personal tax compliance framework is undergoing a decisive transformation, driven by digitisation, pre-filled data integration, and the introduction of simplified tax regimes by the Indian Income tax department.The Income tax return (ITR) forms for FY 2025\u201326 (AY 2026\u201327) underscore this evolution, signalling a shift from basic disclosures to more rigorous requirements for accurate, consistent, and comprehensive reporting by taxpayers, which helps authorities navigate fast processing of tax return as cross verification of claims between individual ITR vis-\u00e0-vis reporting from businesses become easier.With another tax return filing season round the corner, it is pertinent for taxpayers to plan. The first question that arises is which ITR form to choose from the various forms notified by the tax department. The selection of the appropriate ITR form depends on an individual’s specific circumstances, including residential status, nature of income, taxable income thresholds, etc.Against this backdrop, a nuanced understanding of the various ITR forms for FY 2025\u201326 is essential for globally mobile professionals, domestic salaried taxpayers, and individual investors to understand the basis of applicability of the different ITR forms. Please refer to the table below.<\/p>\nITR-1, ITR-2 & ITR-3 \u2013 Which one to choose?<\/h2>\n<\/p>\n
Please refer to the table for selection criteria to choose appropriate ITR forms: <\/p>\n\n
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ITR filing under an incorrect form may be considered defective, potentially leading to delays in processing and follow-up actions from the tax department. This remains a common error in practice. For instance, salaried taxpayers who also engage in F&O trading activities often mistakenly file ITR-2, despite being required to file ITR-3 due to the presence of business income. Such misclassification may complicate compliance and necessitate revision of the ITR.Given the increasing complexity of income profiles, individual taxpayers should carefully assess the nature and sources of their income before selecting the applicable ITR form to avoid procedural setbacks.<\/p>\nResidential status \u2013 Does it impact ITR form selection?<\/h2>\n<\/p>\n
Individual taxpayers who qualify as RNOR or NR are not eligible to file ITR-1, regardless of their sources of income. In such scenarios, taxpayers are typically required to file ITR-2.Non-Resident taxation is limited to income received in India, deemed to be received in India, or income that accrues or arises in India. However, with the increasing prevalence of remote work and cross-border employment arrangements, determining the source and taxability of income has become significantly complex.Additionally, NR taxpayers are required to furnish enhanced disclosures in their ITR, including details such as their country of residence, Tax Identification Number (TIN), period of stay in India etc. Therefore, accurately determining residential status at the outset is essential to ensure correct reporting and appropriate ITR form selection.<\/p>\nOld vs New Personal Tax Regime – Can I revisit my tax regime in ITR?<\/h2>\n<\/p>\n
Salaried taxpayers effectively have two opportunities to evaluate their choice of personal tax regime. First, at the start of the year when communicating preferences to the employer for withholding purposes, and again after the close of the year at the time of filing the ITR.The ITR forms require taxpayers to explicitly confirm their selected regime at the time of filing. The NPTR continues to apply by default, while opting for the old personal tax regime (\u2018OPTR\u2019) requires an active selection. Notably, for salaried individuals, the choice made at the time of filing may differ from the option declared to the employer during the year.Given that the selected regime directly impacts on the availability of deductions and exemptions, taxpayers should undertake a careful reassessment before finalising their ITR.In cases where the OPTR is chosen, it is essential to ensure that all deductions and exemptions are accurately reported and supported by appropriate documentation, particularly considering increased system-driven validations and data cross-verification by the tax department based on reporting from corresponding businesses and information gathered by other sources.<\/p>\nITR schedules \u2013 How to navigate reporting?<\/h2>\n<\/p>\n
Having understood the criteria for selecting the ITR, now let us dive deeper into the forms and analyse the schedule wise reporting requirements. This serves the purpose to collate the key information and documents that individual taxpayers may require while filing the ITR forms. We have tried to break down the illustrative list below depending on the topic of reporting required in the schedules for the ease of reading and comprehension. However, consulting an expert on the subject matter is recommended before filing your tax return.Personal Information, Details of Directorship, Holding of Unlisted shares, etc.<\/span>The initial section of the ITR form focuses on core taxpayer information and applicability-linked disclosures that form the foundation of filing. Accurate reporting of personal details, directorship positions, and unlisted equity shareholdings is critical, as these disclosures are increasingly used for system-driven validations by the tax department. <\/p>\n\n
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Reporting of Sources of Income under various heads<\/span>With increased integration of AIS, TIS, TDS disclosures, and system-driven validations, taxpayers should ensure that income is correctly classified, reconciled, and disclosed under the appropriate schedules.<\/p>\n\n
\n\n\n\n<\/colgroup>\n\n\n| Schedules<\/td>\n | Key Reporting Considerations<\/td>\n | Changes in ITR-1 & 2 for FY 2025\u201326<\/td>\n<\/tr>\n |
\n| Schedule Salary \u2013 ITR 1 & 2<\/td>\n | Ensure consistency between Form 16 and Annual Information Statement (AIS)\/ Taxpayer Information Summary (TIS) available on the income tax portal<\/p>\n Accurately report the bifurcation of salary income as allowances, perquisites, and deductions<\/p>\n Maintain details for exemption claimed towards house rent allowance (rent paid, metro vs. non-metro classification, landlord details)<\/p>\n Salaried individuals having income from foreign retirement accounts (such as overseas pension or social security plans) should evaluate taxability carefully and maintain supporting documentation.<\/p>\n Form 10-EE is required to be filed if tax deferral is opted for income from foreign retirement accounts<\/p>\n<\/td>\n | ITR-1 no longer allows reporting of income from foreign retirement accounts where tax deferral is opted<\/td>\n<\/tr>\n |
\n| Schedule House property \u2013 ITR 1 & 2<\/td>\n | Maintain property-wise details including ownership share, co-owner PAN, and tenant details<\/p>\n Maintain complete housing loan documentation, including loan account details, outstanding balance, interest, etc.<\/p>\n<\/td>\n | ITR-1 now permits reporting of income from up to two house properties<\/p>\n Accordingly, additional details are required, including property address, co-ownership details, ownership percentage, name and PAN of co-owner, and tenant details.<\/p>\n Unrealised rent can now be claimed as a deduction, and the net rental income to be reported in ITR-1<\/p>\n No change in reporting requirements in ITR-2<\/p>\n<\/td>\n<\/tr>\n |
\n| Schedule Capital gains \u2013 ITR 1 & 2<\/td>\n | Capital gains remain a key scrutiny area, requiring transaction-level accuracy and reconciliation with AIS and broker statements<\/p>\n Correct classification of short-term and long-term capital gains is imperative<\/p>\n All capital transactions should be reported, including those where gains may ultimately be exempt or below the taxable threshold. For instance, long-term listed equity gains within the exemption limit of INR 125,000 or gains fully offset by available losses<\/p>\n<\/td>\n | Removal of dual-period capital gains computation requirement as it was applicable only for FY 2024-25 being a transition year<\/td>\n<\/tr>\n |
\n| Virtual digital assets (VDA) \u2013 ITR 2<\/td>\n | Report transaction-wise details of each transfer of crypto\/ other VDAs, including date of acquisition, date of transfer, sale consideration, and cost of acquisition<\/p>\n Loss from one VDA transaction cannot be set off against another VDA gain or any other income<\/p>\n No deduction is allowed other than cost of acquisition while computing taxable VDA income<\/p>\n<\/td>\n | No change<\/td>\n<\/tr>\n |
\n| Schedule other sources \u2013 ITR 1 & 2<\/td>\n | Report income on gross basis<\/p>\n Proper classification of interest based on the source, such as savings account, fixed deposit, or interest from provident fund, companies and financial institutions<\/p>\n<\/td>\n | Introduction of additional fields to report interest earned from:<\/p>\n Non-banking financial companies<\/p>\n Housing finance companies<\/p>\n Companies<\/p>\n Specified bonds or borrowings subject to concessional rates earned by NRs<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n\n\n<\/table>\n<\/div>\n Brought Forward, Carry Forward of Losses, Reporting of Exempt Income, Deductions, etc.<\/span>This requires careful attention, particularly as the ITR utility now performs enhanced inter-schedule validations and cross-checks with pre-filled information. Inaccurate claims, incorrect set-offs, or incomplete disclosures may lead to denial of benefits, validation errors, or processing delays.<\/p>\n\n \n\n\n\n<\/colgroup>\n\n\n| Schedules<\/td>\n | Key Reporting Considerations<\/td>\n | Changes in ITR-1 & 2 for FY 2025\u201326<\/td>\n<\/tr>\n | \n| Set-off of losses and Carry Forward \u2013 ITR 2:<\/p>\n Current Year Loss Adjustment (CYLA)<\/p>\n Brought Forward Loss Adjustment (BFLA)<\/p>\n Carry Forward of Losses (CFL)<\/p>\n<\/td>\n | Ensure losses are reported under the correct head of income and assessment year, as the utility requires year-wise break-up of brought-forward losses<\/p>\n Reconcile brought forward losses with the preceding year\u2019s ITR to avoid any mismatches<\/p>\n Verify that losses being set off are eligible against the relevant income head (for example, capital losses can be adjusted only against capital gains subject to applicable rules)<\/p>\n Note that certain losses cannot be carried forward unless the original return is filed within the prescribed due date for filing ITR<\/p>\n<\/td>\n | No change<\/td>\n<\/tr>\n | \n| Chapter VI-A deductions \u2013 ITR 1 & 2<\/td>\n | Life insurance premium \/ other eligible investments, maintain details such as policy\/ document number, name of institution\/ insurer amount invested\/ paid etc.<\/p>\n Housing loan principal repayment, maintain lender details and loan account information<\/p>\n Medical insurance deduction, maintain policy number, insurer name, insured person details, and premium amount paid<\/p>\n National Pension System (NPS) contribution, maintain PRAN\/ account details and contribution amount<\/p>\n Ensure deductions are not duplicated i.e. additional claims are not being made in ITR when already considered by employer in Form No. 16.<\/p>\n<\/td>\n | Section 80G: Additional disclosure now required for payment details such as transaction reference number (UPI \/ cheque \/ NEFT \/ RTGS) and bank IFSC code while claiming deduction for donations<\/p>\n Section 80GGC: Additional disclosures now required for name and PAN of the political party\/ electoral trust while claiming deduction for political contributions<\/p>\n<\/td>\n<\/tr>\n | \n| Schedule Exempt income \u2013 ITR 1 & 2<\/td>\n | Ensure correct classification of exempt income from the dropdown available<\/p>\n Exemptions based on Double Taxation Avoidance Agreement like Dependent Personal Services, Short Stay Exemption, etc. should be reported in this schedule and disclosure for availability of Tax Residency Certificate must be marked<\/p>\n<\/td>\n | Clarification that treaty-based exemption applies only to NR\u2019s<\/td>\n<\/tr>\n<\/tbody>\n\n<\/table>\n<\/div>\n Foreign Tax Relief, Reporting of Foreign Income and Foreign Assets, Balances of Assets & Liabilities<\/span>Comprehensive information exchange relating to overseas income and assets between governments requires special attention of eligible taxpayers when reporting under these schedules. These schedules require detailed disclosures, consistency across multiple reporting sections, and alignment with supporting documentation to minimise scrutiny exposure for resident taxpayers with overseas income, foreign tax credits, or offshore financial interests.<\/p>\n\n \n\n\n\n<\/colgroup>\n\n\n| Schedules<\/td>\n | Key Reporting Considerations<\/td>\n | Changes in ITR-1 & 2 for FY 2025\u201326<\/td>\n<\/tr>\n | \n| Schedule Foreign Source Income (FSI) and Schedule Tax Relief (TR) \u2013 ITR 2<\/td>\n | Taxpayers claiming foreign tax credit should report country-wise and source-wise foreign income, along with the corresponding foreign tax paid \/ withheld<\/p>\n Details such as taxpayer identification number in foreign jurisdiction, foreign tax reference details, relevant article of treaty (where applicable), and exchange rate used for conversion should be maintained<\/p>\n Amount claimed in Schedule TR should be reconciled with income reported in Schedule FSI<\/p>\n Form 67 is required to be filed for claiming foreign tax credit<\/p>\n Ensure underlying documentation is maintained such as foreign payslips, withholding statements, foreign tax payment receipts, foreign tax returns, etc.<\/p>\n<\/td>\n | No change<\/td>\n<\/tr>\n | \n| Schedule Foreign Assets (FA) \u2013 ITR 2<\/td>\n | ROR taxpayers should disclose details of all foreign assets\/ financial interests held at any time during the year, including – foreign bank accounts, custodial accounts, equity\/ debt interests, foreign retirement accounts, immovable property, trusts, and signing authority in overseas accounts<\/p>\n Foreign asset balances are to be reported on a calendar year basis i.e., as on December 31, 2025. However foreign income to be offered to tax and reported as per India financial year.<\/p>\n Maintain asset-wise details such as country, name\/ address of institution or entity, account number\/ identification number, peak balance \/ investment value, and income derived therefrom<\/p>\n Incomplete or partial disclosure may trigger scrutiny notices and applicable penal consequences<\/p>\n<\/td>\n | In Schedule FA(G), reporting of income under the head \u201cbusiness or profession\u201d has been removed now.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n Computation of Total Income & Tax, Tax Credits and Validation Checks<\/span>The concluding sections of the ITR form focus on computation of income from all heads, corresponding tax thereon, reconciliation of tax credits, and validation of data. Taxpayers should carefully review these to ensure consistency with Form 26AS, AIS, TIS and supporting records before electronic submission of the ITR. <\/p>\n\n ![\"Computation](\"https:\/\/static.toiimg.com\/photo\/msid-130977983\/computation-of-total-income-tax.jpg\" "\\"\\"") <\/div>\n<\/div>\n Before proceeding with filing, taxpayers should ensure that the ITR form is free from validation errors. Any inconsistencies, incomplete disclosures, or incorrect entries in the ITR may trigger validation errors in the utility, which must be resolved prior to electronic submission.Act before the statutory window closes: accuracy, preparedness, and accountability<\/span>In an increasingly digitised tax landscape, filing an ITR can no longer be treated as a routine, year-end exercise based solely on Form 16 or tax deducted at source. Taxpayers should note that detailed instructions for completing the notified ITR forms are still awaited and may provide further guidance on certain reporting requirements.With the above context, salaried taxpayers should initiate their preparation well ahead of the filing deadline by collating supporting documentation, reconciling pre-filled information such as AIS and TIS, and carefully reviewing schedule-wise disclosures to ensure accuracy and completeness.For most individual taxpayers the due date continues to be 31 July following the end of the year except for individuals having business or professional income. Delays can trigger late filing fees, interest liabilities, restrictions on the carry forward of certain losses, and slower processing of refunds.Ultimately, in a system increasingly driven by data matching, automation, and analytics, salaried taxpayers who treat return filing as a structured and proactive compliance exercise rather than a last-minute obligation will be far better positioned to avoid discrepancies, minimize risk, and ensure a smooth and efficient filing experience.(The author, Ravi Jain, is Tax Partner at Vialto Partners. Vikas Narang, Director and Pawan Digga, Manager at Vialto Partners have also contributed to the article. Views are personal)<\/span><\/div>\n
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