ITR-1 & ITR-4 Utilities Are Live: A Founder’s 45-Minute Filing

On 30 May 2025, the income-tax department released the Excel utilities for ITR-1 and ITR-4 for AY 2025-26 — and quietly added a field that lets a lot more people stay on the simple forms. If your income is salary plus a small amount of long-term capital gains, you can now file ITR-1 instead of being forced onto the heavier ITR-2. This post is a 45-minute filing walkthrough for a salaried founder: who actually qualifies for ITR-1, the document checklist, the new LTCG field, and the mistakes that get a return rejected.

What changed on 30 May 2025?

The income-tax department made the ITR-1 (Sahaj) and ITR-4 (Sugam) Excel utilities available for AY 2025-26. The headline change: a new field to report long-term capital gains under Section 112A up to ₹1.25 lakh. Previously, anyone with even a rupee of listed-equity LTCG had to file ITR-2. Now, if your LTCG from listed shares or equity mutual funds is within ₹1.25 lakh, you can disclose it right inside ITR-1 or ITR-4.

For a salaried founder who sold a few mutual-fund units or some ESOPs-turned-shares within that limit, this is the difference between a 45-minute ITR-1 and a much longer ITR-2.

The release also brought tighter in-form validation. The utilities now check more of your entries against expected ranges and required fields before they let you generate the upload file, which catches a class of mistakes that used to sail through and surface later as a notice. That's good news if you fill the form carefully — and a source of confusing red errors if you don't, because the utility will refuse to proceed until the flagged cell is fixed. Most of those errors are self-explanatory once you read them; the temptation to dismiss them is what gets people into trouble.

Why this matters now

The utilities going live is the starting gun. You can't file until the form's software exists, and for AY 2025-26 it landed late — which is exactly why the deadline moved to 15 September. The new LTCG field matters because it widens who gets the easy form. But "easy form" is not "no rules" — pick the wrong ITR and the portal can treat your return as defective, which means you redo it under a clock.

Can a salaried founder use ITR-1? (the eligibility test)

ITR-1 is for resident individuals with income up to ₹50 lakh from salary, one house property, and other sources like interest — now plus LTCG under Section 112A up to ₹1.25 lakh. The trap for founders is the disqualifiers. You CANNOT use ITR-1 if any of these apply.

So the honest answer for most founders: if you hold equity in your own startup or sit on its board, you're on ITR-2, not ITR-1 — even if your only cash income is salary. ITR-1 fits the salaried founder who has fully exited, holds no unlisted shares, isn't currently a director, and whose only capital gain is small listed-equity LTCG. ITR-4 fits the founder running an unincorporated practice under presumptive taxation.

It's worth being precise about why the form choice is enforced so strictly. The ITR forms aren't just paperwork tiers — each one maps to the schedules the department needs to assess your specific situation. A director or unlisted-shareholder has disclosures (shareholding details, directorship details) that ITR-1 has no place to capture. Filing ITR-1 anyway doesn't just risk a notice; it means you've legally omitted disclosures you were required to make. That's why the portal treats the wrong-form return as defective rather than just nudging you — the omission is the problem, not the format. Get the eligibility right and the rest of the filing is genuinely a 45-minute form-fill.

The 45-minute filing walkthrough (the steps)

This assumes you've confirmed ITR-1 is correct for you. If you're on ITR-2/3, the document gathering is the same — the form is just longer. Manvi on our team walks first-time-filer clients through this exact sequence every season; the order matters, because each step's output feeds the next.

Your document checklist

What gets a return rejected or marked defective?

Five errors cause most rejections and defective-return notices. Each starts with the symptom.

The symptom is a defective-return notice under Section 139(9). The most common cause for founders is using ITR-1 when you were a director or held unlisted shares. The fix is to check eligibility before filing, not after.

The symptom is a tax demand months later for income you thought was reported. The cause is income in AIS that you left out of the return — interest from a forgotten account, a freelance payment. The fix is reconciling every AIS line before submitting.

The symptom is a refund that never arrives. The cause is a bank account that isn't pre-validated on the portal. The fix is pre-validating the account where you want the refund, well before filing.

The symptom is the return showing as "not filed" despite uploading. The cause is skipping e-verification. The fix is e-verifying the same day via Aadhaar OTP.

The symptom is mismatched TDS and a smaller refund than expected. The cause is trusting pre-fill that missed a deductor. The fix is matching every TDS line against Form 26AS by hand.

A real example: a salaried-founder filing

A founder we know in Bengaluru had fully exited his first startup, drew a salary at his new full-time job, and had ₹90,000 of LTCG from redeeming some equity mutual funds. In prior years that LTCG forced him onto ITR-2. For AY 2025-26, because his LTCG was under ₹1.25 lakh and he held no unlisted shares and wasn't a director anywhere, ITR-1 worked — and the filing took him under an hour with the new field.

The one thing that nearly tripped him: he was still showing as a director on a dormant company he'd co-founded years earlier and never formally resigned from. We caught it before filing; he resigned, updated his DIN status, and then ITR-1 was clean. The same attention to clean financial data drives our product work — on Radiant Finance, every downstream feature depends on the upstream numbers being right, which is exactly the discipline a good tax filing needs. The founder-perspective version of this — what we wish every first-time filer knew — is on our founder's site, viveksinra.com. For the operational books-cleanup that makes any filing painless, see our six-week books-cleanup sprint, and if you'd rather automate the data-gathering entirely, our automation team wires document collection into a single workflow.

Frequently asked questions

When did the ITR-1 and ITR-4 utilities go live for AY 2025-26?

The income-tax department released the Excel utilities for ITR-1 (Sahaj) and ITR-4 (Sugam) on 30 May 2025. The notable addition was a field to report long-term capital gains under Section 112A up to ₹1.25 lakh, which previously forced filers onto ITR-2.

Can I report capital gains in ITR-1 now?

Yes, but only long-term capital gains under Section 112A — from listed equity shares or equity mutual funds — up to ₹1.25 lakh. If your LTCG exceeds that, or you have any short-term capital gains, you must use ITR-2 instead.

Can a startup founder file ITR-1?

Usually not, if you're a current director or hold unlisted shares in your own company — both disqualify ITR-1 regardless of how simple your income is. ITR-1 fits a salaried person who has fully exited, isn't a director, and has only small listed-equity LTCG. Otherwise it's ITR-2 or ITR-3.

What's the most common reason an ITR gets marked defective?

For founders, using ITR-1 when they were a director or held unlisted shares during the year. The portal issues a defective-return notice under Section 139(9), and you have to refile on the correct form under a deadline. Check eligibility before you file.

Do I have to use the new tax regime?

The new regime is the default for AY 2025-26, but you can still opt for the old regime if it's better for you. Compare your tax under both — the utility computes both when you toggle — and if you want the old regime, select it explicitly rather than letting the default stand.

What happens if I file but don't e-verify?

A filed-but-unverified return is treated as not filed. You have 30 days to e-verify, usually via Aadhaar OTP or net-banking, but if the window lapses the return is invalid and you may face late-filing consequences. E-verify the same day you upload.