Like the inevitable Monday morning woes, the annual ‘tax filing blues’ are here to haunt us again. All the more this year, where individual tax payers are confronted with new ITR (Income Tax Return) forms such as the ITR 2A and additional disclosure requirements under certain heads of income, such as capital gains. As if that were not enough, thanks to the government’s recent moves to up the ante against black money, extensive information is now sought from those who have foreign income or own foreign assets.

But, doesn’t every cloud have a silver lining? And so, the good things about this year’s tax filing season first.

Reasons to breathe easy Every year, the salaried class normally has two ITR forms to choose from — ITR 1 and 2. This year, there is another form to reckon with, the ITR 2A. But it means no harm. Two of the biggest headaches (if we are allowed to call them so) — capital gains and foreign income/asset disclosures — are completely out of sight in the ITR 2A form. Hence, ITR 2A is a mere seven pages long. In contrast, with all possible disclosure requirements under these two areas included, ITR 2 is almost double that at 13 pages.

So, if you had income from salary/pension, from house properties and other sources in 2014-15, but haven’t entered into any capital gains tax-related transactions or have stood miles away from any kind of foreign income or assets, you could be eligible to use the simpler ITR 2A form. It’s even better if you have income from only one house property or don’t believe in owning houses at all! You could use the simplest ITR 1 form, Sahaj.

A second change that makes things easy for tax payers this year is related to the disclosure of exempt income. Remember your auditor advising you to move from ITR 1 to ITR 2 last year just because your exempt income, such as PPF interest or dividend receipts, was above ₹5,000? You can now go back to filing ITR 1 itself, if you are otherwise eligible to use that form. Unlike earlier, only exempt income from agriculture in excess of ₹5,000 calls for moving to ITR 2 or 2A, from ITR 1 this year.

Next, a bit of thought has also gone into easing the use of the forms. For example, the schedules related to advance tax, self-assessment tax and TDS payments were buried amidst several other schedules related to various income heads in the forms until last year. This meant sifting through several pages of what may be irrelevant or non-applicable schedules to many assessees, before they again found something that actually needed to be filled up. This year, schedules relating to the advance, self-assessment tax and TDS payments have been made part of the main form, and appear soon after the verification section. Other schedules related to income follow the main section like an annexure.

Foreign trips and bank accounts This apart, an earlier proposal to include details of foreign trips, with respect to countries visited, number of times visited and expenditure incurred on these trips, has thankfully been dropped. Additional disclosure for this year on this front is only Passport Number. Besides, another proposal to include even dormant bank accounts that one may have, has also been withdrawn. A dormant account is one in which you have not transacted for the last two years. For many people who change jobs or move towns frequently, keeping track of and disclosing all their earlier accounts may have been tough. Now, details relating to only non-dormant savings/current accounts held alone are sought.

Finally, the extension of the usual July 31 deadline to file returns, to August 31, 2015, is also a major breather. It gives tax payers enough time to fathom the new forms and disclosure requirements.

But well, if all these brought a smile on your face, the returns bring some reasons to frown.

Tough ask Remember the good old days when all returns were filed manually? Several details relating to computation of various incomes needed to be attached to the returns, making it a bulky document. Then came the days of electronic filing - simple forms and ‘annexure-free’ returns. Although annexure-free now, there has been a slow tightening of the noose with regard to disclosure requirements, thus making the return forms lengthy.

Over the last three assessment years, the number of pages in ITR 2 form (which captures capital gains and foreign income/assets) has moved up from 10 in 2013-14, to 12 in 2014-15 to 13 now. Last year, the form brought in disclosure of long-term capital gains under each asset class separately. So, whether you earned your long-term gains from the sale of land/building, or from sale of bonds/debentures, or from sale of listed securities/ units/ zero-coupon bonds, it has to be stated separately henceforth.

Reining in capital gains This year, the department has turned the spotlight on the capital gains tax exemption provisions. It is common knowledge that when one sells assets such as a residential house, the capital gains are subject to tax. The seller can avoid tax if he/she invests this amount within a specified period in another house or in certain bonds or in an account called the ‘Capital Gains Accounts Scheme’ available in many banks. When the assessee deposits the money in the ‘Capital Gains Accounts Scheme’, the funds in this account should be used to buy a new property within two years from the sale of the earlier property or be used to construct a new property within three years of the sale of the earlier property. If this is not done, the capital gains that were earlier not taxed because of the investment in this scheme will now become taxable.

But so far, there was no way to track whether the amount in this scheme was being fully utilised for the said purpose within the said timeframe, except perhaps when a random IT return was taken up for scrutiny. This led to a lot of big-ticket income escaping the tax net. ITR 2 this year has been redesigned to capture when a property was sold, when the capital gains amount was deposited in the scheme, how much of it has been utilised, and in which year, and how much more remains.

Besides, in the main section of the return, under the computation of total income, capital gains now has to be reported separately based on the various tax brackets it falls under, both in case of short-term and long-term gains.

Thirdly, for non-residents filing returns in India and claiming that their capital gains are not taxable in India as per DTAA (Double Tax Avoidance) provisions, more details are sought.

“Though the computation is not really attached to the returns, the department is capturing enough information at the point of filing the return itself. This implies that the authorities don’t really have to wait for an assessment or a scrutiny to review whatever has been considered as taxable or exempt by you,” sums up Tapati Ghose, Partner, Deloitte Haskins and Sells LLP.

Foreign assets under the scanner Thanks to the government’s efforts to crack down on black money stashed abroad, Schedule FA at the fag end of ITR 2 has also been spruced up this year. While details of foreign bank accounts, of financial interest in any entity, of investment in immovable property or any other capital asset abroad was already being captured in the IT returns earlier, there is an attempt to deepen the information flow this year. Assessees are now required to disclose this information even if they are only ‘beneficial owners’ or ‘beneficiaries’ in any such foreign income or assets.

The instruction leaflet to ITR 2 goes on to explain a ‘beneficial owner’ as “ an individual who has provided, directly or indirectly, consideration for the asset and where such asset is held for the immediate or future benefit, direct or indirect, of himself or any other person.” A ‘beneficiary’ is defined as “an individual who derives benefit from the asset during the previous year and where the consideration for such asset has been provided by any person other than such beneficiary.”

Secondly, additional columns such as nature of income, the amount of income or interest received, the amount offered to tax, schedule and item number under which it has been offered to tax in the return have also been brought in. This is directed at making it easy for a cross-check by the authorities in case they decide to delve deeper into the return.

All this information overload on foreign income/assets sought by the authorities implies that those who have such interests must be more careful this year.

“If you are an ordinary resident in India and hold any foreign asset which you have not disclosed so far, it is best you report it in ITR 2 this year,” says Kuldip Kumar, Leader-Personal Tax, PwC. “In addition, you also need to ascertain whether the sources of such asset are explainable.

If not, you may use the one-time compliance window under the Black Money Law, expiring on September 30, 2015,” he explains. Of course, if your source is explainable it won’t cost you a penny to disclose in the ITR 2. But if you are using the Black Money compliance window, you need to pay 60 per cent of the value of such asset as tax and penalty.

Also read: The electronic route to filing returns

Related Topics
comment COMMENT NOW