Scrutiny of refurbished return forms for Assessment year 2015-16

I. Introduction to New Rule 12

The Rule 12 of the Income-tax Rules was amended vide Notification No. 41/2015, Dated 15-04-2015. The new ITR Forms 1, 2 and 4S were notified for the assessment year 2015-16 vide said notification.

In view of various representations received it was announced that these ITR forms will be reviewed. Having

considered the responses received from various stakeholders, new ITR forms have been notified vide Notification No. SO 1660, dated June 22, 2015.

At present individuals and HUFs having income from more than one house property or capital gains are required to file Form ITR 2. It was observed that majority of taxpayers who file Form ITR 2 do not have capital gains. With a view to provide a simplified version of this form for these individuals and HUFs, a new Form ITR 2A is notified which can be filed by an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income.

Further, it shall not be mandatory to furnish details of foreign trips in new Form ITR 2. Only Passport Number, if available, would be required to be furnished in the Form 2.

As regards furnishing of details of the bank accounts in ITR forms, only the IFS Code, account number of all current/savings accounts which are held at any time during the previous year have to be furnished. The balance in accounts will not be required to be furnished. Details of dormant accounts which have not been operational during the last three years are not required to be furnished.

It is further provided in Rule 12 that individuals having exempt income without any ceiling (other than agricultural income exceeding Rs. 5,000) can also file return in Form ITR 1. If taxpayer has agricultural income the return shall be filed in ITR 2 or ITR 2A, as the case may be.

Till assessment year 2014-15, individuals or HUFs, who were otherwise not liable to file return of income electronically, could claim tax refund by filing return of income in physical form. However, Rule 12 as notified on 15-04-2015, has made it mandatory for every taxpayer to file return of income electronically so as to claim refund of tax from the department.

Under the extant Rules all taxpayers including super senior citizen (being an individual of 80 years or more) are required to file return of income electronically, if their total income exceeds five lakh rupees. Now an option has been given to the super senior citizens whose total income exceeds five lakh rupees or who is claiming income-tax refund, to file return of income in physical form, provided return is furnished in ITR- 1 or ITR- 2.

As per the new provision (as notified on 15-04-2015) every individual or HUF whose total income exceeds five lakh rupees or who is required to file return in Form ITR-3 or ITR-4 shall have to file return of income electronically.

If an individual (not being a citizen of India) is in India on a business, employment or student visa purposes and he acquires any asset during the previous year in which he was a non-resident, such asset shall not be required to be reported in Schedule FA – Details of foreign assets and income if no income is derived from that asset during the current previous year.

II. Key changes in new ITR Forms

1. Introduction of ITR 2A

[ITR 2A]

At present individuals/HUFs having income from more than one house property or capital gains are required to file Form ITR-2. It is, however, noticed that majority of individuals/HUFs who file return in Form ITR 2 do not have capital gains. With a view to provide a simplified form for these individuals/HUFs, a new Form ITR 2A has been introduced which can be filed by an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income or have not claimed relief under section 90/90A/91.

ITR 2A includes almost all fields as were contained in ITR 2, except information relating to capital gains, foreign asset/foreign income and relief under section 90/90A/91.

2. Details of all bank accounts held by assessee

[ITRs 1, 2, 2A, 4S]

Under new ITR form, an assessee is required to furnish details of all bank accounts held by him in India at any time during the previous year. However, the new ITR forms notified on June 22, 2015 provide immunity to the taxpayer from furnishing details about the bank accounts which have become dormant.

The 'dormant' account shall be those current and saving bank accounts which have not been operational for more than 3 years.

Following details shall be reported in respect of each bank account held by assessee in India:

  a) IFSC Code of the Bank

  b) Name of the Bank

  c) Name of joint holders (if any) (withdrawn)

  d) Account Number

  e) Account Balance as on 31^st March of the previous year (withdrawn)

  f) Nature of the bank account, i.e., current account or saving account

3. Details of foreign travelling shall not be reported, except Passport No.

[ITRs 2, 2A]

If assessee has travelled overseas, the details about such travelling is not required to be furnished in the new return forms. However, the individual should furnish his Passport number, if available.

4. Reporting of Aadhaar Number

[ITRs 1, 2, 2A, 4S]

The ITR forms require assessee to provide his Aadhaar Number (if assessee has obtained the same).

5. Date of Formation by HUF

[ITR 2, 2A, 4S]

In ITR forms, an HUF is required to report date of its formation.

6. Reporting of amount that has remained unutilized in capital gains account

[ITR 2]

If assessee is unable to roll over the investment in new capital asset within the specified time period so as to avail of the exemptions under section 54, 54B, etc., he can deposit the sum in capital gains account scheme.

In that case, exemption to be granted to assessee shall be aggregate of actual investment in new capital asset and amount deposited in capital gains account scheme before due date of filing of return of income.

The amount so deposited in the capital gains account scheme should be utilized for investment in specified asset within specified time-limit, otherwise the unutilized amount shall be chargeable to tax in the previous year in which the time-limit expires. The unutilized amount would be taxable as short-term capital gain/long-term capital gain, depending upon the nature of original capital gain.

In ITR forms, requisite details are required to be provided in respect of amount so deposited in capital gains account scheme.

The details which are required to be provided if amount is deposited in capital gains account scheme are as follows:

  a) Previous year in which asset is transferred

  b) Section under which exemption is claimed

  c) Year in which new asset is acquired

  d) Amount utilized out of capital gains account scheme to acquire new asset

  e) Amount that has remained unutilized in capital gains account scheme or amount which is not used for making investment in specified new asset

7. Return filed pursuant to order of CBDT under Section 119

[ITR 1, 2, 2A, 4S]

For avoiding genuine hardship, by general or special order, the Board may authorize any tax authority other than CIT (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief after the expiry of the period specified under the Act.

If assessee is filing return of income pursuant to an order of CBDT under Section 119(2)(b), it shall tick the check-box [ under Section 119(2)(b)] introduced in the ITR form.

Generally CBDT extends date of filing of return under Section 119 in cases of natural calamities or when taxpayer faces genuine hardship in certain circumstances. Recently, the due date of filing of return for J&K taxpayers was extended by the CBDT due to devastation caused by flood in J&K.

8. Details of income taxable under DTAA

[ITR 2, 2A]

If capital gain or residuary income of assessee is taxable as per provisions of the DTAA entered into between India and a foreign country, of which the assessee is a resident, following details shall be furnished in the return:

  a) Name of the Country

  b) Relevant Article of the DTAA

  c) Rate of tax under DTAA (applicable in case of residuary income)

  d) Confirmation if TRC has been obtained

  e) Corresponding section of the Act which prescribe the rate of tax (applicable in case of residuary income)

  f) Amount of income

Further, the special tax rate on capital gain or residuary income and tax on such income as per DTAA shall be disclosed separately in Schedule SI.

9. Advance Pricing Agreement – Code for filing modified return withdrawn

[ITR 2]

As per provisions of Section 92CD – Effect of Advance Pricing Agreement ('APA'), where any person has entered into an APA and prior to the date of entering into the agreement any return of income has been furnished under section 139 for any previous year to which such agreement applies, such person shall furnish, within a period of three months from the end of the month in which the said agreement was entered into, a modified return in accordance with the APA.

In the ITR forms notified earlier on April 15, 2015, the taxpayer was required to select the relevant check-box in Part A – Gen [Modified Return - Section 92CD] if modified return was being filed pursuant to an Advance Pricing Agreement.

The check-box for selecting the option of 'Modified Return – Section 92CD' has been withdrawn from ITR 2 as notified on June 22, 2015. Such an option is withdrawn from ITR 2 for the reasons that the taxpayer who enters into an APA will have the business income and in that case, he shall file return of income in ITR 4 only. Similarly, the additional verification clause introduced in the ITR form notified earlier has also been withdrawn.

10. Details about the foreign assets and foreign income

[ITR 2]

If an individual (not being a citizen of India) is in India on a business, employment or student visa purposes and he acquires any asset during the previous year in which he was a non-resident, such an asset shall not be required to be reported in return if no income has been derived from that asset during the current previous year.

The ITR forms seek more details about the foreign assets and income from any source outside India. Schedule FA is substituted which requires assessee to provide detailed information about such foreign assets and income. The additional disclosures in the new ITR form shall be as under:

1) Foreign Bank Account:

  a) Status of account holder (i.e., Owner/Beneficial Owner/Beneficiary)

  b) Date of opening of such bank account;

  c) Interest accrued in the account; and

  d) Details about the interest offered to tax in the return.

2) Financial Interest in a foreign entity:

  a) Nature of financial interest (direct, beneficial ownership or beneficiary) in such entity;

  b) Date since such interest is held;

  c) Income accrued from such interest;

  d) Nature of income; and

  e) Details about the income offered to tax in this return.

3) Foreign Immovable Property or any other capital asset

  a) Whether ownership in such asset is direct or beneficial or as beneficiary;

  b) Date of acquisition of such asset;

  c) Income derived from such asset;

  d) Nature of income; and

  e) Details about the income offered to tax in this return

4) Signing authority in any foreign account

  a) Whether income accrued in such account is taxable in assessee's hands; and

  b) If yes then furnish details about the income offered to tax in this return

5) Trustee or Beneficiary or Settlor in a foreign trust

  a) Date since the position of trustee or beneficiary or settlor held in foreign trust;

  b) Whether income derived from the trust is taxable in assessee's hands; and

  c) If yes, details about the income offered to tax in this return

6) Any other income derived from any source outside India

  a) Country Name and Code;

  b) Name and address of the person from whom income is derived;

  c) Amount of income derived;

  d) Nature of income;

  e) Whether income is taxable in assessee's hands; and

  f) If yes, details about the income offered to tax in this return.

11. Agricultural income

[ITR 2, 2A]

The Schedule EI in ITR forms requires assessee to provide following figures separately:

  a) Gross agricultural receipts

  b) Expenditure incurred on agriculture

  c) Unabsorbed agricultural loss of previous eight assessment years

  d) Net agricultural income for the year.

12. Distinction between heavy and light good carriages removed

[ITR- 4S]

The Finance (No. 2) Act, 2014 amended Section 44AE to remove the distinction between heavy goods carriages and light good carriages. From Assessment Year 2015-16, presumptive income in respect of goods carriages is computed at a uniform rate of Rs. 7,500 per month for any goods carriages.

Therefore, the ITR forms remove the concept of type of goods carriages and to provide for uniform rate of Rs. 7,500 per month for computation of presumptive income of goods carriages.

13. Acknowledgment of details relating to exempt income in ITR-V

[ITRs- 1, 2, 2A, 4S]

Relevant columns have been provided under ITR-V to acknowledge exempt income, inter-alia, agricultural income and other exempt incomes.

14. Concessional tax rate in case of sale of listed securities (other than unit)

[ITR 2]

As per the existing proviso to Section 112, if tax payable on long-term capital gains arising on transfer of a capital asset, being listed securities or units or zero coupon bonds, exceeds 10% per cent of the amount of capital gains before allowing for indexation adjustment, then such excess shall be ignored.

The Finance (No. 2) Act, 2014 amended the said proviso to provide that the concessional rate of tax of ten per cent shall be available only for long-term capital gain arising from transfer of listed securities (other than unit) and zero coupon bonds.

Therefore, consequential amendment is made to ITR forms in accordance with the amendment.

15. Sale of units of business trust

[ITR- 2]

The Finance (No. 2) Act, 2014 introduced a new Chapter XII-FA in the I-T Act to provide for special provisions relating to business trust. The special taxation regime contains provisions for taxability of income in the hands of business trusts and the income distributed to its unit holders.

Consequential amendment is made to Section 10(38) to provide that long-term capital gain arising from transfer of unit of a business trust on which securities transaction tax (STT) is paid shall be exempt from tax.

Similarly, Section 111A has been amended to provide that short-term capital gain arising from transfer of unit of a business trust on which STT is paid shall be chargeable to tax at reduced rate of 15%.

Necessary changes have been made in this regard in the ITR forms.

16. Securities held by FIIs

[ITR 2]

Section 2(14) of the Act was amended by the Finance (No. 2) Act, 2014 to provide that securities held by FIIs shall be deemed as 'Capital Assets'. The amendment was made to end the controversy of categorization of income of FIIs as business income or capital gains.

Consequential changes have been made in ITR forms in this regard.

17. Reshuffling of Schedules

[ITRs 1, 2, 2A, 4S]

The information required to be filed in the following Schedules has been reshuffled:

  a) Schedule BA – Details of Bank Accounts [ITRs 1, 2, 2A, 4S]

  b) Schedule IT – Details of payments of Advance Tax and Self-Assessment Tax [ITR 2]

  c) Schedule TDS1 – Details of Tax Deducted at Source from Salary [ITR 2]

  d) Schedule TDS2 – Details of Tax Deducted at Source on Income [ ITR 2]

  e) Schedule FT – Passport Number. No need to furnish details of foreign travel and expenses incurred during the year. [ITRs 2, 2A]