Introduction
The Central Board of Direct Taxes (CBDT) has released the updated ITR-7 Form for Assessment Year (AY) 2025–26, which applies to Financial Year (FY) 2024–25. This update makes major changes designed to promote increased transparency and compliance by entities who claim tax exemption. Familiarity with the changes is key to helping such eligible organizations properly and on time
Who Must File ITR-7?
ITR-7 is meant for entities mandated to provide returns under the following sections of the Income Tax Act, 1961:
- Section 139(4A): Trusts and institutions receiving income from property held under trust wholly or partly for charitable or religious causes.
- Section 139(4B): Political parties.
- Section 139(4C): Research associations, news agencies, and institutions availing exemptions under different clauses of Section 10.
- Section 139(4D): Universities, colleges, and other institutions mentioned in Section 35.
Organizations that generally file ITR-7 are those that are claiming exemption under Sections 11, 12, 13A, 10(21), and 10(23C)
Major Changes in ITR-7 for AY 2025–26
A. Greater Disclosure Requirements
The new form requires greater disclosures, specifically in regard to
- Foreign Contributions: In-depth reporting of income arising from foreign donations.
- Voluntary Donations: Segmentation of voluntary donations received.
- Accumulated Income: Reporting of income accumulation and its utilization.
- Application of Funds: Details on the way funds have been applied in the year.
These amendments are intended to improve transparency and accountability in financial reporting by organizations that are required to file ITR-7.
B. Reporting of Capital Gains
An important addition is the need to split capital gains depending on the date of transaction:
- Prior to July 23, 2024: The capital gains need to be reported separately for transactions
carried out prior to this date. - July 23, 2024, or later: Capital gains on or later than this date are to
be reported separately.
This differentiation is in concurrence with amendments brought in under the Finance Act, 2024, related to how indexation and computation of tax is done
C. Buyback Loss Adjustments
The shape now lays down that losses on capital resulting from buyback of shares are permitted only where the related dividend income is taxed under ‘Income from Other Sources’. This comes into effect from October 1, 2024, and is intended to curb misuse of buyback transactions for tax evasion
Filing Process and Deadlines
A. Filing Method
ITR-7 is required to be filed electronically using the e-filing portal of the Income Tax Department. The verification can be done using
- Digital Signature Certificate (DSC)
- Electronic Verification Code (EVC)
- Aadhaar OTP
As an interesting observation, political parties are mandated to file returns solely through electronic verification means; submission in physical form through ITR-V is not allowed
B. Due Dates
- Those Not Requiring Audit: July 31, 2025
- Those Requiring Audit: October 31, 2025
Filing in time is advisable to avoid a penalty and follow tax laws.
Conclusion
The New ITR-7 Form for AY 2025–26 brings into force crucial amendments that need to be understood by the entities in order to ensure compliance and transparency. Increased disclosure requirements, elaborate reporting on capital gains, and tailor-made provisions for buyback loss adjustment highlight the need for rigorous financial reporting. Entities covered under the listed sections need to carefully examine these changes and ensure timely and accurate filing in order to retain their exempt status and avoid imminent penalties
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