ITR Forms 1 & 4 for FY 2024-25: Key Changes & Who Can File

Published on May 1, 2025

The Income Tax Department has announced the release of the new ITR forms 1 and 4 for the assessment year 2025–26, for taxpayers filing returns for the financial year 2024–25. These simplified forms are primarily for individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) whose total income does not exceed Rs 50 lakh. Filing of these returns can commence for income earned between April 1, 2024, and March 31, 2025, with the last date for filing being July 31, 2025. Late filing may attract penalties, making it crucial for taxpayers to file their returns on time.

Key Changes in ITR Forms for FY 2024-25:

One of the major changes introduced this year is the inclusion of long-term capital gains (LTCG) of up to Rs 1.25 lakh on listed shares and equity mutual funds under Section 112A in ITR-1, also known as the Sahaj form. Previously, individuals earning from such capital gains had to file the more complicated ITR-2 form, making the process cumbersome for small investors. This simplification allows salaried taxpayers who have earned capital gains from listed shares or mutual funds to file their returns using the simpler ITR-1 form.

This move is aimed at easing the tax filing process for small investors, enhancing taxpayer services, and encouraging greater voluntary compliance. Samir Kanabar, Tax Partner at EY India, noted that this step reflects a shift towards improving the taxpayer experience by offering simplified forms for individual taxpayers. He also emphasized that this change would reduce filing-related stress, making the process more user-friendly and inclusive, especially for small taxpayers.

Additionally, ITR-1 can now accommodate taxpayers who earn up to Rs 1.25 lakh in LTCG from listed shares and equity mutual funds, eliminating the need for a more complex filing process. This change is expected to improve ease of compliance and attract a broader group of taxpayers to file on time.

Who Can File ITR-1?

ITR-1 (Sahaj) is the simplest form and is intended for resident individuals whose total income does not exceed Rs 50 lakh per year. This income can come from a variety of sources, including:

Salary or Pension: Income from regular employment or pensions.
Single House Property: Income from renting out a single house property.
Interest Income: Earnings from sources such as fixed deposits, savings accounts, or recurring deposits.
Agricultural Income: Small amounts of agricultural income, up to Rs 5,000.

ITR-1 is best suited for individuals with straightforward income structures within India and who have no complex financial dealings. This includes salaried employees, pensioners, and those with small interest income. However, certain individuals cannot use this form, including:

Directors of Companies: Individuals who hold the position of director in a company are not eligible.
Unlisted Equity Shares: If you have investments in unlisted equity shares, you must choose another form.
Foreign Income: Individuals with income from foreign sources or those who hold foreign assets are ineligible to use ITR-1.
Employee Stock Options (ESOPs): Individuals with deferred tax payments on ESOPs need to choose a different form.
Large Cash Withdrawals: If you have had tax deducted under Section 194N (related to large cash withdrawals), ITR-1 is not applicable.

In summary, ITR-1 is for individuals with basic, domestic sources of income, offering a simplified filing process for those who meet the eligibility criteria.

Who Can File ITR-4?

ITR-4, also known as Sugam, is designed for resident individuals, HUFs, and firms (except LLPs) with total income not exceeding Rs 50 lakh. This form is particularly useful for taxpayers earning income from businesses or professions that fall under the presumptive taxation schemes provided under Sections 44AD, 44ADA, or 44AE. This includes:

Small Business Owners: Individuals engaged in small businesses who wish to avail the presumptive taxation scheme under Section 44AD.
Freelancers and Professionals: Individuals providing professional services or freelancing who wish to opt for the presumptive scheme under Section 44ADA.
Transporters: Individuals in the transportation business who meet the criteria for the presumptive taxation scheme under Section 44AE.

Additionally, taxpayers who have long-term capital gains from the sale of listed shares or equity mutual funds, provided the gains do not exceed Rs 1.25 lakh, can also file ITR-4. However, certain taxpayers are excluded from using this form, including:

Directors of Companies: As with ITR-1, directors of companies are not eligible to use ITR-4.
Unlisted Equity Shares: If you have investments in unlisted equity shares, you must choose a different form.
Foreign Income or Assets: If you have income from foreign sources or own foreign assets, you cannot use ITR-4.
Agricultural Income: If your agricultural income exceeds Rs 5,000, you are not eligible for ITR-4.

ITR-4 is ideal for small business owners, professionals, freelancers, and transporters who have a straightforward income structure and wish to simplify the process of tax filing.

Conclusion:

The release of the new ITR forms 1 and 4 for FY 2024-25 is a significant step toward simplifying the tax filing process for small taxpayers in India. By allowing salaried individuals with LTCG of up to Rs 1.25 lakh to file ITR-1, the Income Tax Department is streamlining the tax return process and reducing the burden on small investors. As always, taxpayers should ensure they file their returns before the due date of July 31, 2025, to avoid penalties and complications.

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