10 Major ITR Changes for AY 2026-27: What Every Taxpayer Must Know

Income tax return filing for Assessment Year 2026-27 includes several important changes affecting salaried individuals, property owners, investors, and small business taxpayers. The updates cover ITR form eligibility, house-property reporting, deduction disclosures, capital gains, tax slabs, filing deadlines, and revised returns.

AY 2026-27 applies to income earned between 1 April 2025 and 31 March 2026, also known as Financial Year 2025-26. Although the Income Tax Act, 2025 came into effect on 1 April 2026, returns for FY 2025-26 will continue to be filed under the Income-tax Act, 1961. Taxpayers must therefore select this assessment year while filing this return.

If you’re a taxpayer and keen to learn about the new changes in tax filing so that you can be free from ITR errors, we have covered here key changes in ITR, additional fee on late returns, form to choose, documents required, and mistakes to avoid for ITR filing. Keep scrolling.

ITR Changes for AY 2026-27: 10 Key Updates

1. AY 2026-27 Returns Will Be Filed Under the Old Income-tax Act

One of the biggest sources of confusion is the transition from the Income-tax Act, 1961 to the Income Tax Act, 2025.

Income earned from 1 April 2025 to 31 March 2026 belongs to AY 2026-27 and will be governed by the Income-tax Act, 1961. The new Act applies to income earned from 1 April 2026 onwards.

Therefore, taxpayers filing returns during July, August or later in 2026 for FY 2025-26 must:

• Select AY 2026-27.
• Use the notified ITR-1 to ITR-7 forms.
• Follow the applicable provisions and section numbers of the Income-tax Act, 1961.
• Claim TDS credit reflected against AY 2026-27.

Taxpayers do not need to file two returns during the transition year. The return for income earned during FY 2026-27 will become due in 2027.

2. ITR-1 Now Allows Income From Two House Properties

Earlier, ITR-1, also known as Sahaj, was generally restricted to taxpayers having income from only one house property. From this assessment year, an eligible taxpayer can report income from up to two house properties in ITR-1.

A resident individual can generally use ITR-1 when total income does not exceed ₹50 lakh and income is received from eligible sources such as:

• Salary or pension
• Up to two house properties
• Family pension
• Interest and other eligible sources
• Agricultural income up to ₹5,000
• Long-term capital gains under Section 112A up to ₹1.25 lakh

This change may help salaried taxpayers who own two properties avoid moving to the more detailed ITR-2 form solely because of the second property. (Income Tax Department)

However, ITR-1 cannot be used when the taxpayer has short-term capital gains, income from more than two properties, foreign assets, foreign income, business income, total income exceeding ₹50 lakh or other disqualifying conditions.

3. ITR-4 Also Permits Up to Two House Properties

The two-house-property benefit has also been extended to ITR-4, commonly known as Sugam.

ITR-4 may be used by eligible resident individuals, HUFs and resident firms other than LLPs where:

• Total income does not exceed ₹50 lakh.
• Business or professional income is computed under Sections 44AD, 44ADA or 44AE.
• Income is received from salary or pension.
• Income is received from up to two house properties.
• Eligible LTCG under Section 112A does not exceed ₹1.25 lakh.

Taxpayers with short-term capital gains, income from more than two house properties, total income above ₹50 lakh, or other excluded income cannot use ITR-4. (Income Tax Department)

4. New Field Added for Unrealised Rent

A separate field for rent that could not be realised has been introduced in ITR-1 and ITR-4.

Unrealised rent refers to rent that was due from a tenant but could not actually be recovered. Providing a separate reporting field can help taxpayers calculate taxable house-property income more accurately.

If unrealised rent is recovered in a later year, it is generally taxable as income from house property in the year of recovery. A deduction equal to 30% of the recovered unrealised rent may be available while calculating taxable income. (Income Tax Department).

Taxpayers should retain documents supporting the unpaid rent and any recovery made in later years.

5. Conditions for Treating Two Houses as Self-Occupied Have Been Relaxed

Taxpayers have been able to treat up to two houses as self-occupied since AY 2020-21, subject to specified conditions.

From AY 2026-27, the earlier conditions requiring the owner to either occupy the property as a personal residence or be unable to occupy it due to employment, business, or professional reasons have been removed.

This may simplify house-property reporting for taxpayers who own two residential properties and wish to treat both as self-occupied, subject to the applicable tax provisions. (Income Tax Department).

A property that is partly self-occupied and partly let out during the year may require a different tax calculation. Taxpayers should review the house-property schedule carefully before submitting the return.

6. Secondary Address Information Is Now Required

The AY 2026-27 ITR forms include a new field for a secondary address under personal and communication details.

Taxpayers must answer whether the secondary address is the same as the primary address.

• When “Yes” is selected, the primary address may be used as the secondary address.
• When “No” is selected, separate secondary-address information must be entered.

The requirement applies across major ITR forms and is intended to maintain more complete communication information for taxpayers. 

Taxpayers should also verify their mobile number, email address, PAN details and bank-account information before filing.

7. More Details Are Required for Tax Deductions

The AY 2026-27 forms require more detailed information for several Chapter VI-A deductions.

Section 80C

Under Section 80C, taxpayers may need to provide:

• Amount eligible for deduction
• Policy number
• Document identification number.

Section 80CCD(1) and 80CCD(1B)

The Permanent Retirement Account Number, or PRAN, must be entered when claiming eligible NPS deductions.

Section 80D

For health-insurance deductions, taxpayers may need to provide:

• Name of the insurance company
• Policy number
• Eligible health-insurance amount

Sections 80E, 80EE, 80EEA and 80EEB

Details such as the lender’s name, loan-account number, sanction date, original loan amount, outstanding amount and eligible interest may be required.

Section 80G

Taxpayers claiming deductions for eligible donations must provide additional information such as:

• Transaction reference number
• Bank IFSC
• Donation details

Section 80GGC

For eligible donations to political parties, the name and PAN of the political party must be reported.

Sections 80DD and 80U

Taxpayers may need to provide disability-related details and the acknowledgement number of Form 10-IA. 

These additional disclosures make it important to collect all policy documents, receipts, bank references, and loan certificates before starting the return.

8. Capital-Gains Reporting Has Been Simplified

For AY 2025-26, taxpayers had to separately report certain capital gains based on whether the transfer occurred before or after 23 July 2024.

Now this date-based bifurcation has been removed from the capital-gains schedule. Taxpayers no longer need to divide transactions solely based on whether the transfer happened before or after 23 July 2024.

However, taxpayers must still correctly report:

• Nature of the capital asset
• Purchase and sale dates
• Sale consideration
• Cost of acquisition
• Transfer expenses
• Applicable exemption
• Short-term or long-term classification

For specified listed securities covered by Section 111A, eligible short-term capital gains are generally taxed at 20%. Long-term capital gains covered by Section 112A are generally taxed at 12.5% on gains exceeding the applicable ₹1.25 lakh threshold. Different rules may apply depending on the asset, transaction date, residential status, and availability of grandfathering relief. 

Taxpayers should reconcile capital-gain figures with broker statements, AIS, and other transaction records.

9. New Tax-Regime Slabs and Section 87A Rebate Apply

The new tax regime remains the default tax regime for eligible individual taxpayers. For AY 2026-27, the new-regime slab rates are:

The rebate under Section 87A under the new regime has increased to a maximum of ₹60,000 for eligible resident individuals with total income up to ₹12 lakh, subject to the applicable rules and restrictions.

Under the old regime, the maximum Section 87A rebate remains ₹12,500 where the applicable total-income condition is satisfied. 

Taxpayers should calculate their liability under both regimes before selecting an option. Salaried and other non-business taxpayers can generally choose between the regimes through their ITR, while eligible taxpayers with business or professional income may need to file Form 10-IEA within the prescribed due date to opt for the old regime. 

10. Filing and Revised-Return Deadlines Have Changed

The applicable due date depends on the taxpayer category.

The official ITR-4 guidance confirms 31 August 2026 as the due date for the assessment year 2026-27. The transition guidance also lists 31 July, 31 August, 31 October and 30 November 2026 as applicable filing dates depending on the taxpayer’s circumstances. 

A belated return may be filed up to 31 December 2026 or before completion of assessment, whichever is earlier. Late-filing fees and interest may apply.

Additional Fee on Late Revised Returns

A revised return for AY 2026-27 can generally be filed up to 31 March 2027 or before completion of assessment, whichever is earlier.

However, a revised return filed after 31 December 2026 may attract an additional fee under Section 234-I:

• ₹1,000 where total income does not exceed ₹5 lakh
• ₹5,000 where total income exceeds ₹5 lakh

This additional fee applies from 1 January 2027 for the current assessment year. (Income Tax Department)

Which ITR Form Should You Use for AY 2026-27?

Selecting an incorrect ITR form may result in the return being treated as defective. Taxpayers can use the “Help me decide which ITR form to file” option available on the e-filing portal.

Documents Required for ITR Filing

Keep the following documents ready, wherever applicable:

• Form 16 and Form 16A
• Annual Information Statement
• Form 26AS
• Salary slips
• Bank statements and interest certificates
• Housing-loan interest certificate
• Rental agreement and rent receipts
• Capital-gain statements
• Dividend and interest details
• Donation receipts
• Insurance-policy details
• NPS contribution details
• Education, housing or electric-vehicle loan information
• Previous-year return and loss details
• Tax-payment challans

ITR forms are generally annexure-less, which means taxpayers do not normally upload these proofs with the return. However, the documents should be preserved in case they are requested during assessment or verification. 

PAN-Aadhaar linking is strongly advisable. The official ITR-4 guidance states that taxpayers may still be able to file when PAN is not linked with Aadhaar, but portal access and certain functions may be limited. 

Common Mistakes to Avoid

Avoid these common errors:

• Selecting the wrong assessment year
• Using ITR-1 despite having ineligible income
• Ignoring interest shown in AIS
• Reporting only Form 16 income
• Missing income from a second house property
• Claiming deductions without the required details
• Selecting the wrong tax regime
• Failing to reconcile capital gains
• Providing an incorrect bank account
• Forgetting to verify the return
• Waiting until the final day to file

Review the complete tax computation before submitting the return.

Conclusion

The ITR changes for AY 2026-27 are intended to simplify filing for some taxpayers while requiring more detailed and verifiable information from others.

The ability to report two house properties in ITR-1 and ITR-4 may benefit many homeowners. At the same time, additional deduction disclosures, mandatory secondary-address information, capital-gain reporting and revised-return fees make accurate preparation more important.

Before filing:

• Select the correct ITR form.
• Compare AIS and Form 26AS with your records.
• Confirm the applicable tax regime.
• Collect supporting documents.
• Check the filing deadline applicable to you.
• Review the return before submission.
• Complete verification promptly.

(Sources: Livemint, Economic Times, Financial Express, Business Today)

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is only for educational purposes. Always discuss with your SEBI-registered financial advisor for investment-related decisions.