The income tax department has notified the income tax return forms for assessment year 2019-20. There are a number of changes made in the new forms. On careful reading of these changes, it appears that tax authorities want tax payers to provide more extensive details about their transactions, so that such information and details may be used for better profiling of taxpayers, for tracking cases of potential tax evasion and increasing the tax base using data analytics.
Further, the tax authorities may use such additional details to improve the Computer Aided Scrutiny Selection process, while selecting cases for limited or complete scrutiny, based on exhaustive information provided by taxpayers in the ITR forms. Some of the key changes/ new disclosure requirements in ITR forms are explained below, which would be good for taxpayers to keep in mind while filing their ITRs.
Additional reporting for directors/ shareholders of unlisted firms
In a significant change, which apparently increases the income tax risk profile and monitoring of directors/ equity shareholders of unlisted companies, the I-T department now wants such directors/ shareholders to furnish additional details as to name, PAN of the concerned companies and their director identification number.
The benefit of simpler ITR forms Sahaj (ITR-1) and Sugam (ITR-4) is no more available for such directors, irrespective of their taxable income/ source of income. Having such details in ITR form may help department identify cases where taxable income/ source of income reported by such directors/ shareholders may not match up to directorship/ shares held by them (such as cases of dummy directors).
Additional reporting regarding residential status of individuals
Till now, residential status of an individual in the ITR forms was only a self-declaration and actual determination of such residential status by tax authorities was possible, only after such cases were selected for scrutiny. In the new forms (except those ITR forms meant only for residents and ITR forms for non-individuals), the individual taxpayers will now need to fill in complete details about number of days spent in and outside India in ITR form, based on which their residential status will be determined (and not just a self-declaration).
Additional reporting for agricultural income
Many would have heard recently about shocking amounts of agricultural income being reported by taxpayers, who are essentially not farmers. The temptation of reporting an income as ‘agriculture income’ stems from the fact that ‘agricultural income is exempt from income tax’ in India. In order to track bogus cases of agricultural income, the new ITR forms now require such persons to also declare name of district, size of land parcel, etc., in their ITR forms, so that such claim of agriculture income may be verified from land records.
Additional reporting regarding foreign assets
Scope of reporting of foreign assets is now enlarged to specifically include foreign depository accounts, foreign custodial accounts, foreign debt and equity interest (including beneficial interest) in any foreign entity, cash value of foreign insurance/ annuity contracts, in addition to existing details about foreign bank accounts, financial interest in any foreign entity, details of immovable property or any other capital asset or interest in any foreign trust as trustee, beneficiary or settlor.
Reporting for charitable trusts, educational institutions
Charitable trusts, educational institutions, etc., which claim I-T exemptions and are required to file ITR-7, are now required to furnish more detailed information about their expenditure for administrative purposes, expenditure for objects of trust/ institution, dis-allowable expenditure, source of fund to meet revenue expenditure, interest and other revenues received by them from various sources, etc.
An individual having total income of up to ₹50 lakh from sources such as salary, one house property, other sources (interest income) and agricultural income up to ₹5,000 can file the return in ITR-1. However, it cannot be used anymore by an individual who is the director of a company or has investments in unlisted equity shares or has income on which TDS (tax deducted at source) has been deducted in another person’s hands.
ITR-4 is applicable to individuals, Hindu Undivided Families and firms (other than limited liability partnerships) having total income of up to ₹50 lakh, and assessees who choose to file their ITR under the presumptive taxation scheme. However, it cannot be used by individuals or HUFs who are not resident and ordinarily residents, non-resident partnership firms, directors of companies or persons having investment in unlisted equity shares or having more than one house property and so on.
If you are supposed to file your returns in ITR-1 form, remember it is mandatory to mention the Indian address and mobile number. The intent appears to be to enable hassle-free communication with the tax department.
Apart from your salary, you also need to disclose other component of your package. Standard deduction from salary was introduced from 1 April 2018. The respective changes have been made in ITR forms.
Besides, salaried employees have to report the value of perquisites, profit in lieu of salary, exempt allowances and also deductions for entertainment allowance, professional tax and standard deduction separately. The requirement is mainly to sync in details mentioned in the Form 16.
In the recent past, a mismatch between Form 16 and ITR resulted in queries from the Centralised Processing Centre. Additional care is required to ensure any mismatches are well analysed to ensure that questions raised by the tax office can be responded to effortlessly.
Until now, if you had more than one self-occupied house, you could only consider one as self-occupied, while all others were considered as “deemed to be let out” and you needed to pay tax on the potential rent of such property.
Budget 2019 relaxed this provision. From this fiscal, you can consider two properties as self-occupied. While relaxation in the rule will come into force from the next AY, the required changes have already been made in the new ITR form. A new option to select “deemed let out” is provided in ITR-1 and ITR-4. Also, the PAN (Permanent Account Number) of the tenant has to be provided in ITR-2 in case TDS is deducted by the tenant.
According to income-tax rules, a property buyer has to deduct TDS at the rate of 1% if the value of the property exceeds ₹50 lakh. An amendment has been made in the ITR form to disclose such information by the seller. Disclosure of the buyer’s information is mandatory if tax is deducted or PAN is quoted by the buyer in documents. The mandatory disclosure includes the name and PAN of the buyer, the percentage share, the amount and the property address.
Also, since long-term capital gains on listed equity shares and equity-oriented funds are taxable from 1 April 2018, the respective changes have been made in the ITR forms.
If you have earned interest income, which is categorized under the income-tax head “other sources”, you will have to provide detailed information of such sources. Separate disclosures have been made mandatory for interest income from bank savings account, fixed deposits and income-tax refund, in the nature of pass-through income or others.
If you travel out of the country frequently, you may need to provide more details. A self-declaration on the residential status of an individual is not sufficient any more. The income-tax department now wants individuals to report the number of days spent in and outside India. A person is considered a tax resident if he or she is present in India for at least 182 days or more in an FY, or 60 days or more in an FY and 365 days or more during the preceding four FYs. Income is chargeable to tax in India based on an individual’s residential status.
Non-resident Indians are also required to file their returns in India, if they have a source of income based in India. The additional information that they are required to furnish in new ITR forms include mentioning the country of residence, taxpayers’ identification number, the number of days of stay in India in case of Indian citizen or a person of Indian origin (PIO).
The above details will help the assessing officer seek additional information as required with respect to overseas income as and when required through exchange of information and determine whether income has escaped taxation.
In the last few years, the government has made several amendments in the income-tax rules to gather information about foreign assets held by Indians. Taking that forward, this year’s ITR forms have several new provisions.
Apart from foreign bank accounts, details of foreign depository accounts are also required to be reported. Details of foreign custodial accounts, foreign equity and debt held and foreign cash value insurance contract details have to be reported separately in the tax return forms.
Non-disclosure or inadequate disclosure of such information can land you in trouble, so make sure you disclose all the details required.
There are various other changes being introduced in the ITR forms. If you have made any donation to charitable institutions, you will have to disclose the amount of such donations made in cash and other modes separately. Senior citizens having interest income and claiming deduction under Section 80TTB have to report it in the space provided.
Those with agriculture income above Rs.5 lakh need to mention details such as district name with PIN code, measurement of the land, whether the land is owned or leased and whether it is irrigated or rain-fed and so on.
Taxpayers need to collate additional details/ reporting requirements well in advance this year, in order to be able to fulfill the reporting requirements prescribed in new ITR forms. One may also expect greater automated scrutiny of ITRs, based on extensive data/ details required and furnished in ITRs.
It is advisable for taxpayers to seek professional assistance, in case they are not clear about any reporting requirement or the appropriate ITR form for them.