From April 1, 2026, India’s new Income-tax Act, 2025 will reshape how taxpayers file their returns. While ITR-1 to ITR-7 remain, the draft Income-tax Rules, 2026 tighten eligibility for simplified forms like ITR-4, expand disclosure requirements, and push digital-first compliance across all categories. With draft ITR forms open for public feedback until February 22, 2026, taxpayers may soon face a more detailed and structured return-filing process.
New Income Tax Law from April 1, 2026: What happens to your ITR forms? (AI-generated image)
India’s income tax system is set for a structural reset. The Income-tax Act, 2025 will come into force from April 1, 2026, replacing the six-decade-old Income-tax Act, 1961. To operationalise the new law, the government has drafted the Income-tax Rules, 2026, along with revised tax forms, including ITR forms.
Before finalising them, the government has placed the draft Income-tax Rules, 2026 and forms in the public domain to seek feedback from taxpayers, professionals and other stakeholders. The draft rules will remain open for comments for 15 days, up to February 22, 2026, after which they are expected to be notified.
So what does this mean for taxpayers—and more importantly, what happens to ITR-1 to ITR-7 under the new law?
Familiar ITR structure, but with sharper boundaries
At a broad level, the government has retained the existing ITR framework. Taxpayers will continue to see ITR-1 to ITR-7, broadly mapped to the same categories—salaried individuals, business owners, companies, firms, and trusts.
However, the draft rules make one thing clear: eligibility conditions are now more precisely defined, and simplified returns are being tightly ring-fenced.
ITR-1: Still the simplest, but digital-first
ITR-1 (Sahaj) remains meant for resident individuals earning income from salary, one house property and other sources like interest. The draft rules reaffirm that this return is meant only for straightforward cases.
One important clarification is on filing mode. Electronic filing is the default, and paper filing is allowed only for super senior citizens aged 80 years or above. For everyone else, digital filing—either through electronic verification code (EVC) or digital signature—is the rule.
ITR-2: The default once things get complex
ITR-2 continues to apply to individuals and Hindu Undivided Families (HUFs) who do not have business or profession income. This includes taxpayers with capital gains, multiple house properties, or foreign income.
Under the new rules, ITR-2 is clearly positioned as the fallback return once a taxpayer no longer qualifies for ITR-1. With the new capital gains framework and tighter foreign asset rules under the Income-tax Act, 2025, disclosures in ITR-2 are expected to become more detailed.
ITR-3: Business income brings heavier disclosures
Taxpayers earning income from business or profession will continue to file ITR-3. The draft rules indicate that once a taxpayer falls outside presumptive taxation or simplified returns, ITR-3 becomes mandatory.
Given the expanded rules on perquisites, capital gains, and special income categories, ITR-3 is likely to become more disclosure-heavy, especially for professionals, traders, and high-income individuals.
ITR-4 (Sugam): Biggest tightening under the new rules
The most significant change for individual taxpayers is around ITR-4 (Sugam).
While ITR-4 remains available for presumptive taxation cases, the draft rules clearly list who cannot use this form. Taxpayers will be barred from filing ITR-4 if they:
Have foreign assets or foreign income
Are directors in a company
Held unlisted equity shares during the year
Earn more than ₹50 lakh
Own more than two house properties
Have carried-forward losses
Have agricultural income above ₹5,000
In short, ITR-4 is no longer a “one-size-fits-all” shortcut. Many small business owners and professionals who earlier used Sugam may now be pushed into ITR-3.
ITR-5 and ITR-6: Structure stays, compliance deepens
ITR-5 (for firms, LLPs, AOPs and BOIs) and ITR-6 (for companies) continue largely unchanged in structure. However, the draft rules strengthen digital compliance, audit linkages and reporting requirements.
For companies, digital signature filing remains mandatory, and there is closer integration with new returns such as ITR-A (for business reorganisation) and ITR-BL (for block assessment cases) introduced under the new law.
ITR-7: Trusts and institutions under sharper scrutiny
ITR-7, used by charitable trusts, political parties and exempt institutions, sees a clear push towards greater transparency and electronic compliance.
Audit reports, donation disclosures, and utilisation of funds are closely linked to the return. The draft rules make it clear that defective or delayed filings can risk registration or exemptions, reinforcing a substance-over-form approach.
One clear message: digital, detailed, and disciplined filing
Across all ITR forms, the draft Income-tax Rules, 2026 send a consistent message:
Electronic filing is the norm
Simplified returns are narrowly defined
Disclosure requirements are expanding
The tax administration will rely more on structured data
Importantly, the government has invited public feedback before finalising these rules. Taxpayers and professionals have time until February 22, 2026, to study the draft ITR forms and flag practical issues.
When the new law finally kicks in from April 1, 2026, the ITR numbers may look familiar—but the way taxpayers file, qualify, and disclose will be noticeably different.
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