ITR-1 and ITR-2 Major Updates for AY 2026-27: A Complete Guide for Salaried Assessees
The Central Board of Direct Taxes (CBDT) has notified revised ITR forms for Assessment Year 2026-27 (Financial Year 2025-26), introducing a series of meaningful changes that directly affect salaried assessees. With the return filing deadline of 31st July 2026 fast approaching, it is essential to understand what has changed, which form applies to your situation, and what compliance pitfalls to avoid. Some changes bring welcome simplification, while others impose stricter disclosure requirements. Here is a comprehensive breakdown.
Why These Changes Matter for Salaried Assessees
Every assessment year, the CBDT revises ITR forms to align them with legislative amendments, policy directions, and enforcement priorities. For AY 2026-27, the revisions to ITR-1 (Sahaj) and ITR-2 carry significant practical implications. Choosing the wrong form, missing a mandatory disclosure, or selecting an incorrect tax regime can expose an assessee to scrutiny, disallowance of deductions, or penalty proceedings.
Understanding these changes in advance — rather than rushing through the filing process at the last moment — is the most prudent approach.
Major Changes in ITR-1 (Sahaj) for AY 2026-27
1. LTCG Under Section 112A Now Permitted in ITR-1
This is arguably the most significant relief introduced this year for small investors who are also salaried assessees.
Previously, even a modest Long-Term Capital Gain (LTCG) from listed equity shares or equity-oriented mutual funds required an assessee to abandon the simpler ITR-1 and file the considerably more detailed ITR-2. This caused unnecessary complexity for small investors who otherwise had straightforward income profiles.
Under the revised framework for AY 2026-27:
- A salaried assessee can now file ITR-1 if they have LTCG taxable under
Section 112Afrom listed shares or equity mutual funds - The LTCG amount must not exceed ₹1.25 lakh
- There must be no brought-forward capital loss from prior years under the capital gains head
- There must be no carry-forward capital loss to subsequent years
Important Note: If the LTCG exceeds ₹1.25 lakh, or if there is any capital loss to be carried forward or set off, the assessee must still file ITR-2. The relaxation is strictly conditional.
This change is particularly beneficial for salaried assessees who make periodic investments in equity mutual funds through SIPs and redeem small amounts periodically. Such assessees no longer need to navigate the complexity of ITR-2 solely on account of modest capital gains.
2. House Property Income — Coverage Expanded to Two Properties
Under the earlier ITR-1 structure, only assessees with income from a single house property were eligible to use the Sahaj form. This restricted a large number of salaried assessees who owned two properties — a scenario that is increasingly common in urban India.
For AY 2026-27, ITR-1 now accommodates income from up to two house properties, making it accessible to a wider segment of salaried assessees.
New Disclosure Requirements for House Property in ITR-1
Along with this expansion, the CBDT has introduced additional disclosure fields to enhance transparency: