ITR Filing for FY 2024–25: Key Changes Every Taxpayer Must Know

1. 📄 ITR-1 Now Open to Certain Capital Gains

Until now, taxpayers with capital gains had limited options in terms of ITR forms. The most widely used form, ITR-1 (Sahaj), was restricted to individuals with income from salary, one house property, and other sources (like interest). However, for FY 2024–25, a major relaxation has been introduced.

Taxpayers earning long-term capital gains (LTCG) from listed shares and equity mutual funds—up to a limit of ₹1.25 lakh—are now permitted to file using ITR-1, provided they meet all other eligibility criteria for this form. This change is expected to benefit small investors who had to earlier navigate more complex ITR forms just for reporting minor gains.

However, this relaxation does not apply to:

• Taxpayers with short-term capital gains (STCG)
• Those carrying forward capital losses
• Individuals with business or professional income

In such cases, appropriate ITR forms such as ITR-2 or ITR-3 must be used.

Why this matters: It simplifies the filing process for small retail investors, reducing paperwork and saving time during returns preparation.

2. 📊 Updated Capital Gains Schedule Reflecting Budget 2024 Changes

The Union Budget 2024 introduced significant amendments to the taxation of capital gains. In response to this, the capital gains reporting schedule in ITR forms has been revised.

Capital gains now have to be bifurcated based on two distinct periods:

• Gains earned before July 23, 2024
• Gains earned on or after July 23, 2024

This division is essential as different tax rates may apply depending on the time of realization of gains.

To comply with this requirement, taxpayers are advised to collect updated capital gains statements from their brokers, mutual fund houses, or depository participants. These statements should clearly mention the date of sale, acquisition cost, and type of security to ensure accurate reporting.

Why this matters: It ensures proper application of tax rates based on revised rules and helps prevent under-reporting or errors during filing.

3. 🔄 Shift in Tax Responsibility for Share Buybacks

A significant structural change has been made concerning taxation on share buybacks.

Effective from October 1, 2024, the tax liability for share buybacks now rests with individual shareholders rather than the company. This marks a reversal from earlier provisions where companies paid the buyback tax.

Under the revised framework:

• The entire amount received from a company for buyback of its shares will be taxed in the hands of the investor.
• This amount will be treated as deemed dividend, meaning it will be taxed at applicable income tax rates.
• Importantly, the cost of acquisition will not be allowed as a deduction, which means the full amount becomes taxable.

However, the cost of the acquired shares can still be carried forward as a deemed capital loss, which can be set off against future capital gains.

Why this matters: Investors need to account for increased tax liability on buybacks and ensure proper planning to avoid a sudden tax hit.

4. 🏭 Mandatory MSME Payment Timeline Reporting

If you operate a business or are a professional filing under the Presumptive Taxation Scheme or under normal provisions, there's a new disclosure requirement concerning payments to MSMEs.

Taxpayers are now required to report the duration within which they settled their dues to Micro, Small, and Medium Enterprises (MSMEs). Specifically:

• Any payment made beyond 45 days of receiving goods or services from an MSME will not be allowed as a deductible business expense.

This move is aligned with Section 43B(h) of the Income Tax Act, which aims to promote timely payments to MSMEs, thereby improving their cash flow and working capital management.

Why this matters: Delayed payments will now have direct tax implications, prompting businesses to be more disciplined in settling their MSME dues.

5. 💼 Higher Threshold for Asset and Liability Reporting

The government has raised the threshold limit for disclosing assets and liabilities in the AL (Assets and Liabilities) schedule of ITR.

Previously, individuals and HUFs (Hindu Undivided Families) with a total income exceeding ₹50 lakh were required to provide detailed disclosures about their:

• Immovable properties
• Bank balances
• Investments
• Jewelry and vehicles

From FY 2024–25, this threshold has been increased to ₹1 crore.

This change is expected to ease the compliance burden on middle-income taxpayers who fall between the ₹50 lakh and ₹1 crore income brackets.

Why this matters: Reduced reporting requirements for many high-earning salaried individuals and professionals, thereby streamlining the ITR filing process.

🔍 Important Reminders Before Filing Your ITR

While the above changes are crucial, don't overlook the basics. Here are some general tips to ensure smooth and error-free ITR filing this year:

✅ Collect All Income Documents

• Form 16 from your employer (for salaried individuals)
• Bank statements and interest certificates
• Capital gains statements from brokers and mutual fund houses
• TDS (Tax Deducted at Source) certificates (Form 16A, 26AS, or AIS)

✅ Choose the Right ITR Form

Selecting the correct form based on your income type, capital gains, and profession is critical. Using the wrong form can lead to defective returns or rejection.

✅ File Within the Due Date

The usual deadline for filing ITR is July 31, unless extended by the government. Filing late can lead to penalties and interest under Sections 234F and 234A.

✅ Cross-Check Pre-Filled Data

Ensure that all pre-filled information (from the Income Tax portal) matches your documents. Correct any discrepancies before submission.

The updates introduced for FY 2024–25 reflect the government’s continued push towards digitalization, transparency, and timely compliance. These changes, especially around ITR-1 usability and MSME payment timelines, aim to make the tax ecosystem more efficient and fair.

Taxpayers should treat ITR filing not just as an annual obligation, but as an opportunity to understand their finances better and optimize future tax planning. In case of confusion, consulting a chartered accountant or certified tax consultant is strongly recommended.

By staying informed and filing correctly, you ensure peace of mind and avoid unnecessary scrutiny from the tax department.

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