Most of the new ITR forms 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.
- Reporting of the amount deferred in respect of ESOPs [ITR 2 & 3]
If an employee has received ESOPs from an eligible start-up referred to in Section 80-IAC in respect of which the tax has been deferred, the Part B of Schedule TTI (Computation of tax liability on total income) seeks the disclosure of the tax amount which has been deferred in this respect.
- 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 dividends 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.
- Effect of marginal relief to be highlighted in the ITR [ITR 2, 3, 5]
Marginal relief is allowed when taxable income is beyond the threshold limit after which surcharge is payable, but the net income over the threshold limit is less than the amount of surcharge.
Computation of marginal relief
|♦ Tax on actual total income [A]||xxx|
|♦ Tax on deemed total income [B]||xxx|
|The difference in tax [C]||xxx|
|♦ Actual total income [D]||xxx|
|♦ Deemed total income [E]||xxx|
|The difference in income [F]||xxx|
|Marginal Relief (if C is more than F)||xxx|
Now, the ITR Forms for the Assessment year 2021-22 have been amended to specifically require the assessee to show the effect of marginal relief on the tax payable by disclosing “surcharge computed before marginal relief” and “surcharge computed after marginal relief” separately.
- Increase in threshold limit for tax audit [ITR 3 & 6]
Previous year ITR forms required the assessee to furnish whether during the year total sales/ turnover/ gross receipts of business exceeds Rs. 1 crore but does not exceed Rs. 5 crores. Necessary amendments have been brought in the ITR forms as notified for the assessment year 2021-22 to enhance the limit.
- Adjustment of unabsorbed depreciation if the assessee has opted for Section 115BAC or 115BAD [ITR 3 & 5]
The ITR forms notified for Assessment Year 2021-2022 has amended Schedule DPM (Depreciation on Plant and Machinery) to make such one-time adjustment to the WDV of the respective block of the asset. Further, Schedule UD [Unabsorbed Depreciation and allowance under Section 35(4)] has also been amended to make the corresponding adjustment to the unabsorbed depreciation for the amount of depreciation already adjusted with the WDV of the respective block of the asset.
- Adjustment of carried forward losses if the assessee has opted for Section 115BAC or 115BAD [ITR 3 & 5]
Assessee opting for an alternative tax regime of Section 115BAC or Section 115BAD has to forego various exemptions and deductions. Further, carried forward losses attributable to such exemptions and deductions are not allowed to be set off. These losses are deemed to have been given full effect to and no further deduction for such loss shall be allowed for any subsequent year.
ITR Forms notified for Assessment Year 2021-2022 have been amended to require the adjustment of such losses which are not allowed to be carried forward and set off.
- 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.
- 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%.
- Increase in safe harbor limit prescribed under Section 50C [ITR 2, 3, 5 & 6]
Up to Assessment Year 2020-2021, this provision was not applicable if the value adopted for the payment of stamp duty was up to 105% of the consideration received. The Finance Act, 2020, has increased such a tolerable limit from 105% to 110% from Assessment Year 2021-2022. Consequential changes have been made to ITR-2, 3, 5, and 6.
- 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.
- Undertakings not eligible for deductions removed from Schedule Section 80-IB [ITR 3, 5, 6]
Schedule 80-IB has been amended to remove appropriate rows allowing deduction under the above obsolete sub-sections.
- Nature of security to be furnished in Schedule 112A and Schedule 115AD [ITR 2, 3, 5, 6]
The ITR forms notified for the Assessment year 2021-2022 have inserted one new column in both the schedules requiring the assessee to provide the nature of the securities transferred (shares or units).
- Computation of cost of acquisition for Section 112A and 115AD [ITR 2, 3, 5, 6]
The relevant schedules in the ITR forms notified for Assessment year 2021-2022 have been modified to enable the assessee to put information regarding the sale price, FMV, and the cost of acquisition of the security and ascertain the gains appropriately.
- Schedule 5A requires the assessee to furnish the tax audit requirement of the spouse under sections 44AB or 92E [ITR 3]
Finance Act, 2021 has extended the due date to file a return of income in case of a person, who is a partner of a firm who is required to obtain a Transfer Pricing report under Section 92E, to 30th November of the assessment year.
Finance Act, 2021, has amended the due date for filing of return of income in case of spouse of a person, being a partner in a firm whose accounts are required to be audited or who is required to furnish a Transfer pricing report under Section 92E, if such spouse is governed by the provisions of Section 5A.
Schedule 5A requires the assessee to furnish information regarding apportionment of income between spouses governed by the Portuguese Civil Code. Various details regarding the spouse in such cases are captured in the ITR such as the Name and PAN of the spouse, income under various heads of income.
In order to ensure that such spouse has furnished return of income by the applicable due date, the consequential changes have been made in ITR -3 notified for the Assessment year 2021-22 to seek the due dates applicable in case of a spouse.
- Additional question for ensuring the compliance under Section 92E [ITR 3, 5, 6]
Additional questions have been inserted in Part-A (General Information) to ensure that the assessee has complied with the requirements to obtain a Transfer Pricing report under Section 92E.
- STCG other than those covered under section 111A can’t be shown in Schedule PTI [ITR 3]
Short-term capital gains other than those covered under section 111A cannot be disclosed in Schedule PTI.
- No need to bifurcate carried forward losses into Pass-through losses and Normal losses [ITR 2, 3, 5 & 6]
Losses carried forward by an assessee have the same treatment under the Income-tax Act even if they are in nature of pass-through losses. Old ITR forms bifurcated the losses under the head House property and Capital gains in Schedule CFL between pass-through losses and Normal losses. However, ITR utilities issued by the department do not require any such bifurcation. To bring the ITR forms in line with the ITR utilities issued by the department, ITR forms notified for the assessment year 2021-2022 have removed such bifurcation, and now a consolidated figure of such losses is to be disclosed.