NewDelhi: The government has notified income tax return forms –ITR-1 to ITR-7 –for the assessment year 2026-27, enabling individuals, pensioners, and other taxpayers to begin filing their returns within the stipulated timelines.
Deepesh Chheda, Partner, Dhruva Advisors shared some pertinent questions regarding the reporting changes and compliance requirements for AY 2026-27 (FY 2025-26). Excerpts…
1. The ITR-7 Excel utility has been released relatively late this year. What could be the possible reasons, and what implications does this have for taxpayers?
The delayed release of ITR-7 appears to be a result of the Income-tax Department prioritising accuracy over speed. This year, return utilities have been rolled out in phases and refined through subsequent updates, suggesting extensive testing before and even after release. At the same time, the Department has introduced stronger validations by integrating data from AIS, TIS and Form 26AS, making return filing more accurate but also increasing the time required to develop and test the utility.
What are the key changes for ITR-7 under the Income-tax Act, 1961, if any?
The changes in ITR-7 for AY 2026-27 are largely focused on additional disclosures to strengthen reporting and facilitate better verification by the tax department.
Section 13(3) identifies certain persons as related parties of a trust, including substantial contributors. Transactions with such related parties are subject to specific conditions, and non-compliance may impact the trust’s tax exemption. Earlier, a person was treated as a substantial contributor if they had contributed more than ₹50,000 in a year. Now this threshold has been increased to contributions exceeding ₹1 lakh during the year or ₹10 lakh in aggregate. The ITR-7 utility has been updated to reflect this revised reporting requirement.
Political parties are now required to disclose whether their compliance report under the Representation of the People Act has been filed with the Election Commission of India or the relevant State Election Commission, along with the date of filing.
Trusts registered under other laws, such as FCRA, DARPAN or SEBI regulations, are also required to disclose the validity period of such registrations. Further, in the schedule relating to investments in concerns where specified persons have a substantial interest, the reporting requirement has been changed from the “nominal value” to the “total value” of the investment i.e. instead of cost, possibly fair value is to be reported.
What are the critical compliance considerations that trusts, charitable institutions, educational institutions and other eligible entities should keep in mind while filing ITR-7?
For entities filing ITR-7, return filing is only one aspect of the overall compliance framework. They should maintain proper books of account, complete the required audit, and adhere to the prescribed timelines under the Income-tax Act. Timely filing of prescribed forms, including Form 10BD and Form 10BE for eligible donations, is equally important. Where income is proposed to be accumulated instead of being applied during the year, the prescribed form should be filed within the applicable timeline to claim the available tax benefit. Transactions with related parties or specified persons should be appropriately documented and carried out at fair value. Newly established trusts should also obtain the required registration within the prescribed timelines to ensure continued eligibility for tax exemption.
Beyond income tax, entities should also ensure compliance with other applicable laws. For instance, organisations registered under the Foreign Contribution (Regulation) Act (FCRA) should file the prescribed returns, such as FC-1 / FC-4, within the applicable timelines and comply with other regulatory requirements.
Bureau Report
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