CBDT has notified the new Income Tax Return forms for FY 2025–26 (Assessment Year 2026–27), and this filing season brings some of the most significant changes in recent memory. Budget 2025 introduced zero tax on income up to ₹12 lakh under the new regime, overhauled the tax slabs, introduced a brand-new ITR-B form for undisclosed income, and tightened reporting requirements across all existing forms. Whether you are a salaried employee in Mumbai, a business owner, or an NRI, understanding which ITR form applies to you — and what has changed — is the first step to a clean, penalty-free filing. This guide, prepared by a CA in Mumbai, covers everything you need to know.
Key Takeaway: Budget 2025 Zero-Tax Benefit
Under the new tax regime, individuals with total income up to ₹12 lakh pay zero income tax due to the enhanced Section 87A rebate. For salaried taxpayers with a standard deduction of ₹75,000, the effective tax-free limit is ₹12.75 lakh. This applies only if you opt for the new regime — the default from FY 2023–24 onwards.
Which ITR Form Should You File for AY 2026–27?
Choosing the wrong ITR form is one of the most common mistakes that leads to defective return notices from the Income Tax Department. Here is a clear breakdown of each form and who must use it:
| Form | Who Should File | Key Exclusions |
|---|---|---|
| ITR-1 (Sahaj) | Resident individuals with income up to ₹50 lakh from salary/pension, one house property, and interest income | Cannot use if: director in a company, hold unlisted shares, have capital gains, or have foreign income/assets |
| ITR-2 | Individuals and HUFs with income from salary, multiple house properties, capital gains, foreign assets/income — but no business income | Cannot use if you have business or professional income (use ITR-3) |
| ITR-3 | Individuals and HUFs who have business or professional income (including F&O trading) | Requires filing of P&L and Balance Sheet if turnover exceeds threshold; tax audit if applicable |
| ITR-4 (Sugam) | Individuals, HUFs, and firms (not LLP) opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE with total income up to ₹50 lakh | Cannot use if: director, hold unlisted shares, or have foreign income/assets |
| ITR-5 | Partnership firms, LLPs, AOPs, BOIs, and cooperative societies | Not for individuals, HUFs, or companies |
| ITR-6 | Companies other than those claiming exemption under Section 11 (charitable trusts) | Mandatory e-filing; companies claiming Section 11 exemption must use ITR-7 |
| ITR-7 | Persons including companies required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D) — trusts, political parties, research institutions | Specific to entities claiming exempt status |
| ITR-B (New) | Persons who have been subjected to a search, seizure, survey, or requisition proceedings under the Income Tax Act | Mandatory where undisclosed income needs to be declared post-search; replaces the earlier Block Assessment route |
A CA in Mumbai who handles outsourced accounting services for businesses routinely navigates form selection across ITR-3, ITR-5, and ITR-6 — the three forms that require detailed financial statement disclosures and are most prone to errors.
Budget 2025: The New Tax Regime Slabs for FY 2025–26
The Union Budget presented on February 1, 2025 made the new tax regime significantly more attractive. The revised slabs are as follows:
| Annual Income Range | New Regime Tax Rate | Old Regime Tax Rate |
|---|---|---|
| Up to ₹4,00,000 | NIL | NIL (up to ₹2.5L) |
| ₹4,00,001 – ₹8,00,000 | 5% | 5% (₹2.5L–₹5L) |
| ₹8,00,001 – ₹12,00,000 | 10% | 20% (₹5L–₹10L) |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% (above ₹10L) |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
Important: The Section 87A rebate under the new regime has been enhanced to ₹60,000 (previously ₹25,000), effectively making total income up to ₹12 lakh tax-free. However, this rebate does NOT apply to special-rate income such as Short Term Capital Gains (STCG) under Section 111A or Long Term Capital Gains (LTCG) under Section 112A — a critical nuance that even experienced taxpayers miss.
Standard Deduction Enhanced to ₹75,000
Salaried employees and pensioners get a flat standard deduction of ₹75,000 under the new regime (up from ₹50,000). This means a salaried individual with a gross salary of ₹12.75 lakh effectively has a net taxable income of ₹12 lakh and pays zero tax under the new regime.
NPS Employer Contribution: Section 80CCD(2) Enhanced
For private sector employees, the employer's contribution to NPS deductible under Section 80CCD(2) has been increased from 10% to 14% of basic salary, bringing it on par with government employees. This is available in both the old and new regimes and provides meaningful tax savings for employees whose employers offer NPS.
What Is the New ITR-B Form?
ITR-B is a newly notified form introduced for the first time for AY 2026–27. It is applicable where the Income Tax Department has conducted a search, seizure, or requisition under Sections 132 or 132A, or a survey under Section 133A of the Income Tax Act.
Previously, income assessed in search cases went through Block Assessment — a separate process. The introduction of ITR-B streamlines this by requiring the taxpayer themselves to disclose and quantify undisclosed income in a structured return. Key features:
- Filed for the block period covering up to 6 previous assessment years plus the year of search
- Includes schedules for disclosed and undisclosed income, asset details, and sources of cash or investments found during search
- Tax rate on undisclosed income: flat 60% + 25% surcharge = effective 75% (Section 113)
- Must be filed within 60 days of receiving the notice under Section 153C or completion of search assessment
- Normal ITR forms (ITR-1 through ITR-7) are still filed separately for the regular assessment year
If your business or premises has been subject to a survey or search, it is critical to engage a CA in Mumbai experienced in search and seizure matters — the ITR-B filing process has significant legal and financial consequences.
Key Changes in Reporting Requirements for AY 2026–27
Beyond the new slab rates and forms, CBDT has introduced several important reporting changes across all ITR forms this year:
Capital Gains — Post Budget 2024 Rates Now Reflected
The ITR Schedule CG has been redesigned to capture the revised capital gains tax rates announced in Budget 2024 (effective from July 23, 2024):
- LTCG on listed equity / equity MF (Section 112A): 12.5% (previously 10%) on gains above ₹1.25 lakh per year (exemption limit increased from ₹1 lakh)
- STCG on listed equity / equity MF (Section 111A): 20% (previously 15%)
- LTCG on other assets (Section 112): 12.5% without indexation (indexation removed from Budget 2024 for most asset classes)
- STCG on other assets: Taxed at applicable slab rates
The Schedule CG in ITR-2, ITR-3, and ITR-5 now has a split between gains arising before and after July 23, 2024, since the old and new rates apply to different periods of the same financial year for FY 2024–25 assets, though for FY 2025–26 the post-July 2024 rates apply throughout.
Virtual Digital Assets (Crypto) — Tighter Disclosure
All ITR forms now include an enhanced Schedule VDA (Virtual Digital Asset) requiring taxpayers to disclose:
- Date of acquisition and date of transfer of each VDA transaction
- Cost of acquisition and full value of consideration
- Computation of profit — taxed at flat 30% under Section 115BBH with no deductions except cost of acquisition
- TDS deducted at source under Section 194S (1% by the buyer/exchange) must be reconciled against Form 26AS
TDS Threshold Changes — Enhanced Limits
Budget 2025 raised several TDS thresholds, which affects how much tax is deducted from your income at source and therefore your refund/payable position when filing:
- Interest income for senior citizens: TDS threshold doubled to ₹1,00,000 (from ₹50,000)
- Rent payments: TDS threshold doubled to ₹6,00,000 per year (from ₹2.4 lakh)
- Interest on securities: ₹10,000 threshold removed; now based on PAN-linked deduction
- Professional fees (Section 194J): Threshold increased to ₹50,000 per year
Foreign Assets and FEMA Disclosure (Schedule FA)
The Schedule FA (Foreign Assets) in ITR-2, ITR-3, ITR-5, and ITR-6 has been expanded. Taxpayers with any foreign bank accounts, foreign equity holdings, ESOPs from foreign parent companies, or interests in overseas trusts must disclose full details. Non-disclosure attracts a penalty of ₹10 lakh under the Black Money Act — making this one of the highest-risk omissions for professionals with multinational employers.
New Regime vs Old Regime — Which Is Better for You?
Despite the new regime being the default, the old regime still makes sense for many taxpayers, particularly those with significant deductions. Here is a quick framework:
- New regime is better if: Your income is below ₹12.75 lakh (salaried), you have minimal Section 80C investments, no home loan (Section 24b deduction), and no HRA exemption claim
- Old regime is better if: You have a home loan, claim HRA exemption, have Section 80C investments of ₹1.5 lakh, and NPS contributions — because deductions can bring your taxable income significantly below what the new regime would give you
- Business owners and professionals (ITR-3 filers) can switch between regimes each year, but once they opt for the old regime and then switch out to new, they cannot return to old regime in subsequent years. This one-way door makes the choice critical.
Outsourced accounting services that include tax advisory — like those offered by KC Shah & Associates — typically run both regime calculations for every client before filing to ensure you pay the minimum legally permissible tax.
ITR Filing Due Dates for AY 2026–27
Late filing fee under Section 234F: ₹1,000 if total income does not exceed ₹5 lakh; ₹5,000 in all other cases. Additionally, if you have tax payable, interest under Section 234A accrues at 1% per month from the due date until actual payment.
5 Common ITR Filing Mistakes to Avoid for AY 2026–27
The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) now capture data from banks, registrars, brokers, and GSTN. Any mismatch between your ITR and AIS will trigger an automated scrutiny notice. Always download and cross-check AIS before filing.
The ₹60,000 Section 87A rebate under the new regime does NOT reduce tax on STCG (Section 111A) or LTCG (Section 112A). Many taxpayers with equity gains incorrectly apply the rebate to their entire tax liability. The ITR utility does block this, but manual return filers often make this error.
Futures & Options trading is treated as business income — even a single F&O trade in the year means you must file ITR-3, not ITR-1 or ITR-2. If you have F&O losses and want to carry them forward, the return must be filed on or before July 31, 2026.
ESOPs are taxed as perquisite (salary income) at the time of exercise — the employer deducts TDS and reports it in Form 16. When you eventually sell the shares, capital gains apply. Many employees double-count or miss one of these events. ITR-2 or ITR-3 must be used; ITR-1 is not valid for ESOP holders.
Filing the return is only Step 1. The return is not complete until you e-verify it — via Aadhaar OTP, net banking, DEMAT account, or by sending a signed physical ITR-V to CPC Bengaluru. You have 30 days from the date of filing to complete e-verification. A return that is not verified within 30 days is treated as never filed.
Documents Checklist Before You File
- Form 16 / Form 16A from employer and all TDS deductors
- Form 26AS and AIS/TIS downloaded from the Income Tax portal
- Bank statements for all accounts (interest income, savings account credits)
- Capital gains statements from broker / CAMS / KFintech for mutual funds
- Property sale/purchase documents if applicable (for capital gains computation)
- Home loan interest certificate from lender (if claiming Section 24b — old regime)
- Rent receipts and landlord PAN if claiming HRA exemption (old regime)
- 80C investment proofs: PPF, ELSS, Life Insurance, EPF, etc.
- Section 80D premium receipts (health insurance)
- Details of foreign assets, foreign bank accounts, or ESOPs from foreign employers
- VDA / crypto transaction history from exchange (for Schedule VDA)
Why Outsourced Accounting Services Make ITR Filing Simpler
For business owners, founders, and high-income professionals, ITR filing has moved well beyond a simple form submission. Between capital gains tax calculations, perquisite valuations, FEMA disclosures, TDS reconciliation, and regime comparison — the complexity is substantial. As a leading CA firm providing outsourced accounting services in Mumbai, KC Shah & Associates handles ITR filings for individuals and businesses across all ITR form types throughout the year.
Our tax advisory process includes a full AIS reconciliation, regime comparison worksheet, advance tax review, and a post-filing compliance calendar — so you always know what to expect next, whether it is advance tax instalments, self-assessment tax, or a refund follow-up with CPC Bengaluru.
Get Your ITR Filed Correctly — The First Time
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