Filing ITR-1 in 2025: Eligibility, New Rules, and Must-Know Tips

Income Tax Return (ITR) filing season is here, and for millions of salaried individuals in India, ITR-1 is the go-to form. However, several crucial updates and compliance requirements have been introduced for Assessment Year 2025-26. Here’s what you should know.

What Is ITR-1?

ITR-1, also called Sahaj, is a simplified return form designed primarily for salaried individuals with straightforward income profiles.

Who Is Eligible for ITR-1 (AY 2025-26)?

You can file ITR-1 if your income sources and profile meet ALL these criteria:

Residential Status: Must be a resident (not ‘not ordinarily resident’).

Income Types:

• Income from salary or pension
• Income from one house property
• Income from other sources (such as interest, family pension)
• Long-Term Capital Gains (LTCG) under section 112A up to a specific threshold (see below)
• Agricultural income up to ₹5,000

Total Income: Must not exceed ₹50 lakh (pre-deductions).

Other Conditions:

• No investment in unlisted equity shares
• Not a director in any company
• No deferred tax on ESOPs
• No assets (including financial interest) located outside India
• You own assets or have financial interests outside India (NEW for AY 2025-26)
• TDS deducted under section 194-N (large cash withdrawals)
• You derive business income (like F&O or intraday trading)
• Capital gains are complex (not only section 112A)

Note: Even if your total income doesn’t cross the taxable threshold, you may be required to file ITR-1 under certain circumstances—like large savings account deposits (above ₹50 lakh), high foreign travel expenditure (above ₹2 lakh), or electricity bills exceeding ₹1 lakh in the year for which ITR to be filed .

Major Changes in ITR-1 for AY 2025-26

Long-Term Capital Gains (LTCG) Reporting

• New Provision: Taxpayers can now report LTCG only under Section 112A in ITR-1, provided:
• Total LTCG does not exceed ₹1.25 lakh
• No carry-forward or set-off of losses
• LTCG does not arise from complex situations (e.g., no business income from F&O, or intraday trading)

Illustration: If you invested ₹50,000 in equity shares and sold for ₹1, 20,000 after one year, your profit of ₹70,000 (below ₹1.25 lakh) qualifies for ITR-1 reporting.

Aadhaar Update: Only a valid and verified Aadhaar number is accepted. The option to use an enrollment number is now removed. If you fail to link or verify Aadhaar, your ITR will be considered invalid, refunds may be blocked, and your PAN could be deactivated

Enhanced Deduction Reporting: A new dropdown facility allows easier selection of deductions, simplifying the process for taxpayers.

Mandatory Declaration of Bank Accounts: All bank accounts must be disclosed, except dormant accounts (inactive for over 3 years).

Reporting Exempt Income: This section shows income on which no tax is payable, making returns more transparent.

Tax Regime Selection: Taxpayers can switch between old and new tax regimes directly within the ITR-1 form each year, with the default being the new regime. No separate form is required for regime change, and your choice can differ from what was notified to your employer.

Key Compliance Alerts

• Filing is mandatory even for non-taxable income in specified scenarios (see eligibility above).
• All valid bank accounts must be declared.
• Maintain accuracy in declaring LTCG and eligible exemptions.
• Ensure Aadhaar is updated and verified—enrollment number is no longer valid.
• Be cautious with regime selection; review implications each year.

Conclusion

ITR-1 remains the easiest route for millions of Indian taxpayers, but new compliance requirements and expanded reporting mean you should be vigilant about eligibility and disclosures. Always check for updated rules before filing and, if necessary, consult a tax professional for complex scenarios.

Stay compliant and file on time to avoid penalties!