1.0
Introduction
Every
year CBDT notifies new Income-Tax Return (ITR) forms. However, in the recent
past CBDT had notified ITR forms a bit late causing inconvenience to various
tax practitioner and taxpayers in
filing ITRs within prescribed time. Thus, we
have witnessed a spate of writ petitions in the various High Courts for
extension of due date of filing return.
The
Delhi High Court in case of Avinash Gupta v. Union of India [2015] 63
taxmann.com 121 (Delhi) criticized the Government for its delay in
notifying ITR forms every year. The Delhi High Court made following remarks:
There
appears to be no justification for delay beyond the assessment year in
prescribing the ITR forms. Accordingly, the respondents are directed to, with
effect from the next assessment year, at least ensure that the ITR form should
be available as on 1st April of the assessment year unless there is a valid
reason therefor.
Thus,
considering such suggestion of the High Court the Government has now notified
the ITR forms, namely, ITR-1, ITR-2, ITR-2A, ITR-3, ITR-4, ITR-4S, ITR-5, ITR-6
and ITR-7 on March 31, 2016.
The
Finance Act, 2015 abolished the wealth-tax. Thus, taxpayers are no longer
required to file returns of wealth tax from assessment year 2016-17 onwards.
However, the Hon'ble Finance Minister in his budget speech had announced that
information which was to be furnished in wealth tax return will now form part
of ITR.
Thus,
in new ITR forms, namely, ITR-1, ITR-2, ITR-2A and ITR-4S the Government has
imposed obligation on Individuals and HUFs having income exceeding Rs 50 lakhs
to furnish information regarding assets and liabilities.
2.0
Changes made in new ITR forms:-
2.1
Declaration of value of assets and liabilities by Individuals/HUF earning above
Rs 50 lakhs:- [ITR 1, 2, 2A, 3, 4, 4S]
The
new ITR forms introduce a new Schedule requiring individuals/HUFs to declare
the value of assets and liabilities if their total income exceeds Rs. 50 lakhs.
Assets include immovable assets and movable assets. Under the heading immovable
assets, taxpayers have to disclose cost of land and building. Under movable
assets cost of Jewellery, bullion, vehicles, Yachts, boats, aircraft and cash
in hand need to be disclosed. Further, such taxpayers need to disclose all
liabilities in relation to such assets.
Note: Individuals and HUFs
with income exceeding 25 lakhs, filing ITR-3 and ITR-4 were already required to
furnish information of their assets and liabilities. Now such threshold limit
of 25 lakhs has been increased to 50 lakhs in new ITR-3 and ITR-4 for
disclosure of details of assets and liabilities.
2.2 TCS credit for
individual taxpayers:- [ITR 1, 2,
2A]
Sub-section
(1D) was inserted in Section 206 by the Finance Act, 2012 to reduce the
practice of cash payments for purchase of bullion and Jewellery and for curbing
the flow of unaccounted money in the trading system.
Section
206(1D) provides that the seller of bullion and Jewellery shall collect TCS at
1% of sale consideration from buyer if such sale consideration is received in
cash and it exceeds:
i) Rs. 2 lakh, in case Bullion; and
ii)
Rs. 5 lakh, in case of Jewellery.
However,
in the absence of any row in the ITR Forms (ITR 1, 2 and 2A), individual
taxpayers were unable to claim credit of such TCS. Therefore, new ITR Forms
provide an option to claim TCS by the individual taxpayers.
2.3 Firms can file
ITR-4S for presumptive income:- [ITR-4S]
Under
the existing provisions of Rule 12, firms were required to file ITR 5 even for
presumptive income. The amended Rule 12 would now allow firms to file ITR 4S
for presumptive income. Accordingly, a separate row is provided for in ITR 4S
to claim deduction of interest and salary paid by the firms to the partners.
2.4 Additional
deduction for contribution to NPS under Section 80CCD :- [ITR 1, 2, 2A,
3, 4 and 4S]
A
new sub-section (1B) was introduced in Section 80CCD by the Finance Act, 2015
to provide for an additional deduction of upto Rs. 50,000 for investment in
National Pension Scheme. Accordingly, a new row is now introduced in the ITR
Forms to claim benefits of such additional deduction.
2.5 Details of pass
through income of business trust or investment fund:- [ITR 2, 2A, 3, 4,
5, 6, 7]
As
per provisions of Section 115UA and Section 115UB, pass through status is
provided in respect of income [other than income from business or profession]
of business trust/investment fund. Thus, income distributed by the business
trust/investment fund is to be taxed in the hands of the unit holders.
The
new ITR Forms have a new 'Schedule PTI' for reporting of pass through income of
business trust/investment fund. Following details should be provided by such
trust in ITR forms:
■ Name of business trust/investment fund
■ PAN
■ Head of income
■ Amount of income
■ TDS on such amount, if any.
2.6
Disclosure of details regarding partnership firm by a partner:- [ITR 3, 4]
In
ITR forms there is a separate 'Schedule IF' wherein partners are required to
disclose the name of the partnership firms in which he is a partner. Now
partners have to disclose whether such firm is liable to transfer pricing audit
under Section 92E? Separate column has been inserted for such purpose in
'Schedule IF'.
2.7
Share of income from firm/AOP/BOI:- [ITR 3, 4, 5, 6]
Share
of income from partnership firm, AOP and BOI is exempt from tax in hands of
recipient. However, such exempt income had to be disclosed in old ITR forms
under 'Schedule EI'. Now, disclosure of such exempt income has been done away
with in new ITR forms.
2.8
Deduction of additional investment allowance:- [ITR 4, 5, 6]
Section
32AD was inserted by the Finance Act, 2015 to provide for an additional
investment allowance to an undertaking set-up in the notified backward areas in
the States of Andhra Pradesh or Telangana. Suitable safeguards have been
provided in the provision for restricting the transfer of the plant or
machinery for a period of 5 years. On transfer of such asset within five years,
the amount of deduction already allowed shall be deemed as income from business
or profession (i.e., deemed income under Section 32AD) in the year of transfer.
A
separate row has been inserted in new ITR forms to claim such deduction under
Section 32AD. Further, a separate row is provided to offer the deemed income to
tax under Section 32AD.
2.9
Effect of ICDS:-
[ITR 4, 5, 6]
New
'Schedule ICDS' has been inserted in ITR forms wherein effect of Income
Computation and Disclosure Standards('ICDS') on profit needs to be disclosed.
2.10
Percentage of commercial receipts by a trust:- [ITR 7]
The
Finance Act, 2015 has substituted the proviso to Section 2(15) to provide that
the advancement of any other object of general public utility shall not be a
charitable purpose, if it involves the carrying on of any activity in the
nature of trade, commerce or business, unless:
i) such activity is undertaken in the course of actual carrying out of
such advancement of any other object of general public utility; and
ii)
the aggregate receipts from such activity or activities during the previous
year, do not exceed 20% of the total receipts, of the trust or institution
undertaking such activity or activities, of that previous year.
In
other words, advancement of any other object of charitable purpose shall not be
deemed as charitable if receipts from any commercial activity exceed 20% of
total receipts. Accordingly, a new row is inserted in ITR 7 to disclose
percentage of commercial receipts vis-à-vis total receipts in order to ensure
that such condition (as given hereinabove) is not violated.
2.11 Application of
income by a trust:- [ITR 7]
Income
of charitable or religious trust is exempt if 85% of its income is applied for
charitable or religious purposes in India. If income applied for charitable or
religious purposes during the previous year falls short of 85% because such
income has not been received during the year or due to any other reason, an
option is given to assessee to apply such income in future years in prescribed
manner. Assessee has to choose such an option by filing Form 9A to the
Assessing Officer before due date of filing return of income under Section
139(1).
Now
a separate row is provided in new ITR 7 requiring trust to confirm if it has
filed Form 9A to exercise such an option and the date of filing of such form.
2.12 Details to be
given by Universities, hospitals, educational institutions:- [ITR 7]
Exemption
under sub-clause (iiiab) and (iiiac) of Section 10(23C) is available to
universities or educational institutions, hospitals or other institutions which
are wholly or substantially financed by the Government, subject to certain
prescribed conditions. The Finance Act, 2015 has amended the provisions of
Section 139 to provide that such entities covered under clauses (iiiab) and
(iiiac) of Section 10(23C) shall be mandatorily required to file their returns
of income.
Now
such universities, hospitals, educational institutions, etc., have to disclose
their name and annual receipts in new ITR 7. Further, they are also required to
disclose the amount eligible for exemption in ITR 7.
2.13 MAT disclosure:-
[ITR-6, 7]
The
Finance Act, 2015 had excluded following incomes for computing MAT liability:
i) Share of a member in the income of the AOP/BOI, on which no income-tax
was payable.
ii)
Passive income (like capital gains, interest, royalty, FTS) accruing or arising
to foreign company if income-tax payable thereon was less than 18.5%.
iii)
Amount representing
- Notional gain on transfer of a capital asset, being share of SPV to a
business trust in exchange of units allotted by that trust referred to in
clause (xvii) of Section 47; or
- Notional gain resulting from change in carrying amount of said units;
or
- Gain on transfer of units referred to in clause (xvii) of section 47.
iv)
Loss on transfer of units referred to in Section 47(xvii) (subject to
conditions)
Consequently,
the Finance Act, 2015 had provided for addition of related expenditure on
aforesaid income while computing MAT liability.
Separate
row have now been inserted in ITR forms to incorporate such changes.
2.14 Disclosure of
Audit information:- [ITR 5, 6]
In
new ITR forms there is a separate row for disclosure of following details if
taxpayer is liable for audit under any Act [other than the Income Tax Act]:
1)
Act and Section under which taxpayer is liable for audit
2)
Date of furnishing of Audit Report.
2.15
Deduction of sum paid for purchase of sugarcane:- [ITR-5]
The
Finance Act, 2015 had inserted Section 36(1)(xvii) to provide that co-operative
society, engaged in the business of manufacturing of sugar, could claim
deduction of expenditure on purchase of sugarcane to the extent of price
approved or fixed by the Government. Expenditure in excess of such fixed price
was to be disallowed.
New
ITR-5 has inserted a separate row for disclosure of sum which is disallowable
under Section 36(1)(xvii).
2.16
Deduction under section 80JJAA:- [ITR 4, 5]
Old
provisions of section 80JJAA, inter alia, provided for deduction to an
Indian company, deriving profits from manufacture of goods in a factory. The
quantum of deduction allowed was equal to 30% of additional wages paid to the
new regular workmen employed by the assessee in such factory, in the previous
year, for three assessment years including the assessment year relevant to the
previous year in which such employment was provided.
With
a view to encourage generation of employment, the Finance Act, 2015 had amended
Section 80JJAA so as to extend the benefit of such provision to all assessees
having manufacturing units rather than restricting it to corporate assessees
only.
New
ITR-4 and ITR-5 forms now contain a separate row for such taxpayers (other than
corporate taxpayers) to claim benefit of such deduction under Section 80JJAA