New ITR forms seek more disclosures from taxpayers

Individual taxpayers should provide information such as income from cryptos, and whether they have opted out of new tax regime in previous years
New ITR forms seek more disclosures from taxpayers

NEW DELHI: The Central Board of Direct Taxes (CBDT) has come out with the new income tax return (ITR) forms for the assessment year 2023-24 well in advance. This will give enough time to the taxpayer to apprise themselves with the new changes made in these ITR forms, which will come into effect from 1 April 2023. 

The finance ministry in its circular said that, “no significant changes have been made to the ITR forms in comparison to the last year. Only the bare minimum changes necessitated due to amendments in the Income Tax Act, 1961, have been made.” 

Finance Minister Nirmala Sitharaman in her Budget 2023 speech proposed next generation common Income Tax Return forms for all taxpayers. It may be recalled that in November 2022, CBDT had circulated the draft version of the ‘Common ITR form’ where all ITR forms from ITR 1 to ITR 6 were proposed to be merged. This was aimed at bringing ease of filing for the tax payers and reducing the time taken by them to file tax returns.

No common ITRs as yet
However, new ITR forms notified by the tax department are not in line with all these announcements. For the assessment year 2023-24, there will be seven ITR forms for different classes of taxpayers.
ITR form 1 (Sahaj) is meant for resident individuals with income up to R50 lakh per annum from salary, one house property, other sources like interest etc, and agricultural income up to R5,000. Similarly ITR 4 (Sugam) is for the resident Hindu undivided family (HUF), individuals and firms other than limited liability partnerships (LLPs) with income up to R50 lakh from business and profession computed under sections 44AD, 44ADA, or 44AE. 

It is to be noted that the individuals and HUFs not having income from business or profession (and not eligible for filing Sahaj) can file ITR Form 2, whereas those having income from business or profession can file ITR Form 3. Meanwhile, persons other than individuals, HUFs, and companies such as partnership firms, LLPs, etc. can file ITR Form 5. Companies other than those claiming exemption under Section 11 can file ITR Form 6. In addition, trusts, political parties, charitable institutions, etc. claiming exempt income under the Act can file ITR Form 7.

While the tax department has claimed there are very few changes in ITR forms from the previous year, tax experts claim new ITR  forms have increased disclosures for taxpayers. “Overall, the new ITR forms notified by the CBDT for FY2022-23 (AY 2023-24) have increased the disclosure requirements on the part of the taxpayers, especially the individual taxpayers. For instance, individuals and HUF having business or professional income are required to provide more information regarding opt in and opt out of new tax regime in previous year/current year,” S Vasudevan, Executive Partner, Lakshmikumaran & Sridharan Attorney said. 

“Further, such individuals or HUF have to now make specific disclosures regarding advances from related parties. Some of the changes are basically to plug the gaps that were there in the earlier forms. For instance, separate schedules for set-off of current year capital losses against current year capital gains income have been added for salaried individuals using ITR-2,” Vasudevan added. Specific schedules have been made in the returns for disclosing income from Virtual Digital Assets (VDA) such as cryptocurrencies for which a special tax regime was introduced in last year’s budget. 

“Tax provisions for taxation of VDAs were introduced from FY2022-23 hence the addition of a new schedule is in line with the expectation,” Saraswathi Kasturirangan, Partner with Deloitte India said. The schedule relating to VDA makes the intent and interpretation clear that loss suffered on a particular VDA will not be allowed to be offset against the gain from other VDAs.

Ved Jain, who is a chartered accountant by profession and former President of the Institute of Chartered Accountant said it would have been better if the Finance Ministry could come out with the next generation common income tax return form for all the taxpayers. “However, this too is a welcome move. The early notification of the ITR forms will help taxpayers in getting the refund sooner. Now the taxpayer can file their return even in April and get the refund or assessment done within a few days,” Jain stated.

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