The Central Board of Direct Taxes (CBDT) has yet again, as part of achieving ease of compliance, come up with the concept of Common Income Tax Return (“ITR”). A draft was released on November 1, 2022, detailing the objective behind such introduction along with a teaser of the proposed ITR inviting comments from general public.  

Presently, there are 7 ITRs available with each ITR for various class of taxpayers. Under the proposed scheme, the plan is to do away with all ITRs except ITR 7 (Trusts), ITR 1 and 4 have been kept optional. The draft sets the context behind introduction of the concept with a specific note stating that it plans to “facilitate the proper reconciliation of third-party data available with the Income-tax Department vis a vis the data to be reported in the ITR to reduce the compliance burden on the taxpayers.” As clearly visible, the Common ITR is now a means to collect as much as data possible from an assessee and use the same to verify or reconcile with the other counterparty or to establish logic or validity with respect to one’s own financial data.

Flow of ITR

— basic information (Parts A to E)

— total income computation (Schedule TI)

— tax (schedule TTI)

— bank accounts

— tax payments (schedule TXP)

What’s new

·          House Property

 PAN of lender for borrowed capital. While this disclosure forms part of the Quarter 4 salary TDS return in Form 24Q, the same has now also been introduced in the ITR.

 Earlier only interest to be disclosed as part of computation, no option for cross-checking.

There is also a column introduced to enter interest for pre-occupation of property, previously no option to enter segregation of interest.

·          Agriculture Income

 Details of the income, such as size of the land, address, mode of irrigation, etc. to be furnished. No such details were called for earlier, only the quantum of income had to be provided.

·          Salary Income

Income received and taxable during the year on which relief from retirement benefit account u/s 89A was claimed in any previous year.

·          Capital Gains

 ISIN Code of share/unit sold taxable as short-term capital gain

 FMV of an asset if acquired prior to April 2001

Previous owner or transferor details including PAN and nature of transfer to be disclosed

Deemed capital gain detailing the type of violation has been introduced.

 The present ITR calls for only details of cost and sale value, proposed ITR focusses on specific information on the capital assets.

·          Virtual Digital Asset

New disclosure pursuant to amendment introduced by Finance Act 2022.

Cost and taxable income to be provided

 Income from VDA can be disclosed as either business income or as capital gains, both taxable at special rate u/s 115BBH.

·          Others

Disclosure of investment made in any firm or unincorporated firms including details of profit and capital balance

Advances received by individuals from persons specified in section 40A(2)(b) and others

 Employees deployed in India and abroad by businesses

Income from foreign remittances

PAN of donee and mode in case of expenditure on scientific research

 GST reconciliation for turnover of GST and non-GST units, similar to audit report

 Disclosure similar to Form 67 in case of foreign tax credits.

The present ITR only helps in reporting an income and related profits, whereas, these additional disclosures provide more information and enable an authority to connect the dots and identify gaps in reporting/disclosure of any income. Taxpayers need to be careful to avoid penal consequences for incorrect disclosure.

On the brighter side, the aim is to make a taxpayer scroll through minimum schedules with minimal efforts. Which ITR should I file, will no more be a nerve-racking exercise. Tax authorities have been heavily investing on AI and automation in recent times to make compliances more effective. These are in line with similar efforts in the past like pre-fill of data, auto-update in Form 26AS, AIS, etc. These are clearly paving the way to One-Stop compliance which has been a key ask by the taxpayers community.

While the above may seem to be mere disclosure, some of the changes may be painful on account of lengthy information, non-availability of details and repetitive disclosure.

The critical question at this juncture is how the additional information disclosed is going to be used by the authorities. Such information should be used diligently. This should not lead to outright adjustments and litigation. While large corporates are accustomed to litigation and have the bandwidth to use the best counsels, this will only be an additional burden on individuals and small taxpayers.

The writer is Tax Leader, Nangia Andersen LLP

(With inputs from Sumita Ramakrishnan, Associate Director, Nangia Andersen LLP)

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