Recently, CBDT notified the ITR for AY 2022-23. Though the tax law itself has not substantially changed, some very important changes feature in the new ITR Forms. Dr. CA Abhishek Murali (President, All India Tax Payers’ Association (AITPA)) provides a lucid comparative analysis of ITR for current AY vis-à-vis ITR for last year. He suggests that the taxpayers should wait till the end of June for filing the return despite ITRs being notified. He explains that “Though the Income Tax Forms have been made available already, the Income Tax Filing process will only effectively start from the month of June, when all Tax Payers have filed their TDS returns. Only on filing the TDS return can the Form 26AS of Tax Payers’ reflect the true position of their incomes and their tax credits.” He states that many salaried employees who filed the return of income in a simple manner by just copying and pasting their Form 16 are in for a surprise and discusses the importance of corroboration of information with AIR and TIS in addition to form 26AS.

Comparative Analysis of ITR

Introduction:

The CBDT and the Income Tax Department have promptly made all the Income Tax Return filing forms (for AY 2022-23) available at the dawn of the new Financial Year. Though the tax law itself has not substantially changed, some very important changes feature in the new ITR Forms. In this very in-depth article, I have captured the specific changes and also highlight how it compares to the ITR of the previous year.

KEY TIPS FOR FILING THE RETURN OF INCOME

Wait till the Month of June before Filing

Though the Income Tax Forms have been made available already, the Income Tax Filing process will only effectively start from the month of June, when all Tax Payers have filed their TDS returns. Only on filing the TDS return can the Form 26AS of Tax Payers’ reflect the true position of their incomes and their tax credits.

Let us take a scenario where a Tax Payer files his return with whatever information he has on hand (like salary slips and bank statements). Even if the figures as per these documents are correct, if the employer furnishes a higher salary income or a lower TDS in the TDS return filed by them (against the PAN of the Assessee) then the Tax Payer will suffer by receiving a notice from the Income Tax Department.

Similarly, a lower claim might mean the Taxpayer loses potential higher refund due to him.

Annual Information Report (AIR) and Tax Payer Information Statement (TIS):

In Late 2021, the Income Tax Department introduced the Annual Information Report (AIR) and Taxpayer Information Statement (TIS) to all the Income Tax Assessees. The AIR and TIS are both a compilation of the all the high value and notified transactions reported to the Income Tax Department of the Appellant.

This includes the details of any fixed deposits made, interest from savings bank account, interest from any fixed deposits, dividends earned and even equity shares/mutual funds sold during the year.

Gone are the Days of Form 16 Filing:

Many salaried employees who filed the return of income in a simple manner by just copying and pasting their Form 16 are in for a surprise. The Form 26AS, AIR and TIS have become critical documents in filing the return of income. The Form 16 will only indicate the Salary Income earned by the Tax Payer. All the information in the return must be corroborated with the AIR & TIS, in addition to the Form 26AS.

Infact, many persons who have filed a mere Form 16 filing before are now receiving notices on failure to disclose information about other income earned.

ITR 1

1) Nature of Employment - Additional Particulars to be Submitting:

In the old ITR forms, in the dropdown of ‘Nature of Employment’, an individual receiving pension had to choose the option of ‘Pensioners’. These new additional categories have been introduced in the New ITRs.

(i) Pensioners – CG,

(ii) Pensioners – SC,

(iii) Pensioners – PSU and

9iv) Pensioners – Others.

 

2) Option to file return in response to Sec 153A/153C has been removed:

Section 153A/153C have now been made inapplicable vide The Finance Act, 2021 from 01/04/2021. Hence, there is no longer an option to file a return in response to the same. This is also the same in ITR 2 & ITR 3.

3) Additional Confirmation that Return to be filed under 7^th Proviso u/s 139(1):

This is also the same in ITR 2 & ITR 3.

4) Details on Income Earned u/s 89A – Income from Retirement Benefit from Foreign Country - to be furnished separately now:

Section 89A, inserted with effect from the assessment year 2022-23, removed the aforesaid difficulty by providing that the income of a specified person from the specified account shall be taxed in such manner and for such year as may be prescribed by rules. The Board has not notified any rules yet. However, the new ITR Forms have amended Schedule S (Details of Income from Salary) to disclose:

• Income from retirement benefits account maintained in a notified country under Section 89A.

• Income from retirement benefit account maintained in a country other than notified country under Section 89A.

The eligible taxpayer is allowed to claim a deduction of ‘Income claimed for relief from taxation on the application of Section 89A’. It is not clear yet how such a deduction shall be computed?

The same should also be properly filled in Schedule OS (Income from Other Sources) in respect of the family pension.

ITR 2

1) The new ITR Forms remove the check-boxes of Sections 153A and 153C from the field of filing status of return income.

2) 

3) Residential Status of Individual to be Filled Properly:

Only Resident (who is also an ordinarily resident) can file a return of income in ITR 1. Any other Assessee will have to file ITR 2 (or ITR 3). The new ITR forms give a detailed description of different clauses of residential status. The Assessee has to choose the relevant option in support of his selection of a residential status.

4) Retirement Benefit from Foreign Country – Sec 89A:

The amount of income earned by a Resident India from his foreign retirement benefits account is chargeable to tax in India on an accrual basis. However, some of these foreign countries tax the amount at the time of receipt. This creates a challenge in terms of claiming credit.

Section 89A, inserted with effect from the assessment year 2022-23, removed the aforesaid difficulty by providing that the income of a specified person from the specified account shall be taxed in such manner and for such year as may be prescribed by rules.

5) Date of purchase and sale of land/building to be provided:

It will be mandatory to furnish the date of purchase and date of sale of land or building if the income arising from the transfer is taxable under the head of ‘Capital Gains’. It is likely this will be used for subsequent verification if the claim has been made within the stipulated time-line.

6) Country and Zip Code if the property is situated in a foreign country to be provided

It was mandatory to furnish in the ITR forms the details of the buyers and the address of the property transferred. The new ITR Forms now require the Country Code and ZIP Code as well if the property is situated outside India.

7) Year-wise details of the cost of improvement to land/building:

The Cost of Improvement was earlier only a single line item. Now the Assessee is required to give year-wise details of the cost of improvement (if any) incurred on the land/building transferred during the relevant year. The new ITR forms seek the following additional details from the taxpayers:

• Cost of improvement;

• Year of improvement; and

• Cost of improvement with indexation.

These details are required to be given year-wise if the assessee has incurred the cost of improvement in different financial years.

8) Deemed Dividend Requires to be Reported Separately in the ITR Forms

The new ITR forms seek separate reporting of dividend income taxable under Section 2(22)(e).

9) Interest from Statutory Provident Fund Contributions in excess of Rs.2,50,000 – Now Taxable:

Vide Finance Act 2021, Sections 10(11) and 10(12) were introduced to restrict exemption from interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the amount or the aggregate of amounts of the contribution made by the employee exceeding Rs. 2,50,000 in any previous year on or after 01-04-2021.

The interest income accruing in respect of the employee’s contribution over Rs. 2,50,000 shall be taxable under the head of “Income from Other Sources”. However, if such person has contributed to a fund in which there is no contribution by the employer, the limit of Rs. 2,50,000 shall be increased to Rs. 5,00,000.

In the new ITR forms, the Schedule OS (Other Sources) has been amended to provide this information.

10)  Details of Interest Income purchased in Foreign Currency by Non Residents to be provided:

11) Expenses/Deductions u/s 57 on Dividend Income to be capped at 20% - To be disclosed separately now

12)  Quarterly Break up of Income from Other Sources to be furnished in a more detailed manner to calculated Interest u/s 234:

13) Background

An employee can defer the payment or deduction of tax in respect of shares allotted under ESOP (specified securities) by an eligible start-up referred under Section 80-IAC. The tax is paid or deducted in respect of such ESOPs within 14 days from the earliest of the following period:

• After the expiry of 48 months from the end of assessment year relevant to the financial year in which ESOPs are allotted;

• From the date the assessee ceases to be an employee of the organisation; or

• From the date of sale of shares allotted under ESOP.

The Part B of Schedule TTI (Computation of tax liability on total income) in ITR Forms of AY 2021-22 shows the disclosure of the tax amount deferred in this respect.

Change in New ITR Form

The New ITR Forms have inserted a “Schedule: Tax Deferred on ESOP”. The Schedule seeks the following disclosures:

Amount of tax deferred in ITR filed for AY 2021-22;

• Date of sale of specified securities and amount of tax attributable to such sale;

• Date on which he ceased to be an employee of the organisation;

• Amount of tax payable in current assessment year;

• Balance amount of tax deferred to be carried forward to next assessment years.

As the outer limitation period of 48 months from the end of assessment year relevant to the financial year in which ESOPs are allotted is not yet over, the employee shall be liable to pay tax deferred in the assessment year 2021-22 in the previous year 2025-26.

The new Schedule has been inserted to keep track of the amount of tax deferred by the employee and the year it should be taxed. The tax payable in the current assessment year is exported in a new row introduced in Schedule Part B – TTI (Computation of tax liability on total income).

14) The consequential changes have been made in Schedule Part B – TTI (Computation of tax liability on total income) to limit the rate of surcharge on dividend income taxable under Section 115AD and other dividend income.

ITR - 3

1) Date of Commencement of business to be Provided included in the new ITR form:

) The following disclosures are required in ITR 3 and ITR 4 in respect of the alternative tax regime of Section 115BAC:

• Whether the assessee has opted for an alternative tax regime under Section 115BAC and filed Form 10-IE in AY 2021-22;

• For the AY 2022-23, the assessee has to choose from the following options:

• Opting in now

• Not opting

• Continue to opt

• Opt out

3) In the new ITR forms, Non Resident has to furnish any existence of a Significant Economic Presence (SEP) in India or not:

4. If Turnover is over Rs 10 crores and less than 5% of payments/receipts are in cash – No Tax Audit – Now Non A/c Payee cheques and DD’s to be excluded:

The old ITR Forms required the assessee to furnish the response regarding cash receipts and payments only. Now however, details of non-account payee cheques or DD should also be considered while fixing the 5% limit.

5) Unabsorbed Additional Depreciation not allowed on opting for 115BAC to be furnished separately:

In the new ITR Forms, Schedule DPM, which deals with depreciation on Plant and Machinery, has been amended. It provides that the WDV of the block as on 01-04-2020 shall be increased by the amount of unabsorbed depreciation (pertaining to additional depreciation), which was not allowed to be adjusted on account of opting for Section 115BAC.

6) Disclosure of FMV of capital assets in a slump sale transaction:

The new ITR forms require reporting of the FMVs calculated as per Rule 11UAE.

7) 80GGA – Donation to Scientific Research or Rural Development:

In the case of a partner of a firm deriving only profit from the firm. The following disclosures are required in this Schedule if the partner to claim deduction under Section 80GGA, and he is not earning any business or professional income except the share of profit from the firm:

• Relevant clause under which deduction is claimed;

• Name and address of Donee;

• PAN of Donee;

• Amount of donation (In cash and other mode); and

• Eligible amount of donation.

8) 80-IA and 80-IB has be curtailed and restricted only for the relevant sectors:

As the sun-set clause has been announced, any deduction under this section is not available for specific businesses - telecommunication services, revival of power generating plant, cross-country natural gas distribution network, multiplex theatres, convention centre, etc.

Schedule 80-IA and 80-IB have been amended to remove the rows allowing deduction under the above obsolete provisions.

9) Foreign Assets Details to be fully disclosed if held during Previous Year (of India) and relevant accounting period (of the foreign jurisdiction):