What is difference in New ITR Forms notified for AY 2018-19
Income-tax Return Forms (ITR Forms) are the prescribed by Central Board of Direct Taxes in which assessee or taxpayer file the information about his income, source of such income and income-tax paid or payable thereon to the Income-tax Department. The CBDT has issued seven types of ITR Forms which are to be used by different class of assessee(s) or taxpayers.
In this Financial Year, the CBDT has released the new Income-tax return (ITR) Forms for the Assessment Year (AY) 2018-19. These ITR Forms will be applicable to file income-tax returns in respect of income earned during the period 01-04-2017 to 31-03-2018.
In the new ITR forms, some of the existing schedules have been modified and some new schedules have been introduced. It is apparent that the new ITR Forms shift the onus on the taxpayers to prove their claim for deductions, expenses or exemptions. These ITR forms require detailed information from trusts and taxpayers who has opted for presumptive taxation scheme and investors in shares of unlisted companies etc.
Overall there are 28 significant changes in new ITR forms in comparison to earlier forms. Most of them are being discussed as under:-
- Detail calculation of income from salary and house property. (Applicable for ITR-1) is the simplest form of income-tax return to be filed by an individual taxpayer who earns income from salary or pension, one house property and other sources. Further, annual taxable income of the individual taxpayer should not exceed Rs. 50 lakhs and his total income should not include any income from betting, gambling, etc. As compared to earlier form, now the new ITR-1 requires detailed calculation of income from salary and from house property, which was restricted to single figure till last year.
- Now the new ITR-1 form cannot be filed for a non-resident. (Applicable for ITR 1) Therefore, a non-resident will have to choose either from ITR-2 or ITR-3 to file his return of income for the Assessment Year 2018-19.
- More financial particulars and information in case of presumption taxation scheme (Applicable form ITR 4). Where a taxpayer opts for presumptive taxation scheme under section 44AD, 44ADA or 44AE, he will have to file the return of income in form ITR 4. The earlier ITR 4 ask for only 4 financial particulars of the business, a) total creditors, (b) total debtors, (c) total stock-in-trade and (d) cash balance. The new ITR 4 form seeks details of 14 financial particulars of business such as amount of secured/unsecured loans, advances, fixed assets, capital account, etc.
- The new ITR 4 requires a taxpayer to provide the aggregate turnover reported by him in GST Returns. (Applicable form ITR 4) This additional information has been introduced to end the ill practice of reporting different turnovers in erstwhile sales tax return and income-tax return. Now the department has shifted the burden on the assessee to report GST turnover in Income Tax returns and if there is difference in GST turnover as reported by the assessee in his GST return and ITR, then this will be a case of prima facie false reporting and therefore taxpayers can expect a notice from the Department to explain the mismatch in turnover.
- The new ITR Forms introduced specific columns to report capital gain exemption under each section separately. (Applicable for ITR 2, 3, 5 and 6). Details of each capital gains exemption under Sections 54, 54B, 54EC, 54EE, 54F, 54GB and 115F shall be reported in its relevant column now. Further, a taxpayer availing these capital gains exemptions is required to mention the date of transfer of original capital asset which was not there in earlier ITR Forms.
- In the case of capital gain arising on transfer of unquoted shares, it would now be mandatory for the investors to obtain the valuation report. (Applicable to ITR 2, 3, 5, 6 and 7) To ensure that investors correctly report the capital gains from unlisted shares, the new ITR Forms require the taxpayer to provide figures of actual sales consideration and Fair Market Value as determined by a Merchant Banker or Chartered Accountant.
- Fee for late filing of income tax returns (Applicable to All ITR Forms). Upto last assessment years, if a taxpayer has not filed ITR before the end of assessment year, penalty under Section 271F could be imposed by the Assessing Officer only after initiating the penalty proceedings. After omission of this penalty provision by the Finance Act, 2017, late fees is levied under Section 234F if taxpayer does not furnish the ITR in time. The taxpayer shall now be required to pay late filing fees under section 234F along with interest under section 234A, 234B and 234C before filing the ITR. However, he may file ITR with tax payable. The late fee for filing income tax return after due date is Rs.5000/- if filed before 31st December and Rs.10000/- if filed thereafter. However, in case the total income is below Rs.5,00,000, then late fee shall not exceed Rs.1000/-.
- Partner cannot file ITR- 2 (Applicable for ITR 3). From the Assessment Year 2018-19, an individual or an HUF, who is a partner in a partnership firm or LLP, shall be required to file his ITR in Form ITR 3 only. Last year the partners were required to file return in ITR 2.
- Reporting CGST, SGST and IGST (applicable for ITR 3, 5 and 6). After enactment of GST Act, the new ITR forms have introduced new columns to report CGST, SGST, IGST and UTGST paid by, or refunded to, assessee during the Financial Year.
- No requirement to mention Gender for Individual in ITR Forms (Applicable for ITR 1. 2, 3 and 4). Individual taxpayers who are filing income-tax return in Form ITR-1, ITR 2 or ITR 3 or ITR 4 aren’t required to mention the gender, i.e., male or female or transgender, as the column of gender has been removed.
- Additional disclosure requirements for Ind AS-Compliant Companies (Applicable to ITR 6).
- Now more information is required for Salary and House property income in ITR-1 and ITR-4.
- Transfer of TDS Credit to Other Person (Applicable to ITR 2 to 7). All citizens who are domiciled in Goa and to whom the Portuguese Civil Code of 1860 is applicable are governed by the system of Community of Property. Under this system, a person is entitled to inherit 50 per cent of the property of his spouse and income therefrom is also liable to be shared equally among the spouse. Under Section 5A, the statute has recognised the system of community of property for the purpose of assessment in respect of all the income other than salary. In this situation, if an income, which is added to the common pool, has been subjected to TDS, the assessees face difficulties in proving their claim for TDS Credit. There are other similar situations, where a person is entitled to claim the credit for tax deducted in the name of another person, i.e., inheritance, etc.Currently, the Income Tax Department matches the TDS disclosed in ITR with the amount of TDS as shown in Form 26AS and in case of mismatch, the department asks the assessee to reconcile the mismatch. Therefore, in the situations as mentioned above, the taxpayers were facing difficulties in claiming the TDS credit. To overcome this problem, the ITR forms introduce new columns in ‘TDS schedule’ which would allow the department to easily correlate the PAN, amount of income and TDS thereon as disclosed by both the parties in their respective return of income. It would make it convenient for the assessee to claim the credit of tax deducted in name of another person.
- Revised Depreciation Schedule (Applicable to ITR 3, 5 and 6). The CBDT vide Income tax (Twenty Ninth Amendment) Rules, 2016, dated 07-11-2016 had restricted the highest rate of depreciation for any block of asset to 40 per cent. In other words, all block of assets which were eligible for depreciation at the rate of 50 per cent, 60 per cent, 80 per cent or 100 per cent would be eligible for depreciation at the rate of 40 per cent. The new ITR Forms have replaced the depreciation column of 50/60/80/100 per cent with 40 per cent in case of plant and machinery, and building. The new columns have also been inserted to enable the entities to claim proportionate depreciation in the event of business reorganisation, i.e. demerger, amalgamation etc. Further, a field is added to disclose the disallowance to be made in respect of depreciation under section 38(2) if an asset is not exclusively used for business purpose.
- A New schedule has been inserted in ITR 6 which requires every company, who is not required to get its accounts audited under Section 44AB, to provide following details in respect of all transactions entered into during the year with a registered or unregistered supplier under GST:
- Transactions in exempt goods or services
- Transactions with composite suppliers
- Transaction with registered entities and total sum paid to them
- Transaction with unregistered entities
- Assessee claiming DTAA relief is required to report more details (Applicable to ITR 2, 3, 5 and 6). Every assessee (resident or non-resident) claiming DTAA relief in India in respect of capital gains or income from other sources are required to provide details of applicable DTAA. The new ITR Forms seeks following additional details for current year:
Rate as per treaty
- Rate as per Income tax
- Section of the Income tax Act
- Applicable rate (lower of A or B)
- Disallowance of expenses in case of TDS default (for residuary income) (Applicable to ITR 2, 3, 5, 6 and 7). The provisions of Section 40(a)(ia) disallow 30% of certain expenditures if tax is not deducted in respect of those expenditures in accordance with Chapter XVII-B or if tax is deducted but not deposited on or before the due date for filing of return of income. The Finance Act, 2017 introduced the similar disallowance provision in case of income from other sources if tax is not deducted or not deposited in accordance with Chapter XVII-B. A new column has been inserted in the ITR Forms to report such disallowances.
- Taxability on remission of trading liability in case of ‘income from other source’ (Applicable to ITR 2, 3, 5, 6 and 7). As per Section 41(1), if a business entity recovers any amount in respect of an allowance or deduction by way of remission or cessation thereof, the amount so received shall be deemed to be the business income and chargeable to tax. There is a similar provision in respect of an expense which had been claimed as deduction against an income chargeable to tax under the head ‘Income from other sources’. The new ITR forms require separate reporting of such remission or cessation, which is taxable as per Section 59, in Schedule OS.
- Impact on profit or loss due to ICDS deviation (Applicable to ITR 3, 5 and 6). In earlier ITR Forms, net impact of ICDS on the profit or loss of the assessee was required to be reported. In other words, only impact of ICDS on the profits (whether negative or positive) was reported in Part A of OI (other information). The new ITR Forms require separate reporting of both profit and loss (and not on net basis) in Schedule OI, Schedule BP (Computation of income from business or profession) and Schedule ICDS.
- Details of foreign bank account of non-residents (Applicable to ITR 2, 3, 4, 5, 6 and 7). The new ITR forms allow non-residents to furnish details of any one foreign bank account for the purpose of payment of income tax refund.
- Reporting of CSR appropriations (Applicable to ITR 6), A new column has been inserted in ITR Form 6 to provide details of apportionment made by the companies from the net profit for the CSR activities.
- Break-up of payments/receipts in foreign currency (Applicable to ITR 6). A new schedule has been inserted in the ITR 6 wherein breakup of payment and receipts in foreign currency are required to be reported by an assessee who is not liable to get its accounts audited under Section 44AB. Assessees are required to provide the details of payment made and sum received in foreign currency towards capital and revenue account.
- Details of fresh registration upon change of objects (Section 12A) (Applicable to ITR 7). Section 12A provides for conditions to be satisfied by a charitable institution for availing of exemption under sections 11 and 12. A new clause (ab) has been inserted in Section 12A(1) with effect from Assessment Year 2018-19 to provide that where a charitable institution has been granted registration and, subsequently, it has adopted or undertaken modification of the objects which do not conform to the conditions of registration, it shall be required to take fresh registration. Consequential changes have been made in the form ITR 7. A trust will be required to furnish the following details if there is any change in its stated objects:
- Date of change in objects
- Whether application for fresh registration has been made within stipulated time period
- Whether fresh registration has been granted
- Date of such fresh registration.
- Taxability of Dividend in excess of 10 lakh (Section 115BBDA) (Applicable to ITR 7). Section 115BBDA provides for levy of additional tax on dividend income received from domestic companies, if it exceeds Rs. 10 lakh in aggregate. When this section was introduced by the Finance Act, 2016, this additional tax was levied only on resident Individual, HUF and firms. The scope of this section was extended by the Finance Act, 2017 by levying the additional tax on all resident taxpayers except a domestic company, funds or instructions as referred to in Section 10(23C) and a trust registered under Section 12A or 12AA. The changes made by the Finance Act, 2017 are applicable from the Assessment Year 2018-19. Accordingly, necessary changes have been incorporated in form ITR 7 which is Applicable to Assessment Year 2018-19. All dividends in excess of Rs. 10 lakh which are taxable under Section 115BBDA shall be disclosed in the Schedule OS (Income from other sources) and Schedule SI (Income chargeable to tax at special rate).
- No deduction for corpus donations made to other institutions (Section 11) (Applicable to ITR 7). Up to Assessment Year 2017-18, a donation made by a registered trust to another registered trust constituted application of income notwithstanding that the donation was made with a specific direction that it shall form part of the corpus of the donee. The Finance Act, 2017 has inserted a new Explanation 2 with effect from Assessment Year 2018-19 to effect that any donation to another charitable institution registered under Section 12AA with a specific direction that it shall form part of the corpus of the donee, shall not be treated as application of income for charitable or religious purposes. The consequential changes have been made in form ITR 7. In Schedule TI (Statement of Income) all the corpus donations made by a trust to another registered trust shall be added back to the taxable income of the donor trust.
- Political Parties to confirm if cash donations are received (Section 13A) (Applicable to ITR 7). Registered political parties are exempt from income tax by virtue of Section 13A of Income Tax Act. Earlier there was no restriction on the political parties to receive the cash donations. However, with effect from assessment year 2018-19, Section 13A puts a restriction on political parties against receiving the cash donations in excess of 2,000. A political party will lose its tax exemption if donation exceeding Rs. 2,000 is received other than by an account payee cheque, draft, ECS or electoral bonds. The new ITR 7 requires the political parties to provide a declaration by selecting the ‘Yes’ or ‘No’ check-box to confirm whether it has received any cash donation in excess of Rs. 2,000. A political party is now required to disclose more information about the auditor who is signing its audit report.