ITR filing AY 2026-27: 4 key updates every taxpayer should know before filing income tax return

These changes are aimed at improving clarity in reporting and reducing errors in filings, and they also affect how certain income details are disclosed and which return forms are used, which can also impact the processing of refunds.

Upstox spoke to CA Gaurav Singh Parmar, Associate Director, Fincorpit Consulting, to understand the key updates.

Taxpayers can now report income from up to two house properties using simpler forms such as ITR-1 and ITR-4, marking a notable easing in filing requirements.

Capital gains disclosure has been streamlined, with the earlier distinction between pre and post July 2024 periods removed. A uniform tax structure will now apply for the full financial year.

A new provision has been introduced for reporting unrealised rent, which has now been included in ITR-1 and ITR-4.

Taxpayers under sections 44AD, 44ADA, and 44AE must now report the total closing balance of all active bank accounts as on March 31, 2026.

Experts note that selecting the correct ITR form has become increasingly important, as incorrect filing may trigger defective return notices and delay refunds. This is also the final filing cycle under the Income-tax Act, 1961, making careful compliance even more crucial.

Essential FAQs for your AY 2026-27 ITR filing

This filing cycle marks the transition phase before the shift to the new tax framework, making it a key year for compliance and reporting updates.

Previously, owning more than one house property forced taxpayers to use more complex filing forms (like ITR-2). For AY 2026-27, the income tax department has eased this restriction, allowing individuals with up to two house properties to use the much simpler and faster ITR-1 or ITR-4 forms, provided they meet the other standard eligibility criteria.

If you are a professional, freelancer, or small business owner filing under the presumptive taxation schemes (Sections 44AD, 44ADA, or 44AE), you must now disclose the total aggregate closing balance of every single active bank account you hold, calculated precisely as of March 31, 2026.

The tax department has eliminated the previous administrative headache of splitting capital gains reporting into distinct "pre" and "post" July 2024 brackets. For the AY 2026-27 cycle, capital gains are streamlined under a single, uniform tax structure that applies seamlessly across the entire financial year.

If you submit your taxes using an incorrect form, the Income Tax Department will invalidate the submission and issue a Defective Return Notice. You will then have a strict 15-day window to correct the mistake and refile. Failing to do so means your return is treated as unfiled, which blocks any tax refunds and can trigger late fees.