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After asking individual taxpayers to declare their assets and liabilities in the new Income Tax Return (ITR) forms, the finance ministry will now tell companies, firms, trusts as well as political parties to give more disclosures in the ITR forms to be notified soon for assessment year 2013-14.
For the computation of total income, in the column 'income from other sources', taxpayers will have to specify the other source from which the income has come. If there are multiple sources, then the break-up of income from each source will have to be provided in the new ITR forms.
As per the existing forms, ‘income from other sources’ is divided into income ‘from owning race horses’ and ‘sources other than from owning race horses’. The government may not specify the other sources and the onus will be on the tax payers to make it clear at the time of filing returns to avoid any explanation to the tax department later.
“At present some companies don’t make ‘other sources’ clear at the time of filing return and later when additional income is detected by the tax department they put it in ‘other sources’ category. After the introduction of new forms, taxpayers will have to attribute every income to a source,” said a finance ministry official, who didn’t wish to be identified, as the forms have gone to the law ministry for vetting.
The new forms—ITR-5 and ITR-6, will also require corporate taxpayers to provide their balance sheets as per revised Schedule 6 of the Companies Act, against as per the I-T Act as present. ITR-5 is used by firms, association of persons, and body of individuals, while ITR-6 is used by companies other than those claiming exemption under Section 11 of the I-T Act.
“If the balance sheet is provided under Schedule 6 of the Companies Act there is no scope for different interpretations which was happening earlier. This will provide more clarity to taxpayers and bring in transparency. Details of ‘other sources’ will leave the tax department with more data to carry out further analysis,” said Ved Jain, former President of Institute of Chartered Accountants of India.
Revised Schedule 6 laid down a new format for preparation and presentation of financial statements by Indian companies from financial year beginning April 1, 2011. The changes were introduced to bring disclosures in financial statements in line with international corporate financial reporting practices.
In ITR-7 too, which is filled by trusts and political parties, the tax department is seeking more information. Political parties will be asked to give their party registration number with the Election Commission of India in the new forms.
Jain, however, said there were enough disclosures for trusts in the current law, but a lot was needed to make norms stringent for political parties for whom “no penalty was prescribed for not filing a return.”
Last month, the government had notified ITR-1, ITR-2, ITR-3 and ITR-4, which made it mandatory for non-salaried individuals with income above Rs 25 lakh to report their assets and liabilities in income tax returns. It sought details of vehicles, yachts, aircraft, bullion, jewellery, works of art and paintings, financial assets such as bank balances, shares and insurance policies.
Last year, the government had made reporting of assets and liabilities mandatory for individuals with foreign assets.
