ITR Update FY 2025-26 (AY 2026-27) - The Only Checklist You Need

The financial year 2025-26 (April 1, 2025 - March 31 2026) brings in a major cluster of tax changes. These changes will affect every Indian taxpayer, including salaried professionals, business owners, and investors; therefore, understanding them before filing your return for AY 2026-27 is essential. Generally, this is the last year governed by the regulations of the Income Tax Act, 1961, as the new Income Tax Act, 2025, has come into effect from April 1, 2026, for the tax year 2026-27 onwards.

In this blog, we will understand the latest ITR Update FY 2025-26 that every taxpayer must know. Here, from the revised capital gain rates to new ITR eligibility criteria, AIS reconciliation mandates, NRI-specific updates, and more, we will cover it all.

The Major ITR Updates For FY 2025-26

The Budget 2024 introduced significant revisions to the capital gains tax, raising the short-term capital gains tax to 20%, the long-term capital gains tax to 12.5%, and removing indexation for most assets. The 2025 budget (February 2025) introduced higher TDS thresholds, revised tax slabs under the new tax regime, and an enhanced basic exemption.

All of these changes introduced in Budget 2024 and Budget 2025 will apply together to the full FY 2025-26 filing.

New Tax Regime: The Default and Revised Slabs: Here, the basic exemption limit for the new tax regime is raised to Rs 4 lakh. There are now seven slabs from nil to 30% (which is above Rs 24 lakhs). The new tax regime is also the default regime; you can opt out and actively choose the old tax regime.

Capital Gains Rates Overhauled: The short-term capital gains on the equity are up to 20%. The long-term capital gains are flat at 12.5%. The indexation for most assets has been removed. CII for FY 2025-26 is 363 and is only applicable to pre-July 2024 property transactions.

The ITR Filing Deadlines: The new bifurcated due dates are: 31 July for ITR-1 and ITR-2; and 31 August for ITR-3 and ITR-4 (for non-audit cases). The revised ITR window is extended to 31 March 2027.

Enhanced TDS Thresholds: The TDS threshold for rent has been raised to Rs 6 lakh per year. The bank interest threshold is up to Rs 50,000 a year. The professional fee threshold has risen to Rs 50,000. New Section 194T on the partner payments.

AIS Is Now The Primary Income Reference: The Form 26AS now focuses only on TDS and TCS credits. The AIS further captures the full picture, including capital gains, dividends, foreign remittances, and SFT mismatches, with ITR triggering automatic notices.

ITR Form Eligibility Expanded: Taxpayers with up to two houses or properties can now file their ITR using ITR-1 and ITR-4; previously, it was only for one house property. Furthermore, some new fields have been added for unrealized rent or any asset disclosure.

The Changes In ITR Forms For AY 2026-27

For AY 2026-27, the income tax department has released updated ITR forms. Several eligibility criteria have been broadened, new fields have been added to the forms, and the old ones have been secured.

The following are the changes from one form to the next.

The Key Filing Deadlines For AY 2026-27

These new deadlines are announced in the Union Budget 2026. This is the first time structural changes to the filing deadlines in India have been made.

Here's a quick view of each deadline:

The AIS and Form 26AS Reconciliation Matters More Than Ever

For FY 2025-26 (AY 2026-27), the ITD has changed how both Form 26AS and AIS operate. Form 26AS is now streamlined to focus exclusively on TDS/TCS credits, self-assessment tax, and advance tax. The Annual Information Statement (AIS) now includes comprehensive income and the transaction register, and non-reconciliation is now the sole and biggest trigger for automated scrutiny notices.

The Form 26AS - What It Shows

• Tax deducted at source (TDS) on your income.
• TCS collects at the source.
• Advance tax paid by you.
• Self-assessment tax paid.
• Refund received.
• TDS defaults by deductors.

AIS - What It Covers (Broader)

• Salary and pension income
• Interest (savings, FD, RD)
• Dividends from shares/ MFs
• Mutual fund redemption and stock trades.
• The property purchase sale.
• Foreign remittances (LRS), Crypto /VDA transactions.
• Foreign government data for NRIs.

How To Use Them Correctly

You can use Form 26AS to verify TDS credit before claiming it in your ITR, as the portal will reject any tax credit not reflected in 26AS. Further use AIS to ensure you have declared every income head. Where the AIS shows income you believe is incorrect, submit the feedback via the portal (both the source and the deductor are notified).

Note: From tax year 2026-27 onwards, the Form 26AS will be replaced by Form 168, in line with the new Income Tax Act 2025 regulations, which integrate AIS data directly.

Common Reconciliation Mistakes To Avoid In AY 2026-27

The following are some of the critical and common reconciliation mistakes that you, as an Indian taxpayer, must avoid in AY 2026-27.

Not declaring FD interest below the TDS threshold: The banks report all interest to the AIS regardless of the TDS. If the FD interest is below Rs 50,000 (new threshold), no TDS is deducted, but the income still appears in the AIS and must be declared.

Missing Capital Gains From Broker Reports: Every equity redemption, mutual fund switch, and stock sale appears in AIS from your SFT filing with your broker. Even a small transaction can create mismatches if it is not reported in Schedule CG.

Previous Employer TDS Overlooked: If you change jobs, Form 26AS will show TDS from both employers under different TANs. Now filing with only your current employer's Form 16, leave unclaimed tax credit, and under-reported income for you.

Claiming TDS not deposited in 26AS: If your deductors have deducted TDS but have not deposited it with the government, it will not appear in Form 26AS. Claiming such credits results in demand notices and interest under Sections 234A and 234B.

The TDS Rule Updates For FY 2025-26

The budget 2025, effective from April 1, 2025, overhauled the TDS threshold across multiple sections. The overarching theme expands the thresholds to reduce the compliance burden on small taxpayers while rationalizing the compliance for new transaction categories. The following are certain impactful changes.

Section 194T - New TDS On Partner Payments: Starting from April 1, 2025, all partnerships, LLPs, and firms must deduct TDS at 10% on the payments made to partners (salary, remuneration, bonus, commission, interest on capital) exceeding the threshold of Rs 20,000 per year. The TDS is not applicable to the cash repayments or drawings. This is a major new compliance requirement for millions of other small firms and LLPs.

Higher Rate Under Section 206AA: If the payee does not provide a valid PAN, TDS shall be deducted at the higher rate of 20% under Section 206AA. Henceforth, ensure that your PAN card is updated with all banks, brokers, and employers before year-end to avoid excessive tax deductions.

The Capital Gains Tax Updates

The capital gains tax overhaul, effective from July 3, 2024 (mid-Budget 2024), is now completely in force for all of FY 2025-26. The ITR forms for AY 2026-27 have been revised and updated to mirror the new unified rates. The earlier pre/post July 23 date split filed in forms is now eliminated since all of FY 2025-26 falls under the new rate regime.

Section 115BBH - The Crypto/ virtual digital assets (VDA): All of the digital assets, such as Bitcoin, Ethereum, NFTs, and more, continue to get taxed at 30% regardless of the holding period. No deductions are allowed except for the cost of acquisition. Losses from VDA cannot be set off against any other income head. Under section 194S, TDS at 1% is applicable on each transaction above Rs 50,000 (Rs 10,000 for certain specified persons).

The CII for FY 2025-26 (Cost Inflation Index): The Central Board of Direct Taxes has notified CII = 363 for FY 2025-26. This is certainly used only for calculating indexed cost under the 20% with indexation option, available solely to resident individuals and HUFs for property acquired before July 23, 2024. For all other assets and for NRIs on property, the 12.5% withholding rate is applicable.

Key Capital Gains Set-Off Rules For AY 2026-27

The ITR Claming Capital Loss Must Be Filed On Time: For taxpayers, the capital losses can be carried forward for 8 years if the ITR is filed before the due date, which is July 31 for ITR-2. A belated return filed after 31 July forfeits the right to carry forward capital losses. Hence, timely filing is important for investors with unrealized loss positions.

New Compliance For High-Value Transactions

The Indian Income Tax Department has significantly upped its data collection network through the reporting of Specified Financial Transactions (SFTs). This is a mandatory issue for registrars, brokers, banks, and mutual fund houses. For FY 2025-26, it means the taxman knows about the high-value transactions before you file. Hence, the non-disclosure guarantees you a notice.

The Compliance Steps Before Filing For High-Value Taxpayers

The following are the compliance steps before filing for high-value taxpayers:

Download and review the AIS 2-3 weeks before the deadline hits.: Go to income-tax.gov.in, go to services, then annual information statement. Review each and every entry. Cross-check with your own bank statements, broker P&L, and MF statements.

Submit AIS feedback on incorrect entries: For any AIS entry that is incorrect (be it duplicate, wrong amount, or not yours), use the feedback option on the portal. The source gets notified, and the corrected data flows into the Taxpayer Information Summary, which pre-fills your ITR.

Verify All Property Transactions Under Section 194-IA: If you have sold a property, the buyer is obligated to deduct 1% TDS and file for 26QB. You must ensure that the sale consideration in 26QB matches the sale consideration in your registered sale deed under the declaration, which carries a Section 270A penalty risk.

Reconcile All Mutual Fund & Equity Transactions: You must depend on the capital gains statement from your broker and CAMS/K Fintech. Ensure that every transaction matches your AIS entries. The CII for FY 2025-26 is 363; use it only for eligible income calculations.

The Updates For NRIs In AY 2026-27

In India, non-resident Indian (NRI) taxpayers faced a different set of tax obligations and opportunities during the FY 2025-26 filing season. There are certain changes for NRIs, right from revised capital gains TDS rates to expanded AIS coverage for foreign government data.

The Bottom Line

FY 2025-26 still closes under the IT Act, 1961, as the new Income Tax Act, 2025, takes effect from April 2026 for future years' filings. In a nutshell, the ITR update for FY 2025-26 includes revised capital gains rates, higher TDS thresholds, expanded eligibility for ITR-1 and ITR-4, strict deadlines, and enhanced AIS systems. All for such changes, signatures towards the tax department's move to automated, data-led compliance. It is safe to say that the era of ,underreported FD interest unreported equity trade is over.

As an NRI, if you are seeking professional assistance for filing your ITR in India, Savetaxs is the name to trust. From residential status assessment and income computation to tax treaty benefits (DTAA), TDS recovery, ITR filing, e-verification, tax planning, and more, our experts ensure your NRI ITR filing is completed correctly and in compliance with Indian tax laws and FEMA.

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