Can you use ITR-1 for AY 2025-26? Yes, if you are a resident with total income up to Rs 50 lakh from salary, one house property and other sources, AND now even if you have long-term capital gains under section 112A up to Rs 1.25 lakh, provided you have no capital loss to carry forward. This is the single biggest change this filing season. Last year, the same small gain pushed you into the longer ITR-2. Now the simple Sahaj form is back on the table for lakhs of small equity investors.
Until last year, a salaried person who sold a few listed shares or equity mutual fund units and booked even Rs 5,000 of long-term capital gain was forced out of ITR-1 and into the heavier ITR-2. The Central Board of Direct Taxes fixed this with Notification No. 40/2025 dated 29 April 2025, which notified the revised ITR-1 (Sahaj) and ITR-4 (Sugam) for Assessment Year 2025-26.
The quick rule: Small section 112A gain up to Rs 1.25 lakh and no carry-forward loss equals you can stay on ITR-1 or ITR-4. Anything more, or any loss to carry forward, and you move to ITR-2 or ITR-3.
This is the comparison that decides your form this season.
| Feature | ITR-1 Sahaj | ITR-2 |
|---|---|---|
| Who | Resident individual, not RNOR | Individual or HUF, any residency |
| Total income cap | Up to Rs 50 lakh | No cap |
| House property | One house property only | More than one allowed |
| LTCG section 112A | Allowed up to Rs 1.25 lakh | Allowed, any amount |
| Other capital gains | Not allowed | Allowed |
| Carry-forward or brought-forward loss | Not allowed | Allowed |
| Business or professional income | Not allowed | Not allowed, use ITR-3 |
| Schedule AL asset disclosure | Not applicable | Only if income above Rs 1 crore |
If every cell in the ITR-1 column fits your situation, file Sahaj. If even one does not, ITR-2 is your form.
For AY 2025-26, both ITR-1 and ITR-4 now accept long-term capital gains taxed under section 112A of the Income-tax Act, 1961, but only within strict limits. Two conditions must both be true:
If both hold, you report the gain in the simple form and pay tax on the portion above Rs 1.25 lakh at the section 112A rate. The CBDT confirmed this relief through Notification No. 40/2025 (29 April 2025). It is a pure simplification: the same tax outcome, but a far shorter form for ordinary investors.
Where ITR-4 fits. ITR-4 (Sugam) is for residents with presumptive business or professional income under sections 44AD, 44ADA or 44AE, with total income up to Rs 50 lakh. The same section 112A relief now applies to Sugam too. So a small shopkeeper or freelancer on the presumptive scheme who also booked a tiny equity gain can stay on ITR-4 instead of jumping to ITR-3.
The new LTCG window does not override the older bars. You are pushed to ITR-2 or ITR-3 if any of these apply:
If you are unsure whether your return facts are reflected in a department notice or assessment, you can file an RTI request to the Central Public Information Officer of the income-tax office holding your file. Our AI RTI Drafter helps you frame that request cleanly.
Schedule AL is the assets-and-liabilities disclosure where you list property, jewellery, vehicles, bank balances and loans. It never appears in ITR-1 or ITR-4, so most salaried filers never see it.
For AY 2025-26, the CBDT raised the income threshold for filling Schedule AL from total income above Rs 50 lakh to total income above Rs 1 crore. This was done through Notification No. 43/2025 dated 3 May 2025, which notified the revised ITR-2, and the same threshold flows into ITR-3.
Plain meaning: If you file ITR-2 or ITR-3 and your total income is between Rs 50 lakh and Rs 1 crore, you no longer have to complete Schedule AL. Only those above Rs 1 crore must still disclose assets and liabilities. This change does not touch ITR-1 or ITR-4 filers, because those forms carry no Schedule AL in the first place.
The intent is to reduce the compliance burden on middle-income filers while keeping disclosure for genuinely high earners.
For a deeper, step-by-step walk through filing and appeals against tax-information denials, see The RTI Playbook.
Kavita Menon, a salaried marketing manager in Pune, earned Rs 18 lakh in salary in FY 2024-25 and sold equity mutual fund units, booking a long-term gain of Rs 90,000 under section 112A. For AY 2024-25 she had to use ITR-2 only because of that gain. This year, for AY 2025-26, her Rs 90,000 gain is under Rs 1.25 lakh and she has no loss to carry forward, so she filed the much shorter ITR-1 in under twenty minutes. The Rs 90,000 sat fully within the section 112A exemption, so her extra tax on it was nil.
Yes, but only long-term capital gains under section 112A up to Rs 1.25 lakh, and only if you have no capital loss to carry forward. Any other capital gain, including short-term gains or property gains, still requires ITR-2.
Then you cannot use ITR-1 or ITR-4. You must file ITR-2, or ITR-3 if you also have business or professional income. The Rs 1.25 lakh ceiling is strict, so even a gain of Rs 1.26 lakh moves you to the longer form.
Yes. Notification No. 40/2025 dated 29 April 2025 extended the same section 112A relief to ITR-4. A resident on the presumptive scheme under section 44AD, 44ADA or 44AE with income up to Rs 50 lakh and a small equity gain can stay on Sugam.
Only if you file ITR-2 or ITR-3 and your total income is above Rs 1 crore. For AY 2025-26 the threshold rose from Rs 50 lakh to Rs 1 crore through Notification No. 43/2025 dated 3 May 2025. ITR-1 and ITR-4 do not contain Schedule AL at all.
You cannot use ITR-1 or ITR-4 if you have any brought-forward or carry-forward capital loss, even with a small section 112A gain. A loss to set off or carry forward requires ITR-2 or ITR-3.
File an RTI application with the Central Public Information Officer of the relevant income-tax office. You can ask for status of your return, assessment details or notices issued to you. Our AI RTI Drafter and First Appeal Builder help if a request is delayed or refused.
Author: Dr. Shrawan Kumar Pathak