De-Tax. Tax returns, now in a crisp form

A new fiscal year has dawned, and the annual tax return filing exercise will soon be upon us. On March 31, the tax department notified the income tax return (ITR) forms for financial year 2016-17 (assessment year 2017-18). There have been many changes. One, in keeping with the Finance Minister’s Budget speech in February, a simple single-page form has been introduced for the majority of the country’s tax filers. Next, the number of forms has been reduced. Finally, the taxman now seeks more information in the returns.

A refreshing change is in the new ITR-1 called Sahaj. The new one-page form is a big simplification over the seven-page namesake that was in use last year. The form this year does away with much of the information not relevant to most taxpayers. The rationalisation of various portions should make filing the return quicker and easier. For instance, under deductions, instead of a plethora of sections, only the key ones — 80C (investments and expenses up to ₹1.5 lakh), 80D (health insurance), 80G (donations) and 80TTA (savings account interest) — have been provided. Other deductions, if any, can be mentioned in a separate column. Says Archit Gupta, Founder & CEO, ClearTax.com, “With the simplification of the most popular ITR-1, filing will be easy for a significant majority of assessees.”

The new ITR-1 is not for everyone though. Last year, there was no income limit for ITR-1 and it could be used by both individuals and Hindu Undivided Families (HUFs). But this year, it has been restricted to individuals having income up to ₹50 lakh from salaries, pensions, one house property and other sources such as interest. So, if you, as an individual, have income exceeding ₹50 lakh or have income from more than one house or from capital gains, then you cannot use ITR-1. The form will also not be applicable if you earn dividend income of more than ₹10 lakh, or have unexplained investments, money or expenditure. In such cases, you have to use ITR 2.

Thankfully, there has been rationalisation here too. Three existing forms — ITR-2, ITR-2A and ITR-3 — have been merged and a single ITR-2 has been notified in their place. So, no more multiple forms that often caused confusion. Essentially, individuals and HUFs not carrying out business or profession should use ITR-2 this year, if they are not eligible to use ITR-1. Individuals and HUFs having income from a business or profession should use ITR-3. Individuals and HUFs having presumptive income from business or profession should use ITR-4 called Sugam.

While there has been simplification and rationalisation in forms on the one hand, you now have to give out more information than earlier. One, from July 1, all tax filers have to compulsorily mention their Aadhaar number in the tax return; this was optional earlier. This will also be applicable for expats who were in the country for 182 days or more in the past 12 months. If the Aadhaar number is not available, then the Aadhaar enrolment id has to be mentioned.

Next, taxpayers have to report cash deposited in their bank accounts during the demonetisation window, that is from November 9, 2016 to December 30, 2016, if they have deposited ₹2 lakh or more in aggregate during this period. Says Suraj Nangia, Partner, Nangia & Co, Chartered Accountants, “The move is to track instances where high-value cash deposits post-demonetisation do not match with the income profile of the taxpayer.”

For those with income more than ₹50 lakh a year, the disclosures have become more extensive. Last year, the Schedule of Assets and Liabilities was added to the forms; this made it mandatory for high-income tax filers to provide details of assets and liabilities. This year, the schedule has been made more detailed. Description and address has to be provided for immovable properties. Also, bank deposits, shares, insurance policies, loans, cash in hand, investments in partnership firms, etc has to be reported. There are also instructions on how the value of immovable and movable assets is to be reported.

Besides, a new section for mentioning long term capital gains and dividend income that are exempt from tax has been added in ITR-1.

All the IT returns forms have to be filed online. However, for ITR-1 (Sahaj) and ITR-4 (Sugam), there are a couple of exemptions. The return in paper form can be filed if the individual was 80 years or more during the financial year. Also, if the income of an individual or HUF does not exceed ₹5 lakh and there is no refund claim, paper returns can be filed.