ITR Forms AY 2025-26: ITR-1 with LTCG up to Rs 1.25 lakh

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.

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:

1. Your total LTCG under section 112A does not exceed Rs 1.25 lakh for the year. This matches the Rs 1.25 lakh annual exemption that section 112A grants on listed equity shares and equity mutual funds.
2. You have no capital loss to carry forward and no brought-forward capital loss to set off in the return.

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:

• Your section 112A gain crosses Rs 1.25 lakh, even by one rupee.
• You have any short-term capital gain, or any capital gain other than section 112A, such as on property or debt funds.
• You have a capital loss to carry forward to future years.
• You are a company director, hold unlisted equity shares, or have deferred ESOP tax.
• You own foreign assets, have foreign income, or are a Resident but Not Ordinarily Resident.
• Your total income exceeds Rs 50 lakh.

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.

1. Is your total income above Rs 50 lakh, or do you have business income, foreign assets, or capital gains beyond a small section 112A gain? If yes, you are on ITR-2 or ITR-3.
2. Are you a resident with income up to Rs 50 lakh, one house, salary and interest, and at most Rs 1.25 lakh of section 112A LTCG with no loss to carry forward? File ITR-1.
3. On the presumptive scheme with income up to Rs 50 lakh and the same small equity gain? File ITR-4.
4. Filing ITR-2 or ITR-3 with income between Rs 50 lakh and Rs 1 crore? You can now skip Schedule AL.

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.

• CBDT Notification No. 40/2025 dated 29 April 2025, notifying ITR-1 Sahaj and ITR-4 Sugam for AY 2025-26
• CBDT Notification No. 43/2025 dated 3 May 2025, notifying ITR-2 and the revised Schedule AL threshold
• Section 112A and section 139, Income-tax Act, 1961

Author: Dr. Shrawan Kumar Pathak