The Central Board of Direct Taxes creates new ITR forms every year, and the new forms for FY 2018-19 have been released. These new forms shall be applicable for the filing of returns for the period between April 1, 2017, and March 31, 2018. With the new forms, the onus has shifted to the taxpayers so that their claims for exemptions, deductions or expenses can be proved. The amount of information sought from taxpayers has increased with the new forms. Here are some of the major changes to keep an eye out for:
Detailed Salary Income Calculation
The new income tax return forms (ITR-1, ITR-2, ITR-3 and ITR-4) expect taxpayers to calculate their salary income in detail. In the previous financial year, these forms requested just a single figure. The new forms will enhance the transparency between the Income Tax Department and the assessee. Taxpayers can get these details from Part B of Form 16 which is issued by their employer.
ITR-2 or ITR-3 to be Filed by Non-Residents
Resident individuals who earn income from a single house property, salary, and other sources, with an overall income of Rs.50 lakh will have to file their income tax returns in Form ITR-1 (SAHAJ). As such, non-residents cannot file their returns through this form going forward. NRIs will have to file their returns using Form ITR-2 or Form ITR-3.
ITR-3 to be Filed by Partner of Partnership Firm
Individuals or Hindu Undivided Families who are partners in partnership firms will have to file their income tax returns using Form ITR-3. During the previous financial year, this category of taxpayers could file their returns using ITR-2.
Details Required Regarding Sale of Unquoted Shares
Under Section 50CA of the Income Tax Act, 1961, the new forms will require certain details to be entered. If there are capital gains arising from the transfer of unquoted shares, the investor will be mandated to attain the valuation report because the new income tax return forms require assessees to enter the actual sales consideration figures and fair market value as determined by a chartered accountant or a merchant banker.
Taxation of Gifts Under Other Sources
Until the previous financial year, any property or any amount of money received for inadequate consideration (more than Rs.50,000) or without consideration was supposed to be reported under income from other sources under Section 56(2)(vii). Starting from AY 2018-19, Section 56(2)(x) was included in the act to include any assessee within the ambit, so going forward, gifts received in the form of property or money for inadequate consideration (more than Rs.50,000) or without consideration will have to be filed and tax will have to be paid accordingly.
If a taxpayer chooses the presumptive taxation scheme under Section 44AD, Section 44ADA, or Section 44AE of the Income Tax Act, the income tax returns will have to be filed in Form ITR-4. The previous ITR-4 required only certain details of the business, such as the overall creditors, the overall debtors, the cash balance, and the overall stock-in-trade. The new form, however, will require information of many more particulars, such as the fixed assets, amount of secured or unsecured loans, the capital account, advances, etc.
Aggregate Turnover Reported in GST Returns
A taxpayer, in the new Form ITR-4, will have to enter details regarding the aggregate turnover reported in GST returns. The reason for the incorporation of this information is to bring an end to the incorrect practice of reporting different turnovers in income tax returns and sales tax returns. In case there are any discrepancies in the turnover reported in the income tax returns and the GST returns, presumptive taxpayers will receive a notice from the Income Tax Department requesting an explanation for the mismatch.
The companies that have no requirement for the auditing of their accounts under Section 44AB will have to submit certain transactions (expenditures) in Form ITR-6. These transactions include transactions in exempt goods or services, transactions with registered entities along with the total amount paid to them, transactions with composite suppliers, and transactions with unregistered entities.
Additional Information from IndAS Compliant Companies
Although IndAS is applicable to High Net Worth companies, i.e. companies with a net worth of Rs.500 crore or more as on March 31, 2014, there was no requirement in the income tax return form for the previous assessment year. However, going forward, a new schedule has been introduced in ITR-6 for IndAS Compliant companies. As such, these companies will have to disclose the IndAS financial statements. Moreover, changes have been incorporated into ITR-6 for the correct calculation of the book profit.
Penalty for Delay in Filing ITR
Taxpayers are expected to file their income tax returns prior to the due date. Until the previous financial year, in case taxpayers faced delays in filing their returns prior to the completion of the assessment year, the Assessing Officer would impose a penalty under Section 271F of the Income Tax Act. The Finance Act, 2017, omitted this provision and late fees are now charged under Section 234F in case taxpayers fail to submit their returns on time. Assessees are now expected to pay late fees in addition to interest. The late fees are charged under Section 234F of the Income Tax Act, and the interest will be charged under Section 234A, Section 234B, and Section 234C of the Income Tax Act.
The Central Board of Direct Taxes has incorporated certain restrictions on the depreciation rate to a maximum of 40% for any block of assets. The new forms have seen a replacement in the depreciation column from 50%, 60%, 80% and 100% to 40%. Moreover, there are new columns now so that the proportionate depreciation in case of amalgamation, demerger, etc. can be incorporated.
Exemptions on Capital Gains
Certain columns have been added to the new ITR forms so that every capital gain exemption can be reported individually. Details regarding all exemptions on capital gains will have to be mentioned under Section 54, Section 54B, Section 54EC, Section 54EE, Section 54F, Section 54GB, and Section 115F. Moreover, taxpayers that avail exemptions on capital gains will have to specify the date on which the original capital asset was transferred.
DTAA Relief Benefit
Taxpayers who claim Double Taxation Avoidance Agreement relief with regard to income from other sources or capital gains must provide information of the applicable Double Taxation Avoidance Agreement.
Changes Related to Trusts
Form ITR-7 now requires additional information with regard to religious and charitable trusts. The kind of information that must be entered includes the aggregate yearly receipts of the institutions or projects operated by the trust. Assessees will also have to include the date on which the trust was registered or the date on which it was approved. It also asks for information regarding the amount of money used over the course of the year.
In case the modifications are made by the trust to objects that don’t comply with the terms of registration, the trust will have to register freshly again. In this case, Form ITR-7 will require the date on which the objects were changed, whether or not the application for registering again was made within the specified time period, whether or not the fresh registration was granted, and the date on which it was re-registered. Under the Finance Act, 2017, donations made by charitable trusts to other charitable trusts will not be considered as application of funds.
Information Regarding NRIs Overseas Bank Account
The new income tax return forms allow NRIs to submit information of any one overseas bank account for the payment of tax refund. This makes it easier to process the transfer of the refund directly to the overseas accounts of the NRIs.
Reporting of Overseas Current Receipts or Payments
Assessees who do not have a requirement for the auditing of their accounts under Section 44AB will have to report the payments made during the year on capital account, payments made during the year on revenue account, receipts during the year on capital account, and receipts during the year on revenue account.
Reporting of CSR Expenditure
Companies are mandated to incur expenses as Corporate Social Responsibility under the Companies Act, 2013. A new column has been added to the Form ITR-6 so that CSR expenditures can be reported in the returns despite these expenses not being allowed under Section 37(1).
Keeping these changes in mind when filing your returns can help in ensuring that you do not make any errors.