Final Call: Know Your Deadlines
For most individual taxpayers, including salaried employees and pensioners, the due date to file Income Tax Returns (ITR) for the Financial Year 2025-26 (Assessment Year 2026-27) is July 31, 2026. This deadline applies to those who are not required to have
their accounts audited. While more than four crore returns have already been filed, the government has indicated that an extension is unlikely this year. However, there is some relief for certain categories. Taxpayers with business or professional income not liable for an audit, who file ITR-3 or ITR-4, now have an extended deadline of August 31, 2026. For those whose accounts require an audit, the deadline remains October 31, 2026.
New vs. Old Tax Regime: The Default Choice
For the FY 2025-26, the new tax regime continues to be the default option for all taxpayers. If you wish to use the old regime and claim various deductions like HRA, LTA, and those under Section 80C, you must actively opt for it when filing your return. The new regime was made more attractive in the Union Budget 2025, with a higher basic exemption limit of ₹4 lakh and revised slabs. A key feature is the enhanced rebate under Section 87A, which makes income up to ₹12 lakh effectively tax-free. For salaried individuals, a standard deduction of ₹75,000 under the new regime raises this tax-free limit to ₹12.75 lakh. The old regime remains unchanged, offering a basic exemption of ₹2.5 lakh and numerous deductions, which may still be more beneficial for those with significant investments and expenses to claim.
ITR Form Updates for AY 2026-27
The Central Board of Direct Taxes (CBDT) has introduced several changes to the ITR forms for this assessment year to simplify filing and enhance reporting. A significant update to ITR-1 (Sahaj) allows taxpayers to report income from up to two house properties, a facility previously unavailable. It also now permits the reporting of long-term capital gains from equity up to ₹1.25 lakh, which previously required filers to use the more complex ITR-2 form. For those using ITR-2 and ITR-3, capital gains reporting has become more detailed. Furthermore, new disclosure requirements are in place for F&O trading and payments to MSMEs.
The High Cost of Missing the Deadline
Failing to file your ITR by the July 31 deadline has several financial consequences. A late filing fee under Section 234F is immediately applicable. This penalty is ₹5,000 for those with a total income exceeding ₹5 lakh, and ₹1,000 for those with an income up to ₹5 lakh. You can file a belated return until December 31, 2026, but the fee will still apply. In addition to the flat fee, if you have unpaid tax dues, an interest of 1% per month will be charged under Section 234A from the due date until you file the return. One of the most significant drawbacks of late filing is that you cannot carry forward certain losses, such as those from business or capital gains, to offset against future income.
A New Legal Framework on the Horizon
While this year's filing for FY 2025-26 falls under the Income Tax Act of 1961, a major overhaul is coming. The new Income Tax Act, 2025, is set to replace the six-decade-old law from April 1, 2026. This new act aims to simplify the tax system with clearer language and fewer sections. One notable change will be the introduction of a unified 'Tax Year' concept, replacing the current 'Previous Year' and 'Assessment Year' system to reduce confusion. Other changes expected under the new act include expanded HRA benefits for more cities like Bengaluru and Hyderabad and revised valuation rules for employer-provided cars.
