Navigating ITR Filing: Key Steps for FY 2025-26 Compliance

Selecting the correct ITR form is crucial for valid tax compliance. For FY 2025–26, ITR-1 is appropriate only for Resident and Ordinarily Resident (‘ROR’) individuals earning up to Rs 50 lakhs from salary or pension, having a maximum of two-house properties, interest income, and eligible aggregate long-term capital gains from equity-oriented shares or funds up to Rs 1.25 lakhs. Any other income/assets over and above what has been mentioned will require one to file form ITR-2. For example, salary earners beyond Rs 50 lakhs, other varied sources of income, brought forward or carry forward of losses, holding foreign assets etc. Submitting the wrong form could result in your ITR being marked as defective.

Tax Regime selection: Old v/s New Salaried taxpayers should also keep in mind that the tax regime chosen for withholding purposes with the employer does not necessarily lock in the same position for ITR filing. At the time of filing, there is an opportunity to re-evaluate and opt for the regime that is more beneficial based on the actual income earned, deductions available, and overall tax position for the year. Taxpayers are required to make an informed decision between the Old Personal Tax Regime (OPTR) and the New Personal Tax Regime (NPTR). For FY 2025–26, the NPTR maintains broader income slabs, offers a Rs 75,000 standard deduction for salaried class, and provides a tax rebate that can effectively make income(s) up to Rs 12 lakhs tax-free under certain specified criteria. The OPTR retains its familiar structure of deductions and exemptions, with a Rs 50,000 standard deduction and a lower rebate threshold. The optimal tax regime depends on which deductions and exemptions you can substantiate, not simply your income level.

Reconciliation of key tax information statements: Form 26AS, AIS and TIS Taxpayers should first get familiar with these information statements - Form 26AS, AIS, and the Taxpayer Information Summary (TIS) available on the Income tax portal before filing their ITR. Form 26AS is the traditional tax credit statement and records tax deducted or collected at source, advance tax payments, self-assessment tax, refund information, and certain high-value transactions. AIS provides a comprehensive summary of financial information linked to the taxpayer’s PAN, covering income from salary, interest, dividends, securities, mutual funds, property transactions, foreign remittances, and other financial transactions. TIS, in turn, provides an easier-to-understand summary of the details found in AIS by showing income and transaction amounts by category in a consolidated format, making it simpler to prepare your ITR. These statements give taxpayers a unified view of their financial data, so it is important to review them before filing. Regular checks help identify errors or missing entries early, allowing time for corrections. The AIS now covers more than just income and TDS; it includes major purchases, investments, interest, dividends, property, and securities transactions. Form 26AS, AIS, and TIS can be updated following the submission of an ITR, discrepancies may lead to automated notices from the tax department. Taxpayers should retain copies of these forms from their filing date, so they can confirm income and credits reported in case questions arise later.

Verification of Personal details and Key disclosures Taxpayers often focus on calculating their taxes but overlook confirming the accuracy of pre-filled personal information and mandatory disclosures prior to submitting returns. Checking identification details, bank information, income records, and statutory fields is essential, as mistakes may lead to mismatches, delays, or compliance problems. Ensuring all pre-filled data is correct helps guarantee a seamless and error-free filing process. Key areas to review include PAN-Aadhaar linkage, whether designated bank accounts are active and validated on the portal for receipt of refunds, and whether contact information such as mobile number and email address is up to date to receive important messages and verification OTPs. Taxpayers should also assess whether any specific disclosures are triggered in their case. For instance, individuals who are directors in any company at any time during the relevant FY or who held unlisted equity shares, should identify these reporting requirements in advance, and keep the relevant particulars ready for accurate disclosure in ITR. These items are often missed not because of technical difficulty, but because taxpayers do not evaluate their applicability early enough in the filing process.

Accurate reporting of salary is essential (ITR schedule S) Salary is considered a straightforward source of income; it often faces scrutiny. Taxpayers should carefully check every component of their taxable salary, such as allowances claimed exempt, perquisites, bonuses, leave encashment, and TDS reported by the employer. It is crucial to accurately disclose this breakdown in the Schedule Salary section of the ITR. HRA and related exemptions now demand exact data and detailed reporting, including workplace location, HRA received, rent paid, and salary details. Salaried individuals must review and document all exemption claims in their returns, rather than relying solely on payroll records, as regulatory checks have become more stringent. If you changed employers during the year, each employer may deduct TDS separately. When filing your ITR, combine all salaries, claim the standard deduction once, and use slab rates for total income. Avoid duplicate deductions and pay any tax shortfall in advance through self-assessment to mitigate interest implications. In brief, TDS on salary is not final; your ITR determines your actual tax liability.

House property: An overview of the taxation of rental income and the available deductions Many taxpayers are aware that housing loan interest may be deductible; however, fewer fully comprehend the distinctions between self-occupied and let-out property, deduction of municipal taxes, or the implications of tenant related TDS on reporting requirements. Municipal taxes are deducted from gross annual value to determine net annual value, only if paid by the owner during the FY, especially relevant for let-out properties. Self-occupied properties typically allow up to Rs 2 lakh in interest deduction per year, while let-out properties can claim a 30% standard deduction and interest on borrowed capital, with loss treatment varying by tax regime. For house property loss set-off, OPTR allows offsetting up to Rs 2 lakh against other income heads annually; NPTR restricts this, though losses can be carried forward under certain conditions. Interest paid on housing loan during the pre-construction phase qualifies for deduction in five equal annual installments, commencing from the year construction is completed. The pre-construction period concludes on March 31 preceding the year of property acquisition or completion, or upon loan repayment, whichever is earlier.

Reporting required for ITR schedule HP The schedule requires more comprehensive disclosures regarding house property that include property addresses, co-ownership percentages, co-owners’ names and PANs, and where applicable, tenant information. For housing loan deduction claims, lender particulars, loan account number, sanction date, loan amount, and outstanding balances are increasingly pertinent. As a result, house property disclosure has evolved beyond a simple “one-line schedule” and now represents one of the more document-intensive components of the tax return for individuals.

Capital gains: Where technical mistakes become expensive mistakes In comparison to the previous year, one welcome change in the ITR form is the removal of the additional or dual reporting requirement that was applicable until July 22, 2024. Nevertheless, capital gains remain among the most complex and error-prone aspects of reporting in ITR, underscoring the importance of both accurate analysis and thorough preparedness. Examining the capital gains taxation framework Capital gains represent one of the most technically challenging areas in ITR. Taxpayers must go beyond simply entering figures; they need to correctly classify assets, apply holding period rules, use special tax rates, understand exemption provisions, and incorporate indexation logic that depends on specific dates. The first step in capital gains computation is determining the holding period, which varies by asset class. Listed equity shares and equity-oriented mutual funds become long-term assets after more than 12 months of holding. In contrast, unlisted shares and immovable properties such as land and buildings require a holding period of more than 24 months to qualify as long-term. These distinctions are critical, as they directly impact the applicable tax rates and the availability of exemptions. The popular Rs 1.25 lakh exemption for long-term capital gains is limited to specified equity-type assets, such as listed equity shares and equity-oriented mutual funds, provided prescribed conditions are met. Taxpayers frequently make the mistake of applying this threshold to other asset classes, like property or gold, where it does not apply. When selling residential house property, taxpayers need to select either a flat 12.5% tax rate without indexation or a 20% tax rate with indexation. Choosing the best option means paying close attention to both the sale and acquisition dates. Taxpayers should also carefully evaluate the availability of exemptions ensuring that all prescribed conditions, investment timelines, and documentation requirements are satisfied. Exemptions relating to reinvestment in residential property, specified bonds etc. should be supported by adequate evidence, including proof of investment and, where relevant, deposits made under the Capital Gains Account Scheme before the due date of filing ITR. Further, one should review the availability of capital loss set off (subject to restrictions) and carry forward.

Reporting in ITR schedule CG & Schedule 112A From a reporting standpoint, capital gains must not be consolidated into a single figure. It is essential to distinctly disclose short-term and long-term gains, as well as accurately classify asset types—including listed shares, equity-oriented mutual funds, immovable property, unlisted shares, gold, debt-oriented investments, or other capital assets—in Schedule CG. Common errors frequently result from misclassification of transactions by category, applicability rate, or want of breakdown, rather than omission. Special consideration should be given to Schedule 112A, which pertains to eligible long-term capital gains arising from listed equity shares, equity-oriented funds etc. This schedule mandates the provision of transaction level details such as script or fund name, ISIN, number of units or shares, sale value, cost, and, where applicable, fair market value as of 31 January 2018 for grandfathering purposes. Taxpayers who rely solely on summaries may face challenges during ITR preparation if these specifics are unavailable. Prior to filing, taxpayers are advised to prepare comprehensive capital gains work accompanied by relevant broker statements, P&L reports, property purchase and sale agreements, and documentation related to exemptions claimed. It is also recommended that reconciliation with AIS, TIS, and transaction statements be finalized in advance to ensure accuracy in reporting.

Residuary head of income (ITR schedule OS) Income from other sources—such as interest, dividends, lottery winnings, certain gifts, and tax refund interest. All such income must be disclosed in the ITR, even if tax is deducted, to ensure accuracy and avoid mismatches with Form 26AS, AIS, or TIS.

DTAA benefits (ITR schedule FSI and schedule TR) Taxpayers proposing to claim relief under a Double Taxation Avoidance Agreement (DTAA) should, before filing the ITR, identify the foreign-sourced income being reported such as salary, interest, dividends, capital gains, or other income taxable in both India and the foreign jurisdiction and keep the relevant supporting documents ready. These typically include a valid Tax Residency Certificate from the foreign tax authority, Form 10F where applicable, foreign tax withholding certificates, tax payment receipts, income statements, and other documents supporting treaty eligibility. Taxpayers should then evaluate the relevant treaty article, the conditions attached to the benefit, and whether the income qualifies for a reduced tax rate, exemption, or foreign tax credit relief. Foreign income and taxes paid should also be reconciled with the disclosures made in the ITR and foreign tax credit schedules to ensure consistency and accuracy. In short, a DTAA claim should not be treated as a last-minute adjustment. Eligibility, treaty position, documentation, and return reporting should all be reviewed together before filing to reduce the risk of mismatch or challenge later.

Foreign income and assets disclosure (ITR schedule FA) Taxpayers qualifying as ROR should carefully review their overseas financial interests and ensure complete and accurate reporting in the relevant schedules of the ITR as of December 31, 2025. This includes foreign bank accounts, custodial accounts, foreign equity investments, interests in foreign entities, retirement accounts, foreign insurance policies with cash value, immovable property sit