The Central Board of Direct Taxes (CBDT) has notified the ITR-7 form for the Assessment Year 2025–26. The form applies to entities such as charitable and religious trusts, political parties, scientific research institutions, universities, colleges, and other institutions that are required to file returns under various sub-sections of Section 139 of the Income Tax Act, 1961.

The updated ITR Form 7 introduces several key changes. Notably, the capital gains schedule has been modified to separately report capital gains arising before and after July 23, 2024, in alignment with amendments introduced in the Finance Act, 2024.

Additionally, capital loss from share buybacks is now allowable, provided the corresponding dividend income is declared under 'Income from Other Sources' for transactions occurring after October 1, 2024. The form also includes changes to accurately capture deductions claimed under Section 24(b) and introduces a requirement to report the relevant TDS section code in Schedule-TDS for better compliance and transparency.

Deepak Kumar Jain, founder and CEO of TaxManager.in, said, "Specifically, it is used under Section 139(4A) for income of charitable and religious trusts, Section 139(4B) for political parties, Section 139(4C) for scientific research institutions, and Section 139(4D) for educational institutions like universities and colleges."

"The updated ITR-7 form… features enhanced disclosure requirements, particularly concerning foreign contributions, registration under different regulatory laws such as FCRA and SEBI, and compliance with tax exemption conditions," he added.

The form now includes expanded fields to report voluntary contributions, income accumulation, and application of funds. Additionally, new compliance checks have been introduced for violations under Section 13, which, if triggered, may result in the denial of tax exemption.

These revisions are intended to boost transparency and ensure that tax-exempt entities strictly adhere to the conditions laid out in the Income Tax Act.

"The updated ITR-7 form for AY 2025–26 signals a strong step towards improving tax compliance for trusts and institutions. By introducing enhanced capital gains reporting aligned with Budget 2024 timelines, enabling buyback loss adjustments under defined conditions, and improving deduction disclosures, the form enhances transparency, simplifies reporting, and ensures compliance with the IT Act, 1961," said Shefali Mundra, tax expert, ClearTax.