Changes in the Income Tax Filing and ITR Forms for 2018-19

The Central Board of Direct Taxes also known as the CBDT is empowered amongst others to regulate all fiscal activities in India.

In line with the above-stated mandate, the CBDT in 2019 commenced the tax activities by introducing some changes in the income tax forms used in filing for income tax return (ITR).

The changes will occasion a major check on the actions of tax evaders by compelling taxpayers to make detailed disclosures in the changed forms.

The forms affected by this change are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5 and ITR 6.

These forms which are available on the website of the CBDT, www.incometaxindiaefiling.gov.in will be discussed to highlight the changes introduced therein together with the mischief the changes intend to cure.

ALSO READ- What happens if you do not file the ITR within the given deadline

The Income Tax Return ITR Forms-

ITR-Form 1 is filed by persons:

a.      whose total income is not less than Indian Rupees 50 lakh,

b.     who earn income from salaries,

c.      who own one real estate/house,

d.     who earn through sources such as interest in shares and agricultural income up to Indian Rupees 5,000.

ITR- Form 2 –

This is filed by persons and members of Hindu Undivided Family who are not under a specific form of business or profession.

ITR-Form 3-

This is filed by persons and members of Hindu Undivided Family who earns a living from a specific business or profession.

ITR- Form 4-

This form is applicable to persons, members Hindu Undivided Family, and firms except for a limited liability partnership with a total income of about Rs 50 lakh and such income emanates from business and profession.

With regards to ITR-3 and ITR-6 companies are mandated to disclose information on their gross receipts for Goods and Services rendered. Previously, this requirement is only for those filing under ITR-4.

The Changes and the Mischief sought to be cured-

Mandatory Electronic Filing

1. In previous fiscal years in India, every person to the exclusion of very old persons and persons with income less than Rupees 5 lakh are mandated to file their Income Tax Returns electronically.
2. Presently, with the Change(s) made in ITR 1 taxpayers irrespective of income must file their ITRs electronically except for elderly person from 80 years and above.

Residential Status

The erstwhile Form ITR 2 merely requires a taxpayer or an assessee to declare/indicate whether he is resident in India or outside the shores of India.

The innovation in the form ITR 2 requires a taxpayer or an assessee to further provide details which will support the residential status selected by the taxpayer.

The information which may be required of such taxpayer includes:

1. The number of days of stay in India,
2. Jurisdiction of his residence, and
3. TIN i.e. tax identification number in the case of a non-resident.

Ghost Directors or Workers and Shell Companies

1. The menace of ghost directors, workers and shell companies are calculated to be curbed with the introduction of Forms ITR 1, 2, 3 and 4.
2. The use of these forms and the mandatory KYC (Know Your Customer) Form for directors which are done electronically ensures that fake directors are seized.
3. Where a Director fails to properly file these forms as required by the CBDT, the directors’ Identification Number will be deactivated.
4. In other words, any person who is a director in a company can only use forms ITR 2, or ITR 3, to file for his or her income tax return.
5. Likewise, a person who served as a director in any company must furnish the CBDT with:
   1. the name of the company,
   2. the Personal Account Number PAN,
   3. the status of the shares of the Company i.e. whether the shares are listed or unlisted,
   4. the Director Identification Number i.e. DIN when he served.

Unlisted Companies

Where it is found that a person undergoing tax assessment has a share in an unlisted company in India, with forms ITR 2, 3, 5 the following information must be provided by such assessee:

1. Name and PAN of the company where he owns such shares
2. The Number of the share, its cost as the time of acquiring up to the financial year under review.
3. The number of shares sold if any and the consideration received for such sale or transfer in the financial year under review.
4. The number of shares held and the cost of its acquisition at the end of the previous financial year.

Salary and Residuary Income

The ITR forms 1, 2, 3 and 4 caused a change in the reporting of salary income by a taxpayer or an assessee.

Effective from 2019, an assessee is mandated to disclose his gross salary, passive income, and then the number of exempted allowances, perquisites and profit in place of salary shall be deducted or added to properly determine his tax.

Compliance to these forms will ensure a clear distinction between the following deductions:

1. Standard deduction,
2. Entertainment allowance, and
3. Professional tax.

Unlike in the past,  the disclosure of the salary and residuary income with the new ITR 1 must be in consonance with Form 16 (which is the certificate for TDS i.e. tax deducted from source).

Tax on Rent, Transfer or Sale of Immovable Property

Where a person makes a capital gain from the sale/transfer of an immovable property, under the ITR he must disclose the following to the Board through Forms ITR 2, 3, 5 and 6:

1. Name of the buyer of the immovable property sold,
2. PAN of the buyer of the property,
3. Percentage share,
4. the price or amount the property was sold,
5. Address of property sold and
6. the Pin code.

In addition to the above, in the cause of filing either ITR 1 or ITR 2 a taxpayer must disclose the rents he or she received in arrears in the preceding financial year.

Where the taxpayer property is a house his ITRs will be pursuant to Form ITR 1.