By Shivanand Pandit
Like it or not, you have to pay taxes and file tax returns. It is that time of year when many drown in reams of paperwork and try to make sense and save on income tax. The Central Board of Taxes notifies the Income Tax Return (ITR) forms applicable for the assessment year. And it is the general practice of the board to change the forms every year to incorporate the amendments made to the Income Tax Act.
Comparatively the number of changes made to the recently-notified ITR forms is the highest in recent years. Approximately 75 changes have been made in various ITR forms for assessment year 2019-20.
The changes have been made regarding disclosure of information and computation of income, change in method to disclose sources of income etc. Numerous changes have been crafted in the form with the intention of obtaining additional particulars, which will assist in validating or cross-verifying the income and other details that the tax authorities may have from other sources.
Now let us make a sincere effort to run through some of the vital changes made and try to understand them.
- It is now compulsory for every taxpayer (except super senior citizen whose age is 80 years or above during the previous year 2018-19) to file the return electronically. The choice available to a taxpayer, whose annual income was below Rs five lakh during the previous year, to file the physical return has been removed.
- The tax payer has to submit information with respect to his residential status, such as the number of days stayed in India and jurisdiction of his residence and tax identification number in case he is a non-resident. Information on investments made by him in equity or debt funds of a foreign entity, apart from foreign account details has to be provided. He is also required to furnish various details such as the name and code of the country in which custodial account is held and account opening date and peak balance during the year, etc.
- The mechanism of reporting of salary income has been changed and the new form is now in sync with the columns of Form 16 issued by the employer. An individual has to specify his gross salary and then deduct or add the amount of exempt allowances, perquisites and profit in lieu to arrive at the taxable figure of salary income. The new ITR forms also demand separate reporting of all deductions allowable under Section 16, namely, standard deduction, entertainment allowance and professional tax.
- In case of capital gain arising from transfer of an immovable asset the assessee has to submit various details about the buyer such as name of the buyer, PAN of the buyer, percentage share, amount, address of the property with pin code. The assessee should furnish the PAN of buyer in ITR form if tax has been deduced under section 194-IA or PAN is quoted by buyer in the registration documents.
- The assessee must disclose additional details of the agricultural land such as name of district, land area, whether land is owned or leased and whether the land is irrigated or rain-fed, if his or her agricultural income exceeds Rs five lakh in the previous year.
- Tax is levied at the rate of 10 per cent on long-term capital gains arising from transfer of such securities, if the long-term capital gain surpasses Rs one lakh. If such assets were bought before February 1 2018, the cost of acquisition of such assets will be actual cost of acquisition of such equity shares/units or lower of fair market value (FMV) of those assets as on January 31 2018 or full value consideration received as a result of transfer of such assets whichever is more. ITR forms have been changed to include these modifications.
- New provision has been introduced to treat the foreign exchange fluctuations. As a result, Part A-P&L, of ITR 3, 5 and 6 have been changed with a new clause ‘Gain or loss on account of Foreign Exchange Fluctuations under Section 43AA’.
- Senior citizen who earn interest income from saving and fixed deposits with banks, post-office or co-operative banks is eligible for deduction up to Rs 50,000. Consequently, changes have been made in new ITR forms and new row has been included for claiming deduction under section 80TTB.
- Arrears of rent received by an assessee is taxable in the year of receipt under the head income from house property. Now arrears or unrealised rent received during the year has to be reported property wise. Necessary changes have been made in various forms to give effect to this provision.
- Three new parts have been included in place of existing Part A of P&L namely, manufacturing account, trading account and Profit & Loss account in new ITR forms. Assessees engaged in manufacturing activities shall be required to arrive at cost of goods sold through manufacturing account, gross profit through trading account and net profit through profit and loss account.
- The new ITR forms require separate disclosure of interest income from saving bank deposits, fixed deposits, income tax refund, in the nature of pass through income and others. Also taxable portion of PF withdrawal has to be reported assessment year wise, not consolidated figure.
- A non-resident or a non-ordinary resident person opted for presumptive taxation scheme cannot use ITR-4 for filing of return of income. Therefore, ITR-3 or ITR-5 as the case may be, shall be filed. Also a taxpayer whose total income is more than Rs 50 lakh shall not be able to file the ITR-4.
- A citizen domiciled in Goa, Dadra & Nagar, Haveli and Daman & Diu, who are governed by the Portuguese Civil Code shall not use ITR-4 for filing of return of income and return can be filed in Form ITR 2 or 3, as the case may be.
To conclude, though the structure of new ITR forms remain similar, the number of changes made are enormous and due to which filing of returns has become difficult. However, taxpayers should not press the panic button and consult tax specialists with their questions. More importantly assessees should not delay the process of filing of returns and prioritize the work of compilation of financial details. This will help them to avoid stringent consequences.
The writer is tax specialist based in Margao.