It’s that time of the year again - the much dreaded Income Tax Return filing season. However, this ITR filing season, certain changes have been introduced in the ITR forms that taxpayers should take note of. The primary reason behind this move is to increase transparency and minimize the chances of tax evasion. We have decoded the ITR forms and explained about the changes in detail below:
Which ITR form is applicable to you?
Before we begin, take a look at the following table to know which ITR is applicable to you:
It is important to note that the facility of filing returns on paper has been made available only for those more than 80 years of age and those who are filing ITR-1 or ITR-4. For all other taxpayers, e-filing is now mandatory.
The forms released for FY 2018-19 (AY 2019-20) require several additional disclosures related to income sources, transactions, etc. The following are the additional details related to each ITR Form.
Changes in ITR-1
ITR-1 Sahaj form is applicable for resident Indian individuals having a total income of up to Rs 50 Lakh. Individuals satisfying this criterion can report income from salary, one house property, income from other sources (excluding capital gains) and agricultural income up to Rs 5000 in the ITR-1 Form.
Unlike earlier, those filing ITR-1 now have to disclose details of every allowance, which has been claimed as exempt. For instance, if a part of HRA has been claimed as exempt, its amount has to be separately reported in the ITR. The same is the case for any other allowance such as LTA or leave encashment or gratuity that has been claimed exempt.
For FY-2018-19 the aforementioned changes will now be reflected in the new Form 16 format, notified by the Central Board of Direct Taxes ( CBDT) Effective 12 May 2019, the list of exemptions to be disclosed while filing ITR-1 is as follows :
While providing details of income from other sources the income split between interest income from fixed deposits and interest income from a savings account has to be disclosed as well.
Changes in ITR-2
The ITR-2 is for individuals and HUF who are earning income other than income from Profits and gains from business or profession.
The new change in ITR-2 is that additional details related to days an individual was present in India and residential status have to be provided now. The individual has to disclose details of days of stay in India in the previous years.
For nonresidents, additional details of the jurisdiction of residence outside India as well as taxpayer identification numbers of the foreign country have to be mentioned.
If an individual has sold the property during FY 2018-19, the person has to share the entire details of the buyer who bought the property. It does not matter whether it is a short term capital gain or long term, the taxpayer has to disclose all buyer details.
Another important change in form is that in case the taxpayer has rent arrears during the financial year, she needs to disclose these details property wise while filing ITR-1 in case there is only one house property on rent and ITR-2 needs to be filed if there are more than one house properties on rent.
An individual who is a director in a company has to provide his Director Identification Number and mention company details against it along with PAN details. If the individual held investments in unlisted equity shares anytime during FY 2018-19, the details of the company invested in along with PAN, the number of shares held, details regarding acquisition/selling of shares have to be disclosed. This also includes individuals who have received employee stock options (ESOPs) in unlisted companies, including companies outside India.
Changes in ITR-3
ITR 3 is applicable for individuals and HUFs having income from gains of business or profession. The additional details that have been disclosed in ITR-2 regarding residential status, directorship in companies, income from house property, investment in unlisted equity shares, foreign asset holdings, etc have to be disclosed in ITR-3 as well.
If the taxpayer has been a partner with a partnership firm, she has to disclose the PAN details of partnership firm and audit details as well. In the new form, the taxpayers who have income from business and profession now have to disclose details about the trading account, manufacturing account and profit, and loss account.
The details of the annual value of all outgoing supplies as per the GST returns filed, is also required to be mentioned.
Changes in ITR-4
ITR-4 is applicable for taxpayers who have opted for the presumptive taxation scheme as per Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act.
As per the new changes, individuals who have presumptive income as well as hold directorship in companies or hold unlisted equity shares, will not be eligible to form ITR-4, they would have to file ITR-3.
Taxpayers that own a business of plying, hiring and leasing goods carriages, who have opted for presumptive taxation scheme (Section 44AE), will have to disclose additional details such as registration number of goods carriage, whether the carriage is owned, leased or hired, capacity of the goods carriage in metric tonnes etc, in the new ITR-4 form.
To sum up, as taxpayers, be mindful of the changes and collect the necessary documents and details required to be furnished well in advance. Fill the applicable ITR form correctly and disclose all details to avoid legal hassles later on.
Disclaimer:The information related to tax filing presented in this blog post is general in nature. Please consult your tax advisor or CA for accurate tax filing advice related to your particular situation.