ITR Filing 2026: 5 Major Rule Changes Taxpayers Must Know Before Filing Their Returns

The Income Tax Return (ITR) filing season for Assessment Year 2026-27 is now underway, and taxpayers across India are preparing to submit returns for income earned during Financial Year 2025-26. While the filing process may appear familiar, several important changes have been introduced this year that could directly impact how returns are filed and assessed.

The Income Tax Department has already released the online filing utilities and Excel tools for ITR-1 (Sahaj), ITR-2, and ITR-4 (Sugam). However, tax professionals advise salaried individuals to wait until mid-June before filing, as most employers are expected to issue Form 16 by then.

From expanded eligibility for ITR-1 to revised capital gains rules and new disclosure requirements, here are the five key changes every taxpayer should understand before filing an income tax return this year.

1. ITR-1 Now Covers More Taxpayers

One of the most significant updates this year is the expansion of the scope of ITR-1 (Sahaj), making it available to a larger group of taxpayers.

Previously, taxpayers filing ITR-1 could report income from only one house property. Under the revised rules, income from up to two house properties can now be reported in the form, simplifying compliance for many individuals.

Additionally, taxpayers can now report Long-Term Capital Gains (LTCG) arising from listed shares and equity-oriented mutual funds under Section 112A through ITR-1, provided certain conditions are met:

• Total LTCG does not exceed ₹1.25 lakh.

• No capital loss from previous years is being carried forward.

• The taxpayer otherwise remains eligible to use ITR-1.

This change is expected to benefit many small investors who previously had to use more complex return forms.

2. Capital Gains Tax Rules Have Been Revised

Capital gains taxation has undergone important changes following amendments introduced in July 2024.

One of the biggest shifts is the removal of indexation benefits for most asset classes. Instead, a uniform Long-Term Capital Gains tax rate of 12.5% now applies to many eligible assets.

The government has also simplified holding period requirements:

• Listed securities qualify as long-term assets after one year.

• Most other assets qualify after two years.

These changes affect investors, property owners, and taxpayers earning gains from the sale of capital assets.

Understanding the revised capital gains structure is essential before reporting investment income in this year's return.

3. New Disclosure for Unrealized Rental Income

The Income Tax Department has introduced a new reporting requirement related to rental income.

Taxpayers will now have to disclose rent that was due but could not be recovered from tenants. A dedicated column has been added to the relevant ITR forms for this purpose.

Earlier, taxpayers filing ITR-1 and ITR-4 had limited options for separately reporting such information. The new disclosure requirement aims to improve transparency and help determine actual taxable rental income more accurately.

Property owners should maintain proper documentation regarding unpaid rent before filing their returns.

4. ITR-4 Filers Must Report Closing Bank Balances

Another major change affects taxpayers filing ITR-4 under the presumptive taxation scheme.

Individuals and businesses claiming benefits under Sections 44AD, 44ADA, or 44AE must now disclose the total closing balance of all active bank accounts as of March 31, 2026.

This new requirement is intended to improve financial transparency and assist tax authorities in better assessing the financial position of taxpayers using presumptive taxation provisions.

Those eligible for ITR-4 should gather bank statements and account information before beginning the filing process.

5. New Tax Regime Disclosures Made Clearer

The process of opting into or opting out of the new tax regime has often created confusion among taxpayers in recent years.

To address this issue, the latest ITR forms include more detailed disclosures and clearer reporting requirements related to tax regime selection.

The updated forms are designed to help taxpayers better understand:

• Whether they are filing under the old tax regime or the new tax regime.

• The conditions for switching between regimes.

• Additional declarations required in specific situations.

The changes are particularly important for individuals with business or professional income, as the rules governing tax regime changes can be more complex for such taxpayers.

Why These Changes Matter

The government and the Income Tax Department continue to focus on making tax filing more accurate, transparent, and user-friendly. While many of the updates are intended to simplify compliance, they also introduce new reporting responsibilities.

Tax experts warn that overlooking these changes could result in incorrect filings, processing delays, notices from the department, or difficulties in claiming eligible benefits.

Important Filing Tip for Taxpayers

Before filing your return, ensure that all relevant documents are available, including:

• Form 16 (for salaried individuals)

• Annual Information Statement (AIS)

• Taxpayer Information Summary (TIS)

• Capital gains statements

• Bank account details

• Property income records

Reviewing these documents carefully and understanding the latest rules can help ensure a smooth and error-free filing experience.

With the filing season now open, taxpayers should take the time to familiarize themselves with the new provisions before submitting their Income Tax Return for FY 2025-26.