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](https://www.businesstoday.in/personal-finance/tax/story/itr-filing-alert-2025-26-excel-utilities-for-itr-1-itr-4-now-support-ltcg-rent-receipts-new-tax-regime-478510-2025-05-31). 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](/blog/itr-deadline-september-15-2025-six-week-books-cleanup-sprint-smb). 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.