Here is a quick summary of the key changes for ITR 1, 2, 3 and 4 under the new Income Tax Rules 2026, replacing the Income Tax Rules 1962, effective from 1st April 2026.
ITR filing AY 2026-27: Big changes in ITR-1, ITR-2, ITR-3 and ITR-4 you must know
The Central Board of Direct Taxes (CBDT) has introduced some key changes in the Income Tax Return (ITR) forms for the Financial Year (FY) 2025-26 (Assessment Year 2026-27). These changes are primarily to enhance transparency, comply with the new tax regime and ease reporting of certain incomes like capital gains and F&O trading.
Here is a quick summary of the key changes for ITR 1, 2, 3 and 4 under the new Income Tax Rules 2026, replacing the Income Tax Rules 1962, effective from 1st April 2026.
Key Changes in ITR-1 and 4
ITR-1 (Sahaj) and ITR-4 (Sugam) are simplified income tax forms for residents with a total income up to Rs 50 lakh in FY 2025-26. ITR-1 is for individuals having income from salary/pension, one house property and other sources (e.g. interest). ITR-4 is for Individuals/HUFs having income from business or profession under presumptive taxation (Sections 44AD/44ADA/44AE).
The changes in both forms are as follows:
1) Rationalisation of Foreign Retirement Account Disclosure in ITR-1 and ITR-4
The removal of specific disclosure fields relating to foreign retirement benefit accounts from ITR-1 and ITR-4 for AY 2026–27 is a rationalisation measure aimed at avoiding duplication and aligning the forms with existing foreign asset reporting requirements.
Taxpayers holding overseas retirement accounts, such as US 401(k) plans, are generally required to file ITR-2 or ITR-3 due to foreign asset or foreign income disclosures. Accordingly, the obligation to disclose such accounts continues in the relevant return forms.
2) Expanded Scope of Simplified Return Filing
The eligibility for filing ITR-1 and ITR-4 has been expanded to include individuals owning up to two house properties, compared to the earlier limit of one house property. This is expected to allow a larger number of taxpayers to use simplified return forms.
Key Changes in ITR-3
The ITR-3 form is necessary for business owners, professionals, and investors with taxable income from multiple sources. The changes in the ITR-3 form are as follows:
1) Reporting of Turnover & Income from Futures & Option Trading [Schedule Part A—Trading Account]
The revised ITR forms now include separate reporting fields for Futures & Options (F&O) turnover and related income credited to the profit and loss account, increasing reporting and reconciliation requirements for trading transactions.
2) Reporting Required for Disallowance of MSME Interest
Section 43B(h) disallows the deduction of payments payable to Micro or Small Enterprises (MSEs) if payment is not made within the prescribed timelines under the MSMED Act. Further, Section 23 of the MSMED Act disallows the deduction of interest paid on delayed payments to MSEs.
“To capture this disallowance, a new reporting column has been introduced in Part A – OI (Other Information) for AY 2026–27, requiring taxpayers to disclose such non-deductible interest,” said CA (Dr.) Suresh Surana.
3) Disclosure of Interest and Remuneration Due or Received from Partnership Firms [Schedule IF]
Taxpayers who are partners in partnership firms are now required to additionally disclose in Schedule IF:
- interest due or received from the partnership firm, and
- remuneration due or received from the partnership firm.
As per CA (Dr.) Suresh Surana, this change aims to improve the reporting of partnership-related income and capital participation.
4) Incorporation of the Extended Due Date up to 31st August
The Finance Act, 2026 has extended the due date for filing the return of income from 31st July to 31st August for taxpayers engaged in business or profession whose accounts are not required to be audited, and for partners of non-audit firms. The ITR-3 form for AY 2026–27 has been updated accordingly in Part A – General.
5) Reporting for Presumptive Income under Section 44BBD
The Finance Act, 2025 introduced Section 44BBD for non-residents providing services or technology for setting up electronics manufacturing facilities or manufacturing electronic goods in India. Applicable from AY 2026–27, the scheme taxes 25% of specified receipts as deemed income. The ITR forms have been updated to capture reporting under Section 44BBD in Part A–GEN and Schedule BP.
Key Changes in ITR-4
The revised framework now makes it mandatory for taxpayers to disclose all bank balances under Schedule BP
Earlier, certain balances/items such as Sundry Creditors, Inventories, Sundry Debtors and Cash in hand were mandatorily required to be disclosed, resulting in a compliance-driven reporting format even where such elements were not relevant to the taxpayer’s facts.
However, the revised framework now requires the taxpayers to mandatorily disclose their Bank Balances, which was an optional disclosure under Schedule BP – Financial Particulars of the Business till the last financial year.
It is pertinent to note that even though such disclosure did not form a part of mandatory disclosure under Schedule BP, the taxpayers were nevertheless required to disclose their Bank details under “Part D21 – Bank Account – Details of all Bank Accounts held in India at any time during the previous year (excluding dormant accounts)”, stated CA (Dr.) Suresh Surana.
In this schedule, the taxpayers were required to provide the details of all the savings/ current accounts held in India during the relevant tax year, except dormant accounts, which are not operational for more than 3 years.
Common Changes Across ITRs
1) Disclosure of Name and PAN of Political Party under Schedule 80GGC
Taxpayers claiming deduction under Section 80GGC are now required to additionally disclose the name and PAN of the political party or electoral trust while claiming deduction for contributions made.
2) Reporting of Fee Paid for Furnishing Revised Return
The Finance Act, 2026 has extended the time limit for filing a revised return from 9 months to 12 months from the end of the relevant tax year or completion of assessment, whichever is earlier. However, the revised return can now be filed only upon payment of an additional fee under Section 234-I. The new ITR forms include a separate column to report such fees paid.
3) Schedule 80G Requires IFSC and Transaction Reference Number
Taxpayers claiming deduction for donations under Section 80G are now required to provide additional details such as transaction reference number for UPI/NEFT/RTGS/IMPS/cheque payments and the IFSC code of the bank.
4) Reporting of Interest Income from Companies, NBFCs and HFCs in Schedule OS [ITR-2 and ITR-3]
The revised ITR forms clarify that interest income earned from companies, NBFCs, and Housing Finance Company (HFCs), such as fixed deposit or debenture interest, should be reported under the ‘Other’ column of Schedule OS where the taxpayer is not engaged in money-lending business.
5) Removal of Bifurcated Reporting of Capital Gains Before and After 23rd July 2024 [ITR-2 and ITR-3]
The requirement to separately report capital gains arising before and after 23rd July 2024 has been removed in the new ITR forms, as the transitional tax rate changes applicable for AY 2025–26 are no longer relevant for AY 2026–27. This simplifies capital gains reporting.
6) Separate Reporting for Interest Income Taxable at Concessional Rate [ITR-2 and ITR-3]
A new column has been introduced in Schedule OS to separately report interest income taxable at the concessional rate under Section 194LC. This change is expected to improve the matching of TDS credits.
7) Rationalisation of Representative Assessee Details
The revised ITR forms now require only three details for representative assessees:
- name,
- email ID, and
- contact number.
Earlier, address details, PAN/Aadhaar details etc. were also required.
8) Introduction of Secondary Address
The new ITR forms for AY 2026–27 introduce a separate field for secondary address in Part A – General. The existing fields for two mobile numbers and two email IDs have also been redesignated as “Primary” and “Secondary” contact details.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.
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