The Income Tax Department is gearing up for the new and simplified Income Tax Act, 2025, which will come into effect from April 1 next year. CBDT Chairperson Ravi Agarwal recently said that the department will release newly designed ITR forms and related rules by January 2026. These forms are being designed entirely in accordance with the new tax system, giving taxpayers time to understand the changes and update their systems, according to him.
Aggarwal stated that the department is working on developing new forms and a compliance framework. During an event at IITF, he said: “We are in the process of designing forms and rules. We are working towards putting this in place by January so that taxpayers have sufficient time to adapt their processes within their systems.”
The new law and new forms will come into effect on April 1, 2026, replacing the existing Income Tax Act, 1961. This change will have the potential to make tax filing more digital, easier and clearer in the coming years, the government claims.
New ITR Forms – What will be the major changes?
These ITR forms, which come with the new law, mark a major shift in the country’s tax system. They have been specifically designed to make filing easier for ordinary taxpayers, salaried individuals, pensioners, and small businesses.
We spoke with Dinkar Sharma, Company Secretary and Partner, Jotwani Associates, on this topic. He explained how the new forms will differ from the existing forms and why these changes were necessary.
1. New Tax Regime will be more prominent
The government has been working towards simplifying the tax structure for a long time. The new tax regime will be more prominent as a default option in the new forms. Exemptions and deductions available under the old regime will also be displayed in a simplified manner.
According to Sharma, “The redesigned ITR forms are expected to present the new regime more prominently, simplify deduction-related disclosures under the old regime, and encourage behavioral transition toward reduced exemptions and lower tax rates.”
This means that taxpayers will be encouraged to move to a system with simpler rates and fewer exemptions in the coming years.
2. Less legalese, simpler tables, and step-by-step instructions
To make the new forms easier to understand and complete, they are being designed with simple language and a clean structure. Technical and legal jargon will be replaced by easily understandable sections. This will reduce taxpayers’ fear or confusion while filling out the forms.
In addition, the number of sections in the new law has also been significantly reduced.
3. Improved matching with AIS-TIS and GST—fewer notices, more accurate data
Auto-prefill data and cross-verification of data will be significantly strengthened in the new forms.
- AIS
- TIS
- and GST returns for businesses
The new system will allow for more matching to reduce errors and mismatch notices.
4. Capital gains reporting — Disclosure required in 2 parts
An important change in capital gains reporting is that: Transactions made before and after July 23, 2024, will be required to be reported separately.
This will make reporting easier and more transparent, in accordance with the new tax rates and indexation rules.
5. Limit for reporting assets and liabilities increased
Until now, individuals with a net worth of more than Rs 50 lakh were required to provide detailed details of their assets and liabilities.
In the new system, this limit has been increased to Rs 1 crore. This will provide relief to middle-income taxpayers.
6. More people will be able to fill simpler forms (ITR-1 and ITR-4)
Eligibility has been improved in the new forms. More taxpayers, including those with certain capital gains (if there is no carry-forward loss), will be able to use the simplified forms ITR-1 and ITR-4.
7. Deadlines will be extended—Taxpayers will get more time
The filing deadline for Assessment Year 2025–26 will be extended to provide taxpayers, tax professionals and companies an opportunity to prepare themselves for the new rules.
8. Greater transparency for high-net-worth and complex income earners
While the forms will be simplified for ordinary and salaried taxpayers, reporting and disclosures will be more detailed for high-net-worth investors or those with complex income sources. This is being done to prevent tax evasion and increase monitoring.
9. Less confusion, fewer errors, fewer disputes
The new forms will provide clear guidance on rules and deductions, reducing common errors such as:
- incorrect income classification
- incorrect entry of exemptions/deductions
- and mismatches.
This will also reduce notices and disputes.
Dinkar Sharma says: “These redesigned forms strike a balance between easing the burden for routine taxpayers and demanding more detailed disclosures from those with complex income sources or substantial assets.”
When will the new forms be implemented?
The new law and new ITR forms will be applicable for the income year 2026–27. That is, they will apply to income earned in FY 2025–26.
The government will release the forms in January so that taxpayers, accountants, and companies can update their systems and documents in time.
Summing up…
The new ITR forms are a major step towards making India’s tax system more transparent, digital, and user-friendly. While the forms and process will be simplified for ordinary taxpayers, they will be more complex for those with complex incomes.