Issues in ITR Forms

The Income Tax Department has released the updated Income Tax Return (ITR) forms for Assessment Year (AY) 2026-27 (Financial Year 2025-26), incorporating several important changes aimed at simplifying compliance, improving transparency, and strengthening data validation mechanisms. Many of these revisions stem from measures announced in the Union Budget 2025 and the ongoing efforts of the Central Board of Direct Taxes (CBDT) to streamline return filing and enhance reporting standards.

A clear understanding of these modifications is essential to ensure accurate return filing and avoid processing delays, notices, or data mismatches. The key changes introduced in the ITR forms for AY 2026-27 are summarized below:

1. Reporting of the fee for furnishing the revised return of income

The Finance Act 2026 has extended the time limit for filing a revised return from 9 months to 12 months from the end of the relevant tax year or from the completion of assessment, whichever is earlier. This extension will allow taxpayers to revise their returns even if a belated return was filed at the end of the permissible period. However, this extended period to file a revised return is applicable only upon payment of an additional fee under Section 234-I of the ITA 1961, which is as follows:

• Rs. 1,000, where the total income does not exceed Rs. 5 lakh; and
• Rs. 5,000, in other cases.

The new ITR forms incorporate a column to report fees paid under Section 234-I for furnishing a revised return of income.

2. Rationalisation in the details sought of the representative assessee

The ITR forms seek only the following three details if the representative assessee files the return:

• Name of representative assessee;
• Email ID of the representative assessee; and
• Contact number of the representative assessee.

3. Introduction of secondary address.

New ITR forms applicable for Assessment Year 2026-27 have expanded this requirement by introducing a separate field for a secondary address, thereby requiring assessees to furnish both primary and secondary addresses. Further, the existing fields for two mobile numbers and two email IDs have been redesignated as “Primary” and “Secondary” contact details.

4. Requires the reporting of turnover & income from futures & option trading

In the ITR form applies to taxpayers engaged in trading activities, including individuals, firms, and companies.

This schedule introduced specific columns to report turnover from Futures & Options (F&O) trading and the income from such trading that is credited to the profit and loss account.

In Part A for the Manufacturing account, Trading account, and P&L section, two new fields are added:

• 12c: Turnover from Futures & Options Trading
• 12d: Income from F&O Trading (transferred to P&L)

These sit alongside the existing fields 12a and 12b.

This in welcome changes, now trading in futures and options, these new fields give you clearer places to report turnover and income separately, reducing the chance of filing errors or mismatches with broker data.

5. Reporting is required for the disallowance of MSME interest

[ITR 3, 5 and 6]

As per Section 16 of the MSMED Act, delay in payment attracts compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India.

Additionally, Section 23 of the MSMED Act, 2006, specifically disallows deduction of such interest paid or payable for delayed payments to MSEs while computing income under the Income-tax Act, 1961.

To capture this disallowance, a new reporting column has been introduced in Part A – OI (Other Information) in ITR forms applicable for the Assessment Year 2026–27, requiring t]9axpayers to disclose the amount of such non-deductible interest.

Implication for businesses:

Now business keep track has outstanding payables to MSME vendors and has been accruing interest on such delayed payments, now is the time to review:

→       Whether vendors are registered under the MSMED Act
→       Whether payment timelines have been adhered to
→       Interest payable as per Section 23 of the MSMED Act, 2006

6. Requires disclosure of the interest and remuneration due or received from the partnership firm.

[ITR 3, 5 and 6]

[Schedule IF: Information regarding partnership firms in which you are a partner] in the ITR forms applies to individuals and entities who are partners in one or more partnership firms during the relevant financial year. This schedule is intended to capture key information about the assessee’s interest in such firms and to ensure proper disclosure of profit-sharing and capital contributions.

The ITR forms notified for Assessment Year 2026-27 introduced the following two additional reporting requirements:

• Amount of interest due or received from the partnership firm
• Amount of remuneration due or received from the partnership firm

7. Name and PAN of the political party to be furnished under Schedule 80GGC

[ITR 1 to 6]

Schedule 80GGC of the ITR is used to claim a deduction for contributions made to political parties or electoral trusts under Section 80GGC. The existing schedule requires the taxpayer to enter the contribution date and the amount contributed, specifying how much was paid in cash and how much was paid through other modes such as cheque, UPI, NEFT, or RTGS. It also asks for details like the transaction reference number and the IFSC code of the bank through which the payment was made.

The new ITR forms require two additional details from the taxpayer seeking a deduction under section 80GGC. Taxpayers are required to provide the name of the political party and its PAN under Schedule 80GGC.

8. Schedule 80G seeks the IFSC and Transaction Reference Number

[ITR 1 to 6]

[Schedule 80G] of the ITR forms seeks the disclosures in respect of the deductions claimed for donations made to specified funds, charitable institutions, or relief organisations under Section 80G. This schedule requires the taxpayer to provide detailed information for each donation, including the type of donation, the applicable limit, and the allowed deduction percentage. It also asks for the name, PAN, and complete address of the donee, along with the city, state code, and pin code, to ensure that the donation is traceable and made to an eligible institution.

The new ITR forms have introduced the following two additional reporting requirements in this Schedule for claiming deductions:

• Transaction reference number for UPI transfers or the cheque/IMPS/NEFT/RTGS reference number, and
• IFS code of the bank.

9. Changes made to incorporate the due date, extended to 31 ^st August by the Finance Act 2026, for filing the return of income

[ITR 3]

The Finance Act, 2026, has amended the ITA 1961 and ITR 2025 with respect to the due date for filing the return of income for taxpayers engaged in business or profession whose accounts are not required to be audited, as well as for partners of non-audit firms.

The due date for filing the return of income for such taxpayers has been extended from 31st July to 31st August. The ITR-3 form for Assessment Year 2026–27 incorporates this change, and accordingly, in Part A – General, which requires the assessee to specify the applicable due date for filing the return of income, the date of 31st July has been substituted with 31st August

10. Assessees opting for the presumptive tax scheme are required to disclose the investment made by them

[ITR 4]

A new column has been introduced in ITR-4 under the head “Financial Particulars of the Business”, requiring disclosure of the amount of investments made by the assessee. This marks an additional reporting requirement for taxpayers opting for the presumptive taxation scheme, where otherwise detailed financial disclosures are minimal.

11. Reporting of income from the presumptive scheme applicable to non-resident

[ITR 3 and 5]

[Schedule Part A—P&L (Profit and Loss Account)] in the ITR form captures details of the taxpayer’s financial-year profit and loss statement. This schedule applies to taxpayers who maintain books of accounts and is especially relevant to those engaged in business or professional activities.

In cases where regular books of account for business or profession are not maintained, the taxpayers are required to provide details under ‘No Account Case’, in which gross receipts and expenses are declared.

The new ITR forms have introduced specific columns for reporting profits and gains from businesses covered under Sections 44B, 44BB, 44BBA, 44BBC, or 44BBD. Non-resident taxpayers are now required to disclose the gross receipts/turnover and net profit from such businesses in this new column.

12. Reporting of interest income from Companies, NBFCs and HFCs in Schedule OS

[ITR 2, 3, 5 and 7]

[Schedule OS] in the ITR form captures details of income from other sources, such as interest, dividends, winnings, and other miscellaneous income.

The new ITR forms clarify that interest earned from companies, Non-Banking Financial Companies (NBFCs), and Housing Finance Companies (HFCs) shall be reported under the ‘Other’ column of Schedule OS. Accordingly, interest income from instruments such as fixed deposits, debentures, etc., with such entities is required to be disclosed in Schedule OS where the assessee is not engaged in the business of money lending.

13. Removal of the fields seeking reporting of foreign retirement account from ITR 1 and ITR 4

[ITR 1 and 4]

Section 89A offers resident individuals the option to defer payment of tax on income from foreign retirement benefit accounts from the year it is earned to the year it is withdrawn. This option is available only if the accounts are maintained in a notified country, and Form No. 10-EE is filed electronically. The income must be reported in the ITR forms applicable to an individual, i.e., ITR-1 to ITR-4.

In the new ITR forms, the columns for disclosing income from retirement benefit accounts maintained in both notified and non-notified countries have been removed from two ITR forms: ITR-1 and ITR-4. This change aligns with the eligibility conditions for these returns. Income from such accounts naturally comes from foreign assets. It is considered foreign source income, and taxpayers holding foreign assets or earning foreign income are not eligible to file ITR-1 (Sahaj) or ITR-4 (Sugam). Therefore, the inclusion of these specific reporting fields in earlier versions of the forms was irrelevant, and their removal reduces redundancy and enhances consistency in the returns.

14. Rationalisation of auditor details sought in ITR Forms

[ITR 3, 5, 7 and 7]

[Schedule Part A – General] requires information about the auditor if the accounts of the assessee need to be audited. Previously, the following details had to be included in ITR 3, 5, 6, or 7, as applicable to the assessee:

• Date of furnishing of the audit report
• Name of the auditor signing the tax audit report
• Membership No. of the auditor
• Name of the auditor (proprietorship/firm)
• Proprietorship/firm registration number
• PAN/Aadhaar No. of the auditor (proprietorship/firm)
• Date of audit report
• Acknowledgement Number of the Audit Report
• UDIN

In the new ITR forms, the reporting requirements for auditor details in this schedule have been significantly streamlined. Only the following details are required to be mentioned:

• Date of furnishing of the audit report
• Acknowledgement Number of the Audit Report
• Name of the auditor (proprietorship/firm)
• PAN of the proprietorship/firm

15. Bifurcated reporting of capital gains earned before or after 23 ^rd July 2024 is removed

[ITR 2, 3, 5, 6 and 7]

Under Section 45(1), capital gains are taxable in the year in which a capital asset is transferred, making the date of transfer crucial for determining the applicable tax provisions. With the enactment of the Finance (No. 2) Act, 2024, significant changes in the capital gains tax regime became effective from 23rd July 2024. Accordingly, for Assessment Year 2025–26, the ITR forms required a separate disclosure of capital gains arising before 23rd July 2024 and on or after that date, as different tax rates and provisions applied based on the timing of transfer.

In the new ITR forms, dual reporting has been removed, as the rate change was relevant only for the transitional period in the previous year, 2024–25. Since no such mid-year change exists for the previous year relevant to AY 2026–27, the requirement to bifurcate capital gains based on transfer date is no longer necessary, thereby simplifying the reporting framework.

16. Removal of Schedule BBS in ITR-6 due to shift in buyback taxation

[ITR – 6]

Up to 30th September 2024, companies were liable to pay tax on the distributed income arising from the buyback of shares, and such income was exempt in the hands of shareholders under Section 10(34A). Accordingly, buyback transactions were required to be reported in Schedule BBS of ITR-6.

However, with effect from 1st October 2024, the taxation mechanism has been shifted, whereby the buyback proceeds are now taxable in the hands of the shareholders and companies are no longer required to pay tax on such transactions. As a result, the relevance of Schedule BBS in ITR-6 has ceased, leading to its removal from the Assessment Year 2026–27.

17. Reporting for presumptive income under Section 44BBD

[ITR 3, 5 and 6]

The Finance Act, 2025, introduced Section 44BBD, providing a presumptive taxation scheme for non-residents engaged in supplying services or technology for setting up electronics manufacturing facilities or manufacturing electronic goods in India. Applicable from Assessment Year 2026–27, the scheme deems 25% of the specified receipts as taxable income.

To facilitate compliance, the ITR forms have been updated by amending the declaration in Part A–GEN to capture whether income is being offered under Section 44BBD, and by incorporating specific reporting in Schedule BP to disclose such deemed profits, in line with other presumptive taxation provisions.

From a compliance perspective, presumptive taxation schemes generally relieve taxpayers from the requirement to maintain books of accounts and undergo a tax audit under Section 44AB. While Section 44AB explicitly excludes assessees opting for Sections 44B and 44BBA from audit requirements, a similar explicit exclusion has not been provided for Section 44BBD. However, the manner in which the new ITR forms have incorporated Section 44BBD, similar to Section 44B or 44BBA, etc., indicates legislative intent to extend the same treatment, suggesting that tax audit may not be required in such cases, thereby aligning compliance requirements with the presumptive framework.

18. Separate reporting is required for certain interest incomes taxable at a concessional rate of 9%

[ITR 2, 3, 5, 6 and 7]

Section 194LC provides that an Indian company or a business trust is required to deduct tax at source on interest paid to non-residents in respect of borrowings made in foreign currency, long-term infrastructure bonds, or rupee-denominated bonds. In particular, a concessional TDS rate of 9% applies to interest payable on long-term bonds or rupee-denominated bonds issued on or after 1st July 2023 and listed on a recognised stock exchange in an IFSC, subject to applicable surcharge and health and education cess. In the new ITR forms, a column has been introduced in Schedule OS to capture such interest income specifically. This change will facilitate matching with TDS credits.

[The author can be reached at ankit.hariya@gmail.com.]