Navigate the Income Tax Return Process for FY 2024-25
A detailed guide on the latest ITR forms, eligibility criteria, and filing tips for the assessment year 2025-26.
Companiesinn
Created: 25th July, 2025 7:15 AM, last update:25th July, 2025 7:15 AM
Article Content
Introduction to Income Tax Returns for FY 2024-25
As the financial year comes to a close, taxpayers must prepare for the income tax filing process. The Income Tax Department has introduced updated software for the Income Tax Return (ITR) forms ITR-1, ITR-2, ITR-3, and ITR-4 for the financial year 2024-25, applicable for the assessment year 2025-26. Notably, these forms have been revised in accordance with changes to the Income Tax Act announced in the recent Budget 2024. Understanding these forms and their specific eligibility requirements is crucial for a seamless filing experience.
Who Can File Using the ITR-1 Form?
The ITR-1 form, often referred to as Sahaj, has undergone modifications to simplify the filing process for many individual taxpayers. Now, those with long-term capital gains from the sale of listed equity shares or equity mutual fund units can file using this form, provided their gains do not exceed ₹1.25 lakh during the financial year.
Eligibility Criteria for ITR-1
To file using ITR-1, taxpayers must meet the following conditions:
- Be an individual considered ordinarily resident (ROR).
- Have total taxable income not exceeding ₹50 lakh for FY 2024-25.
- Income sources must include:
- Salary
- Income from one house property
- Other sources (like interest, dividends, pensions)
- Long-term capital gains (up to ₹1.25 lakh) from listed shares or mutual funds
- Agricultural income up to ₹5,000
It's important to note that long-term capital gains from these sources fall under Section 112A of the Income Tax Act.
Who is Eligible for the ITR-2 Form?
For taxpayers who do not qualify for ITR-1, the ITR-2 form is available. This form has been updated to allow reporting of capital gains from transactions before and after the significant date of July 23, 2024. Furthermore, it provides options for taxpayers to claim capital loss on share buybacks starting October 1, 2024. The threshold for reporting assets and liabilities has also increased to ₹1 crore.
Eligibility Criteria for ITR-2
Taxpayers meeting any of the criteria below should file their tax returns using ITR-2:
- Individuals with a residential status of ROR, RNOR, or Non-Resident.
- Hindu Undivided Families (HUFs).
- Total taxable income exceeding ₹50 lakh in FY 2024-25.
- Varied income sources excluding business profits, including:
- Salaries
- Multiple house properties
- Other income sources (interest, dividends, capital gains)
- Taxpayers who are directors in a company or hold unlisted equity shares.
- Those with foreign income or assets.
- Income derived from the sale/transfer of Virtual Digital Assets (VDAs) such as cryptocurrencies and NFTs.
Understanding the ITR-3 Form
The ITR-3 form is specifically designed for taxpayers who earn income from business or profession. Recently, it has added noteworthy references to Section 44BBC, which pertains to income generated from cruise business activities.
Eligibility Criteria for ITR-3
Taxpayers who can file using ITR-3 must meet any of the following:
- Individuals or HUFs with business income.
This thorough overview of the ITR forms and their eligibility criteria is vital for all taxpayers preparing to file their returns for FY 2024-25. Staying informed about these updates will ensure that you comply with the latest regulations and maximize your tax benefits.
Conclusion
In summary, the changes to the income tax return forms for FY 2024-25 reflect the government's efforts to simplify tax filing for individuals and families. By understanding the specific eligibility criteria for ITR-1, ITR-2, and ITR-3, taxpayers can navigate the filing process with greater ease. Make sure to gather all necessary documentation and consult with a tax professional if needed to ensure accurate reporting and compliance.
Frequently Asked Questions
What are the key updates to the income tax return forms for FY 2024-25?
For FY 2024-25, the Income Tax Department has introduced updates to the ITR forms ITR-1, ITR-2, ITR-3, and ITR-4, reflecting changes from the recent Budget 2024. Notably, the ITR-1 form now allows taxpayers with long-term capital gains of up to ₹1.25 lakh from listed shares or mutual funds to use it, simplifying the process for many individual taxpayers. The ITR-2 form has been revised to accommodate capital gains reporting from transactions before and after the important date of July 23, 2024, and it includes provisions for claiming capital loss on share buybacks starting October 1, 2024. Understanding these updates is essential for ensuring accurate and compliant tax filings.
Who can use the ITR-1 form for filing their income tax returns?
The ITR-1 form, known as Sahaj, is available for individual taxpayers who meet specific criteria. To file using ITR-1, you must be an ordinarily resident individual with a total taxable income not exceeding ₹50 lakh for FY 2024-25. Your income sources should include salary, income from one house property, interest from other sources, pensions, and long-term capital gains from listed shares or mutual funds (up to ₹1.25 lakh). Additionally, you can report agricultural income up to ₹5,000. This form is ideal for those with straightforward income sources, making the filing process more efficient.
What are the eligibility criteria for using the ITR-2 form?
The ITR-2 form is intended for taxpayers who do not qualify for ITR-1. You can use ITR-2 if you are an individual with a residential status of either ROR, RNOR, or Non-Resident, or if you belong to a Hindu Undivided Family (HUF). If your total taxable income exceeds ₹50 lakh for FY 2024-25 or if you have income from multiple sources that exclude business profits, such as salaries, capital gains, or foreign income, you should file using ITR-2. This form also caters to those who hold unlisted equity shares, directors of companies, or possess Virtual Digital Assets like cryptocurrencies.
What types of income are eligible for reporting under ITR-3?
ITR-3 is specifically designed for taxpayers who earn income from business or profession. If you are an individual or a Hindu Undivided Family (HUF) with business income, you are eligible to use this form. The recent updates include references to Section 44BBC, which pertains to income generated from cruise business activities. If you have diversified income streams, including business income, you should ensure to gather all necessary documentation related to your business activities to facilitate accurate reporting while filing your returns.
How can I ensure a smooth filing process for my income tax return?
To ensure a smooth filing process for your income tax return, start by understanding which ITR form you qualify to use based on your income sources and total taxable income. Gather all necessary documentation, including salary slips, bank statements, and details of capital gains or losses. It’s also wise to keep track of any changes in tax regulations that may affect your filing. Consider consulting a tax professional for guidance on complex situations, especially if you have multiple income sources or foreign assets. Planning ahead can help you avoid last-minute rush and errors in your return.
What should I do if I am unsure about which ITR form to file?
If you're unsure about which ITR form to file, take a moment to evaluate your income sources and total taxable income. Start by reviewing the eligibility criteria for each form: ITR-1 for simpler individual taxpayers, ITR-2 for those with more complex income situations, and ITR-3 for business income earners. You can also utilize online resources or consult the official Income Tax Department website for guidance. If you're still uncertain, consider reaching out to a tax consultant or professional who can provide personalized advice based on your specific financial circumstances.
Start Your Business Today
Complete company registration with expert guidance