Key changes in new income-tax return forms
1.0 Introduction
Every year CBDT notifies new Income-Tax Return (ITR) forms. However, in
the recent past CBDT had notified ITR forms a bit late causing
inconvenience to various tax practitioner and taxpayers in filing ITRs
within prescribed time. Thus, we have witnessed a spate of writ
petitions in the various High Courts for extension of due date of filing
return.
The Delhi High Court in case of Avinash Gupta v. Union of India [2015] 63
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121 (Delhi) criticized the Government for its delay in notifying ITR
forms every year. The Delhi High Court made following remarks:
There appears to be no justification for delay beyond the assessment
year in prescribing the ITR forms. Accordingly, the respondents are
directed to, with effect from the next assessment year, at least ensure
that the ITR form should be available as on 1st April of the assessment
year unless there is a valid reason therefor.
Thus, considering such suggestion of the High Court the Government has
now notified the ITR forms, namely, ITR-1, ITR-2, ITR-2A, ITR-3, ITR-4,
ITR-4S, ITR-5, ITR-6 and ITR-7 on March 31, 2016.
The Finance Act, 2015 abolished the wealth-tax. Thus, taxpayers are no
longer required to file returns of wealth tax from assessment year
2016-17 onwards. However, the Hon'ble Finance Minister in his budget
speech had announced that information which was to be furnished in
wealth tax return will now form part of ITR.
Thus, in new ITR forms, namely, ITR-1, ITR-2, ITR-2A and ITR-4S the
Government has imposed obligation on Individuals and HUFs having income
exceeding Rs 50 lakhs to furnish information regarding assets and
liabilities.
2.0 Changes made in new ITR forms:-
2.1 Declaration of value of assets and liabilities by Individuals/HUF earning above Rs 50 lakhs:-
[ITR 1, 2, 2A, 3, 4, 4S]
The new ITR forms introduce a new Schedule requiring individuals/HUFs to
declare the value of assets and liabilities if their total income
exceeds Rs. 50 lakhs. Assets include immovable assets and movable
assets. Under the heading immovable assets, taxpayers have to disclose
cost of land and building. Under movable assets cost of Jewellery,
bullion, vehicles, Yachts, boats, aircraft and cash in hand need to be
disclosed. Further, such taxpayers need to disclose all liabilities in
relation to such assets.
Note: Individuals and HUFs with income exceeding 25 lakhs, filing ITR-3
and ITR-4 were already required to furnish information of their assets
and liabilities. Now such threshold limit of 25 lakhs has been increased
to 50 lakhs in new ITR-3 and ITR-4 for disclosure of details of assets
and liabilities.
2.2 TCS credit for individual taxpayers:-
[ITR 1, 2, 2A]
Sub-section (1D) was inserted in Section 206 by the Finance Act, 2012 to
reduce the practice of cash payments for purchase of bullion and
Jewellery and for curbing the flow of unaccounted money in the trading
system.
Section 206(1D) provides that the seller of bullion and Jewellery shall
collect TCS at 1% of sale consideration from buyer if such sale
consideration is received in cash and it exceeds:
i) Rs. 2 lakh, in case Bullion; and
ii) Rs. 5 lakh, in case of Jewellery.
However, in the absence of any row in the ITR Forms (ITR 1, 2 and 2A),
individual taxpayers were unable to claim credit of such TCS. Therefore,
new ITR Forms provide an option to claim TCS by the individual
taxpayers.
2.3 Firms can file ITR-4S for presumptive income:-
[ITR-4S]
Under the existing provisions of Rule 12, firms were required to file
ITR 5 even for presumptive income. The amended Rule 12 would now allow
firms to file ITR 4S for presumptive income. Accordingly, a separate row
is provided for in ITR 4S to claim deduction of interest and salary
paid by the firms to the partners.
2.4 Additional deduction for contribution to NPS under Section 80CCD :-
[ITR 1, 2, 2A, 3, 4 and 4S]
A new sub-section (1B) was introduced in Section 80CCD by the Finance
Act, 2015 to provide for an additional deduction of upto Rs. 50,000 for
investment in National Pension Scheme. Accordingly, a new row is now
introduced in the ITR Forms to claim benefits of such additional
deduction.
2.5 Details of pass through income of business trust or investment fund:-
[ITR 2, 2A, 3, 4, 5, 6, 7]
As per provisions of Section 115UA and Section 115UB,pass through status
is provided in respect ofincome [other than income from business or
profession] of business trust/investment fund. Thus, income distributed
by the business trust/investment fund is to be taxed in the hands of the
unit holders.
The new ITR Forms have a new 'Schedule PTI' forreporting of pass through
income of business trust/investment fund. Following details should be
provided by such trustin ITR forms:
■ Name of business trust/investment fund
■ PAN
■ Head of income
■ Amount of income
■ TDS on such amount, if any.
2.6 Disclosure of details regarding partnership firm by a partner:-
[ITR 3, 4]
In ITR forms there is a separate 'Schedule IF' wherein partners are
required to disclose the name of the partnership firms in which he is a
partner. Now partners have to disclose whether such firm is liable to
transfer pricing audit under Section 92E? Separate column has been
inserted for such purpose in 'Schedule IF'.
2.7 Share of income from firm/AOP/BOI:-
[ITR 3, 4, 5, 6]
Share of income from partnership firm, AOP and BOI is exempt from tax in
hands of recipient. However, such exempt income hadto be disclosed in
old ITR forms under 'Schedule EI'. Now, disclosure of such exempt income
has been done away with in new ITR forms.
2.8 Deduction of additional investment allowance:-
[ITR 4, 5, 6]
Section 32AD was inserted by the Finance Act, 2015 to provide for an
additional investment allowance to an undertaking set-up in the notified
backward areas in the States of Andhra Pradesh or Telangana.Suitable
safeguards have been provided in the provision for restricting the
transfer of the plant or machinery for a period of 5 years. On transfer
of such asset within five years, the amount of deduction already allowed
shall be deemed as income from business or profession (i.e., deemed
income under Section 32AD) in the year of transfer.
A separate rowhas been inserted in new ITR forms to claim such deduction
under Section 32AD. Further, a separate row is provided to offer the
deemed income to tax under Section 32AD.
2.9 Effect of ICDS:-
[ITR 4, 5, 6]
New 'Schedule ICDS' has been inserted in ITR forms wherein effect of
Income Computation and Disclosure Standards('ICDS') on profit needs to
be disclosed.
2.10 Percentage of commercial receipts by a trust:-
[ITR 7]
The Finance Act, 2015 has substituted the proviso to Section 2(15) to
provide that the advancement of any other object of general public
utility shall not be a charitable purpose, if it involves the carrying
on of any activity in the nature of trade, commerce or business, unless:
i) such activity is undertaken in the course of actual carrying out
of such advancement of any other object of general public utility; and
ii) the aggregate receipts from such activity or activities during
the previous year, do not exceed 20% of the total receipts, of the trust
or institution undertaking such activity or activities, of that
previous year.
In other words, advancement of any other object of charitable purpose
shall not be deemed as charitable if receipts from any commercial
activity exceed 20% of total receipts. Accordingly, a new row is
inserted in ITR 7 to disclose percentage of commercial receipts
vis-à-vis total receipts in order to ensure that such condition (as
given hereinabove) is not violated.
2.11 Application of income by a trust:-
[ITR 7]
Income of charitable or religious trust is exempt if 85% of its income
is applied for charitable or religious purposes in India. If income
applied for charitable or religious purposes during the previous year
falls short of 85% because such income has not been received during the
year or due to any other reason, an option is given to assessee to apply
such income in future years in prescribed manner. Assessee has to
choose such an option by filing Form 9A to the Assessing Officer before
due date of filing return of income under Section 139(1).
Now a separate row is provided in new ITR 7 requiring trust to confirm
if it has filed Form 9A to exercise such an option and the date of
filing of such form.
2.12 Details to be given by Universities, hospitals, educational institutions:-
[ITR 7]
Exemption under sub-clause (iiiab) and (iiiac) of Section 10(23C) is
available to universities or educational institutions, hospitals or
other institutions which are wholly or substantially financed by the
Government, subject to certain prescribed conditions.The Finance Act,
2015 has amended the provisions of Section 139 to provide that such
entities covered under clauses (iiiab) and (iiiac) of Section 10(23C)
shall be mandatorily required to file their returns of income.
Now such universities, hospitals, educational institutions, etc., have
to disclose their name and annual receipts in new ITR 7. Further, they
are also required to disclose the amount eligible for exemption in ITR
7.
2.13 MAT disclosure:-
[ITR-6, 7]
The Finance Act, 2015 had excluded following incomes for computing MAT liability:
i) Share of a member in the income of the AOP/BOI, on which no income-tax was payable.
ii) Passive income (like capital gains, interest, royalty, FTS)
accruing or arising to foreign company if income-tax payable thereon was
less than 18.5%.
iii) Amount representing
- Notional gain on transfer of a capital asset, being share of SPV
to a business trust in exchange of units allotted by that trust
referred to in clause (xvii) of Section 47; or
- Notional gain resulting from change in carrying amount of said units; or
- Gain on transfer of units referred to in clause (xvii) of section 47.
iv) Loss on transfer of units referred to in Section 47(xvii) (subject to conditions)
Consequently, the Finance Act, 2015 had provided for addition of related
expenditure on aforesaid income while computing MAT liability.
Separate row have now been inserted in ITR forms to incorporate such changes.
2.14 Disclosure of Audit information:-
[ITR 5, 6]
In new ITR forms there is a separate row for disclosure of following
details if taxpayer is liable for audit under any Act [other than the
Income Tax Act]:
1) Act and Section under which taxpayer is liable for audit
2) Date of furnishing of Audit Report.
2.15 Deduction of sum paid for purchase of sugarcane:-
[ITR-5]
The Finance Act, 2015 had inserted Section 36(1)(xvii) to provide that
co-operative society, engaged in the business of manufacturing of
sugar,couldclaim deduction of expenditure on purchase of sugarcane tothe
extent of price approved or fixed by the Government. Expenditure in
excess of such fixed price was tobe disallowed.
New ITR-5 has inserted a separate row for disclosure of sum which is disallowable under Section 36(1)(xvii).
2.16 Deduction under section 80JJAA:-
[ITR 4, 5]
Old provisions of section 80JJAA, inter alia, provided for deduction to
an Indian company, deriving profits from manufacture of goods in a
factory. The quantum of deduction allowed was equal to 30% of additional
wages paid to the new regular workmen employed by the assessee in such
factory, in the previous year, for three assessment years including the
assessment year relevant to the previous year in which such employment
was provided.
With a view to encourage generation of employment, the Finance Act, 2015
had amended Section 80JJAA so as to extend the benefit of such
provision to all assessees having manufacturing units rather than
restricting it to corporate assessees only.
New ITR-4 and ITR-5 forms now contain a separate row for such taxpayers
(other than corporate taxpayers)to claim benefit of such deduction under
Section 80JJAA.
Source :.Taxmann.com
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