Income Tax Return (ITR) Form

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Context

• The Central Board of Direct Taxes (CBDT) has proposed a single income tax return (ITR) form for all taxpayers. A draft form has been released, to which all stakeholders can provide inputs up to December 15.

 

What is ITR?

• Income Tax Return (ITR) is a form in which taxpayers file information about their income earned and tax applicable to the income tax department. It reports income, expenses, and other relevant tax information.

 

How many kinds of ITR forms are there now?

• There are seven kinds of ITR forms, which are used by different categories of taxpayers. The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category of the taxpayer like individuals, HUF, company, etc. They are as follows:
• ITR Form 1, called ‘Sahaj’, is for small and medium taxpayers. Sahaj forms can be filed by individuals who have an income up to Rs 50 lakh, with earnings from salary, one house property/ other sources (interest etc).
• ITR-2 is filed by people with income from residential property.
• ITR-3 is intended for people who have income as profits from business/ profession
• ITR-4 (Sugam) is, like ITR-1 (Sahaj), a simple form, and can be filed by individuals, Hindu Undivided Families (HUFs) and firms with total income up to Rs 50 lakh from businesses and professions.
• ITR-5 and 6 are for limited liability partnerships (LLPs) and businesses respectively.
• ITR-7 is filed by trusts and non-profit organizations.

ITR Form	Applicable to	Salary	House Property	Business Income	Capital Gains	Other Sources	Exempt Income	Lottery Income	Foreign Assets/Foreign Income	Carry Forward Loss
ITR-1 / Sahaj	Individual, HUF (Residents)	Yes	Yes(One House Property)	No	No	Yes	Yes (Agricultural Income less than Rs 5,000)	No	No	No
ITR-2	Individual, HUF	Yes	Yes	No	Yes	Yes	Yes	Yes	Yes	Yes
ITR-3	Individual or HUF, partner in a Firm	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
ITR-4	Individual, HUF, Firm	Yes	Yes(One House Property)	Presumptive Business Income	No	Yes	Yes (Agricultural Income less than Rs 5,000)	No	No	No
ITR-5	Partnership Firm/ LLP	No	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
ITR-6	Company	No	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
ITR-7	Trust	No	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes

 

What is the change that has been proposed?

• According to the proposal, all taxpayers, barring trusts and non-profit organizations (ITR-7), will be able to use a common ITR form, which will include a separate head for disclosure of income from virtual digital assets.
• The draft ITR proposes to introduce a common ITR by merging all the existing returns of income except ITR-7.

 

Will ITR-1 (Sahaj) and ITR-4 (Sugam) be withdrawn?

• The current ITR-1 and ITR-4 will continue. This will give an option for such taxpayers to file the return either in the existing form (ITR-1 or ITR-4), or the proposed common ITR, at their convenience.
• The new ITR form would be available alongside the old forms ITR-1 and ITR-4, but taxpayers filing ITR-2, ITR-3, ITR-5 and ITR-6 would not have the option to file the old forms.

The rationale behind the Draft ITR

• The current ITRs are in the form of designated forms wherein the taxpayer is mandatorily required to go through all the schedules, irrespective of the fact whether that particular schedule is applicable or not. This increases the time taken to file the ITRs and in turn, may create avoidable difficulties for taxpayers.
• The proposed draft ITR takes a relook at the return filing system in tandem with international best practices. The draft form aims to make it easier to file returns and to considerably reduce the time taken for the job by individuals and non-business-type taxpayers.
• The taxpayers will not be required to see the schedules that do not apply to them. It intends the smart design of schedules in a user-friendly manner with a better arrangement, logical flow, and increased scope of pre-filling of the Form.

 

Scheme of Proposed Form

As per the draft proposal issued by the CBDT, the proposed common ITR form will have:

• Basic information (comprising parts A to E), Schedule for computation of total income (Schedule TI), Schedule for computation of tax (schedule TTI), Details of bank accounts, and a schedule for the tax payments (schedule TXP) is applicable for all the taxpayers.
• The ITR is customised for the taxpayers with applicable schedules based on certain questions answered by the taxpayers (wizard questions).
• The questions have been designed in such a manner and order that if the answer to any question is ‘no’, the other questions linked to this question will not be shown to him.
• Instructions have been added to assist in the filing of the return containing the directions regarding the applicable schedules
• The proposed ITR has been designed in such a manner that each row contains one distinct value only. This will simplify the return filing process.
• The utility for the ITR will be rolled out in such a manner that only applicable fields of the schedule will be visible and wherever necessary, the set of fields will appear more than once. For example, in the case of more than one house property, the schedule HP will be repeated for each property. Similarly, where the taxpayer has capital gains from the sale of shares taxable under section 112A only, applicable fields of schedule CG, relating to 112A, shall be visible to him.

 

The taxpayers only need to answer questions that apply to them and fill the schedules linked to those questions where the answer has been given as ‘yes’. The new proposed form will save time and energy for the taxpayers.

https://indianexpress.com/article/explained/income-tax-forms-taxpayers-proposal-explained-8244074/