What’s changed in the new ITR forms

Was filing tax returns on time among your financial resolutions for the New Year? You may then have to begin the ground work immediately.

The I-T Department has already released new Income-Tax Return (ITR) forms applicable to salaried individuals (ITR-1) and presumptive income-tax payers (ITR 4) for assessment year 2020-21. Like in the past few years, the applicability has been tweaked and a host of additional disclosures are called for. Understanding the new requirements now will give you enough time to gather the information and file your returns well within the due date, avoiding last-minute surprises and hassles.

ITR-1 eligibility changes

The ITR-1, to be filed by the salaried class, has always been showcased as the model of simplification of the return filing exercise. But it has become a ritual of sorts to make some changes to it each year.

In 2017, ITR-1 was scaled down to a single page from the earlier seven. In 2018, its applicability was restricted to only those assessees who qualify as residents in India per the Income-Tax Act. In 2019, individuals who are directors in a company, or those who have invested in unlisted equity shares (say, senior management or key personnel in unlisted companies/start-ups who have been allotted shares), were additionally excluded from filing ITR-1.

Besides, from 2019 onwards, only senior citizens aged over 80, and whose income did not exceed ₹5 lakh, became eligible to file ITR-1 (and ITR-4) manually. Earlier, anyone whose income did not exceed ₹5 lakh and who did not claim a refund in the return could file the form manually.

ITR-1 has been tweaked yet again in 2020 — so much so that it now extends to two pages. Thus, the one-page form introduced in 2017 has had a shelf life of just three years!

Now, a few additional disclosures are called for. You need to put down your ownership of a passport, if any, and the passport number. Details of your employer, including the name, nature, address and TAN (TDS/TCS account number) are sought. If you own a house property and have let it out, a separate column has been introduced to declare the unrealised rent. In the past, one had to deduct the unrealised rent from the total rent received/receivable and declare only the net amount. Also, the name and PAN or Aadhaar of the tenant, and the address of the property, need to be mentioned.

A separate disclosure on interest earned on any compensation received (treated as ‘Income from other sources’) and deduction claimed thereon are also added this year. The Income-Tax Act allows a deduction of 50 per cent on such income. Earlier, assessees claiming this deduction could not use ITR-1.

In addition, the column for Sec 80 deductions has been made more elaborate this year with the introduction of a separate space for each of the commonly used sections.

Rollback

Apart from these additions, the eligibility for filing ITR-1 has been narrowed further this year. Assessees filing returns in response to a search notice can no longer file ITR-1.

However, the condition that joint owners of a house property cannot file ITR-1 has been rolled back to avoid hassles to tax payers.

Similarly, persons depositing over ₹1 crore singly or on an aggregate in one or more current accounts during a year, persons spending over ₹2 lakh for self or for others on any foreign travel and persons spending over ₹1 lakh on electricity bills, but at the same time not filing returns because their total income is below taxable limit, were barred from filing ITR-1 initially. This condition, too, has been rolled back.

Thus, residents with income from salary, one house property and other sources with total income of up to ₹50 lakh and agricultural income of up to ₹5,000 can use ITR-1.

All other individuals will now have to file the more complex ITR-2 — provided they meet other conditions for that form’s applicability.

What’s new in ITR-4?

Some of the new requirements in ITR-1, such as the disclosure of passport details, employer and tenant details and address of house property, apply to ITR-4 as well. Details on high-value spends, such as deposits in current accounts of over ₹1 crore, foreign travel spends of over ₹2 lakh and electricity bill payments of over ₹1 lakh, are also sought.

Firms which opt for presumptive taxation will now have to furnish the name and address of the partners, their percentage share in the partnership, the rate of interest on their capital, remuneration paid to them as well as their PAN and Aadhaar (if eligible) numbers.

Similarly, partners of a firm who file ITR-4 must disclose the name and PAN of the firm.

When a firm opts for the presumptive taxation scheme, it is assumed that all expenses including salary and interest to partners have been already allowed when computing the presumed income.

When a partner files ITR-4, the interest and salary are taxable in the hands of the partners. So this information has been called to enable cross-verification.

In what could be a breather, though, assessees filing ITR-4 are no longer required to give the financial particulars of the business under heads such as loans, assets, inventories, debtors, creditors and bank balance.

Instead, the aggregate opening balance of all the bank accounts, receipts and withdrawals/payments during the year and the closing balance are enough.