Jun 232021
 

Most of the new ITR form changes are consequential to the amendments made by the Finance Act, 2020 to the Income-tax Act. We have scrutinized the new ITR Forms and have identified the key changes in new ITR forms viz-a-viz last year’s ITR Forms. These changes have been explained below.

 

  1. No option to carry forward TDS deducted under Section 194N [ITRs 2 to 7]

In case of tax deducted under Section 194N, credit for tax deducted shall be allowed in the assessment year relevant to the previous year in which such tax has been deducted. The corresponding amendment has been made in ITR-2 to ITR-7 to restrict the carry forward of TDS deducted under Section 194N.

 

  1. Consequential changes due to change in taxability of dividend Income [ITRs 1 to 7]

The Finance Act, 2020 reverts to taxation of dividends in the hands of the recipient shareholders instead of payment of dividend distribution tax (DDT) on the declaration, distribution, or payment of dividend by the domestic company. The new ITR forms notified for the Assessment Year 2021-22 have been amended to incorporate these changes.

2.1. Schedule OS (other sources)

Dividend income earned by a person is taxable as ‘income from other sources’ under section 56(2)(i). Up to the Assessment Year 2020-21, Schedule OS required disclosure of that dividend income only which is not exempt in hands of the taxpayer. In the new ITR forms, Schedule OS has been amended to include disclosure of all dividend income earned by the taxpayers.

(a) Deduction of expenses from dividend income
A new row has been inserted in Schedule OS to allow deduction of interest expenses. However, the deduction is available only if the dividend income is offered to tax in Schedule OS.
(b) Dividend income chargeable to tax at a special rate
The Finance Act, 2020, has abolished the DDT. Consequently, provisions of section 115BBDA are not applicable on dividends distributed, declared, or paid by companies on or after 01-04-2020. Thus, reference of section 115BBDA has been removed from Schedule OS in the new ITR forms
(c) Dividend Income of non-resident unitholders

A new row has been inserted under the column ‘any other income chargeable at special rate’ of Schedule OS to seek details of dividend income taxable in the hands of the unitholders of the Business trust.

2.2. Schedule SI (Special Income)

Schedule SI contains a list of incomes that are chargeable to tax at a special rate (long-term capital gains, winning from lotteries, games, etc.). Since Section 115BBDA has become redundant, corresponding changes have been made to Schedule SI.

2.3. Schedule EI (Exempt Income)

Now the entire dividend income is taxable in the hands of the shareholders, hence the reference of ‘Dividend income from the domestic company (amount not exceeding Rs. 10 lakh)’ has been removed from Schedule EI.

2.4. Schedule PTI (Pass-through Income)

‘Schedule PTI’ seeks details of Pass-through Income from business trust or investment fund as per Section 115UA and Section 115UB.

 

  1. Clause-wise disclosure in respect of interest taxable under Section 115A read with Section 194LC [ITR 2, 3, 5, 6 & 7]

The Finance Act, 2020 has amended Section 194LC to provide for deduction of tax shall be done at 5% except in case the interest is payable in respect of monies borrowed from a source outside India by way of issue of any long-term bond or rupee-denominated bond, TDS is required to be deducted at the rate of 4%, subject to fulfillment of certain conditions.

Since two different rates have been prescribed under Section 194LC (4% and 5%), ITR forms have been amended to require separate disclosure in respect of the income taxable at the rate of 4% and 5%.

 

  1. Reference of Form 16D has been inserted in Schedule of Tax payments [ITR 3 to 7]

ITR forms require details of tax deducted at source as per the certificate issued by the Deductor. The ITR Forms for Assessment Year 2021-2022 have included a reference to Form 16D.

 

Form 16D is a TDS Certificate issued by a Payer for payment of a commission, brokerage, contractual fee, the professional fee under section 194M. It contains details of the nature of payment and TDS deducted from it. Section 194M has been applicable from the 1st of September 2019. Thus, Form 16D can be downloaded from FY 2019-20 onwards. The taxpayer can download Form 16 from the TRACES portal.

Sensys