Income Tax return filing: Compulsory to declare cash deposit over Rs 1 cr

If travelling abroad, keep a copy of bank statement which has details of payments made for buying tickets and hotel expenses

The income-tax (I-T) department has made significant changes to the I-T return (ITR) filing forms for the Assessment Year (AY) 2020-21. Every year, the tax department notifies these forms around April. This year, it has already notified the two ITR forms for AY2020-21. There are some significant changes that everyone needs to know about. Archit Gupta, chief executive officer, ClearTax, says. “The simple-to-use ITR 1 and ITR 4 are no longer available to those incurring high-value transactions by way of bank deposits, electricity expenditure, and foreign travel.”

Who is the ITR 1 for?

Mumbai-based chartered accountant Gopal Bohra, partner, NA Shah Associates, says, “The new ITR 1 needs to be filled out by an individual who is a resident (other than not ordinary resident) with total income up to Rs 50 lakh and having income from salary, one house property (single ownership), interest income and family pension, and agricultural income up to Rs 5,000.”

Individuals who are directors, having unlisted shares, having house property in joint names, having high-value transactions (that is, spending on foreign travel in excess of Rs 2 lakh in a year or expenditure on electricity exceeds Rs 1 lakh in a year and others), are not allowed to file the new ITR 1. Bohra says, “Further, the new ITR 1 cannot be filed in case of search-related assessments.”

Who is the ITR 4 for? 

As far as the new ITR 4 goes, it is applicable to individuals, Hindu undivided families or firms (other than limited liability partnerships) having total income up to Rs 50 lakh and income from business or profession which is computed under presumptive basis. Remember it’s not for individuals who are directors in a company or have invested in unlisted equity shares or have any brought-forward/carry-forward loss under the head ‘Income from House Property’.

What’s new about the forms?

The new ITR 1 and ITR 4 ask you for details of Indian passport, comprehensive details of an employer (that is, tax deduction and collection account number, nature of the employer, his address). Gupta says: “Further changes include, in case of let-out property, taxpayers would have to furnish the name and permanent account number, or Aadhaar of the tenant (if available). Further, taxpayers can deduct the unrealised rent from the house property. Also, in reporting ‘Income from Other Sources’, taxpayers can claim deduction under Section 57(iv) allowed against interest received on compensation or enhanced compensation.”

The new ITR 4 also seeks details whether cash deposited in the current account exceeds Rs 1 crore, whether expenditure on foreign travel exceeds Rs 2 lakh, whether expenditure on electricity exceeds Rs 1 lakh. This form also seeks details of partners in case of a firm (like name and address, Aadhaar, percentage of share, rate of interest on capital, remuneration).

Bohra says, “The new ITR 4 now only requires details of cash and bank transactions relating to presumptive business, against requirement in the old form like details of capital, loans, advances, creditors, debtors, fixed assets, inventory, etc.”

What’s the most important thing?

There are several changes, but perhaps the most critical change that has come is related to cash in case of presumptive tax assessment. Sudhir Kaushik, chief financial officer, TaxSpanner, says, “The assessee will be required to give the opening balance of cash in hand, and opening balance of bank accounts and will be required to give the total amount received in cash during the year, total amount deposited in a bank during the year, total amount of cash outflow, total amount of withdrawal from the bank during the year, closing balance of cash in hand, and closing balance of banks.”

The 5 new disclosures

House ownership: Individual taxpayers who are joint owners of house property 

Passport: Needs to be mentioned in ITR 1 and ITR 4 

Cash deposit: Applicable to ITR 4, compulsory to declare if the amount deposited as cash in a bank account exceeds Rs 1 crore during the FY

Foreign travel: If you have spent more than Rs 2 lakh on travelling abroad during the FY, you need to disclose the actual amount spent

Electricity consumption: If your electricity bills have been more than Rs 1 lakh in aggregate during the FY, you need to disclose the actual amount