ITR-1 (Sahaj) Gets a Simpler Makeover: Big Relief for Small Taxpayers in AY 2026-27

The Government of India has introduced some key changes in Income Tax Return (ITR) forms, effective from Assessment Year 2026-27. Among them, some taxpayer-friendly changes have been made in the ITR-1 (Sahaj) form, making it simpler to understand and comply with and more inclusive for small taxpayers.

1. Taxpayers Having Two Properties Now Allowed to File ITR-1:

Previously, only taxpayers generating income from a single property were allowed to file an Income Tax Return (ITR) Form 1. As per the recent changes in ITR-1, this eligibility has been expanded. Now, taxpayers with income from up to two house properties can also pay their tax liability using ITR-1. This reduces the need to switch to more complex forms for many individuals.

2. Capital Gains Now Allowed under ITR-1:

Another significant update is the inclusion of certain capital gains. Previously, any capital gains made taxpayers ineligible for ITR-1. Now, long-term capital gains (LTCG) from listed shares and equity mutual funds are allowed, as long as the gains do not exceed Rs 1.25 lakh. This is a big relief for small investors, as they can continue using the simpler ITR-1 instead of moving to ITR-2.

3. New LTCG Tax Rates Aligned in ITR-1:

The tax rates for long-term capital gains (LTCG) have been aligned with the latest budget provisions. Taxpayers now have two options: 12.5% tax without indexation or 20% tax with indexation benefits, depending on what is more suitable for their situation.