Most of the new ITR form changes are consequential to the amendments made by the Finance Act, 2020 to the Income-tax Act. Further, the ITR-1 shall not be available to a taxpayer in whose case the tax has been deducted on cash withdrawal under Section 194N. Further, return filing is also not allowed in ITR-1 or ITR-4 if the tax has been deferred in respect of ESOPs allotted by an eligible start-up.
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.
- ITR – 1 and ITR – 4 cannot be filed in case of deferment of tax on ESOPs [ITR 1 & 4]
Rule 12 has been amended to provide that an assessee in whose case payment or deduction of tax in respect of such ESOPs has been deferred shall not be eligible to furnish his return of income in ITR-1 and ITR-4. Corresponding changes have been made to ITR-1 and ITR-4.
- ITR – 1 cannot be filed in case tax has been deducted under Section 194N [ITR 1]
Tax under this provision is required to be deducted if the amount of cash withdrawn during the year exceeds Rs. 20 lakhs in case of certain non-filers of return and Rs. 1 crore in other cases.
Rule 12 of the Income-tax Rules have been amended to restrict an assessee, in whose case tax has been deducted under this provision, from furnishing return of income in ITR–1. Consequential changes have been made to ITR-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.
3.1. 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.
3.2. 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.
3.3. 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.
3.4. 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.
3.5. Quarterly breakup of dividend income under ITR-1
All ITR forms (except ITR-1) sought a quarter-wise breakup of dividend income earned by the taxpayer during the previous year. This break-up helps in computing interest leviable under section 234C for default in payment of advance tax liability. To provide similar relief to the taxpayer filing return in ITR-1, this form has been amended to allow taxpayers to provide a quarterly break-up of dividend income earned during the year.
3.6. Schedule DDT removed from ITR-6
Schedule DDT seeks details of distributed profits of domestic companies and payment of DDT. Since the payment of DDT has been abolished on any distributed profit on or after April 1, 2020, Schedule DDT has been removed from the new ITR-6 Form.
- Deletion of Schedule DI [ITR 1 to 6]
Since the benefit of Schedule DI extension was available for the Assessment Year 2020-2021 only, ITR forms for the Assessment Year 2021-2022 have removed from the Schedule DI. Another consequential amendment has also been made to remove reference to Schedule DI.
- Exercise of option prescribed under section 115BAC [ITR 1 to 4]
The Finance Act, 2020, has inserted a new Section 115BAC to provide a special tax regime (also known as ‘alternate tax regime’) for Individuals or HUF wherein they have an option to pay taxes at concessional rates subject to fulfillment of certain conditions.
In Part-A (General Information) the assessee is required to choose whether he is opting for the alternative tax regime of Sections 115BAC or not.
Further, an assessee having income from business or profession is required to exercise such option on or before the due date for furnishing the returns of income by filing Form 10-IE. Thus, such assessee is required to mention the date of filing of Form 10-IE and Acknowledgement the number in case he has chosen the alternate regime of Section 115BAC.