 "New I-T return forms will simplify filing for majority")
Filing an income tax return will now be easier than before for most taxpayers. If you have been filling the lengthy and complicated ITR-2 form in the past because you had exempt income of more than Rs 5,000, this year onwards you will be using the simpler and straightforward ITR-1 form. The government has also introduced a new form, ITR-2A, to lessen the hassle. The controversial provisions on disclosing foreign trips and bank account balances are excluded.
"Those who don't have capital gains, income from business or profession or foreign income/assets can breathe easy," says Amit Ajmera, director - direct tax, BDO India. Here are the major changes made to the ITR forms compared to last year and the earlier ones, notified in April this year, that attracted controversy.
Exempt income
In controversial forms: Maintained earlier years' provision.
Earlier, if a person made over Rs 5,000 a year from dividend or tax-free bonds, he was supposed to fill ITR-2, a lengthy and complicated form. Now, such taxpayers can fill ITR-1, also called Sahaj. The form asks for details such as gross total income, deductions and taxable income, and details of tax deducted at source. It can be filled by 'individuals having income from salaries, one house property, and income from other sources such as interest'.
The new form, ITR-2A
Last year: Didn't exist
In controversial forms: Didn't exist
This is newly notified and is a shorter version of ITR-2. It's meant for individuals who carry forward their losses and Hindu Undivided Families (HUFs) but don't have any capital gains or hold foreign assets. It's also for individuals who own more than one house and have exempted capital gains (selling of shares or mutual funds after holding for a year). Earlier, such taxpayers had to fill ITR-2.
Capital gains disclosure
Last year: The disclosure was limited.
In controversial forms: Maintained last year's provisions.
"The government has made the capital gains schedule quite elaborate and complex with the amount of disclosures they have asked. The schedule runs into three pages," says Alok Agarwal, senior director, Deloitte Haskins & Sells. Part of ITR-2, the capital gains schedule covers both short-term capital gains and long-term capital gains (LTCG) during the year.
Suresh Surana, founder, RSM Astute Consulting Group, gives an example on increased disclosures. Say, a person sold a capital asset such as residential property and has LTCG on it. Earlier, when a person sold a house, he could save tax if he purchased another house within two years or built one in three years. If the amount was not utilised immediately after transfer of the asset, he needed to put the money in a capital gains account scheme that are available with most public sector banks. This allowed the I-T department to keep track of the money.
Now, the government wants the taxpayer to disclose things in details such as which year did the transfer of asset take place, under which section did the taxpayer claim exemption, year in which the new asset is acquired, amount utilised from capital gains account scheme and current balance. In the past, some got away by not paying LTCG tax. These disclosures will ensure the government is able to nab such defaulters.
Agarwal of Deloitte says the government has captured another scenario in the tax forms. Let's say a person sold a capital asset and buys a new property with the proceeds. If this new house is sold within three years, the taxpayer is not exempted from the LTCG. He will need to pay fully the LTCG on the earlier house.
Foreign assets/ income
Last year: Limited disclosures
In controversial forms: Stringent disclosure requirement.
The disclosure requirement for resident and ordinarily resident individuals (other than foreign citizens) has become stringent. For instance, under Schedule FA (on Foreign Assets) where a person needs to give details of foreign trusts, the government is asking the taxpayer to disclose the details of trustees, beneficiaries, settlor (such as name, address, date since position held) and also the details of income and its taxability. Any non-disclosure shall have far-reaching implications under the new Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.
Presumptive taxation
Last year: No specifics were required.
In controversial forms: Maintained provisions of earlier years.
Individuals who pay tax under the presumptive taxation scheme, filling form ITR-4S, now need to give details of how they are computing the income. They need to declare gross receipts and provide computation. A detailed working calculation also needs to be provided.
Other changes
There are many other changes in the new forms. Taxpayer now need to disclose their passport numbers, to help I-T department to track foreign trips. While the government is not asking for balances in a bank account, a person needs to provide the IFSC Code, bank name, account number, whether it's a saving or current deposit and which account you want your refund in. A dormant bank account may be excluded.
In case a person is seeking a refund, e-filing is compulsory. Earlier, only those with taxable income of Rs 5 lakh or above had to compulsorily do e-filing. Super-senior citizens, over 80 years, however, can now do physical filing irrespective of income tax slab.
The government is also planning to do away with submission of the ITR-V form. Until now, a taxpayer had to send a physical copy of this returns receipt to the Central Processing Centre in Bengaluru within 120 days. If taxpayers' Aadhaar card is verified by the Electronic Verification Certification system, they will no longer need to send the physical copy of ITR-V.
"Those who don't have capital gains, income from business or profession or foreign income/assets can breathe easy," says Amit Ajmera, director - direct tax, BDO India. Here are the major changes made to the ITR forms compared to last year and the earlier ones, notified in April this year, that attracted controversy.
Exempt income
More From This Section
Last year: If taxpayers had exempt income of over Rs 5,000, they would file ITR-2.
In controversial forms: Maintained earlier years' provision.
Earlier, if a person made over Rs 5,000 a year from dividend or tax-free bonds, he was supposed to fill ITR-2, a lengthy and complicated form. Now, such taxpayers can fill ITR-1, also called Sahaj. The form asks for details such as gross total income, deductions and taxable income, and details of tax deducted at source. It can be filled by 'individuals having income from salaries, one house property, and income from other sources such as interest'.
The new form, ITR-2A
Last year: Didn't exist
In controversial forms: Didn't exist
This is newly notified and is a shorter version of ITR-2. It's meant for individuals who carry forward their losses and Hindu Undivided Families (HUFs) but don't have any capital gains or hold foreign assets. It's also for individuals who own more than one house and have exempted capital gains (selling of shares or mutual funds after holding for a year). Earlier, such taxpayers had to fill ITR-2.
Capital gains disclosure
Last year: The disclosure was limited.
In controversial forms: Maintained last year's provisions.
"The government has made the capital gains schedule quite elaborate and complex with the amount of disclosures they have asked. The schedule runs into three pages," says Alok Agarwal, senior director, Deloitte Haskins & Sells. Part of ITR-2, the capital gains schedule covers both short-term capital gains and long-term capital gains (LTCG) during the year.
Suresh Surana, founder, RSM Astute Consulting Group, gives an example on increased disclosures. Say, a person sold a capital asset such as residential property and has LTCG on it. Earlier, when a person sold a house, he could save tax if he purchased another house within two years or built one in three years. If the amount was not utilised immediately after transfer of the asset, he needed to put the money in a capital gains account scheme that are available with most public sector banks. This allowed the I-T department to keep track of the money.
Now, the government wants the taxpayer to disclose things in details such as which year did the transfer of asset take place, under which section did the taxpayer claim exemption, year in which the new asset is acquired, amount utilised from capital gains account scheme and current balance. In the past, some got away by not paying LTCG tax. These disclosures will ensure the government is able to nab such defaulters.
Agarwal of Deloitte says the government has captured another scenario in the tax forms. Let's say a person sold a capital asset and buys a new property with the proceeds. If this new house is sold within three years, the taxpayer is not exempted from the LTCG. He will need to pay fully the LTCG on the earlier house.
Foreign assets/ income
Last year: Limited disclosures
In controversial forms: Stringent disclosure requirement.
The disclosure requirement for resident and ordinarily resident individuals (other than foreign citizens) has become stringent. For instance, under Schedule FA (on Foreign Assets) where a person needs to give details of foreign trusts, the government is asking the taxpayer to disclose the details of trustees, beneficiaries, settlor (such as name, address, date since position held) and also the details of income and its taxability. Any non-disclosure shall have far-reaching implications under the new Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.
Presumptive taxation
Last year: No specifics were required.
In controversial forms: Maintained provisions of earlier years.
Individuals who pay tax under the presumptive taxation scheme, filling form ITR-4S, now need to give details of how they are computing the income. They need to declare gross receipts and provide computation. A detailed working calculation also needs to be provided.
Other changes
There are many other changes in the new forms. Taxpayer now need to disclose their passport numbers, to help I-T department to track foreign trips. While the government is not asking for balances in a bank account, a person needs to provide the IFSC Code, bank name, account number, whether it's a saving or current deposit and which account you want your refund in. A dormant bank account may be excluded.
In case a person is seeking a refund, e-filing is compulsory. Earlier, only those with taxable income of Rs 5 lakh or above had to compulsorily do e-filing. Super-senior citizens, over 80 years, however, can now do physical filing irrespective of income tax slab.
The government is also planning to do away with submission of the ITR-V form. Until now, a taxpayer had to send a physical copy of this returns receipt to the Central Processing Centre in Bengaluru within 120 days. If taxpayers' Aadhaar card is verified by the Electronic Verification Certification system, they will no longer need to send the physical copy of ITR-V.