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.
- 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.
- 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.
||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.
||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
||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.
2.5. 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.
- 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]
|♦ Tax on deemed total income [B]
|The difference in tax [C]
|♦ Actual total income [D]
|♦ Deemed total income [E]
|The difference in income [F]
|Marginal Relief (if C is more than F)
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.
- 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.
- Deletion of Schedule DI [ITR 1 to 6]
Since the benefit of such extension was available for the Assessment Year 2020-2021 only, ITR forms for the Assessment Year 2021-2022 have been 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.
- 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.
- Exercise of option prescribed under section 115BAD [ITR 5]
. The Co-operative society has to exercise this option on or before the due date for furnishing the returns of income by filing Form 10-IF.
In Part-A (General Information) a cooperative society is required to choose if it is opting for the alternative tax regime of Sections 115BAD. Further, it is required to mention the date of filing of Form 10-IF and Acknowledgement number if it is exercising the option of Section 115BAD.
- Date of cash donation in case of deduction under Section 80GGA [ITR 2, 5 & 6]
Section 80GGA provides a deduction for the donations made by an assessee who is not earning income under the head ‘profits and gains of business or profession’. No deduction is allowed for the cash donation over Rs. 2,000.
ITR-2, 5, and 6 contain a Schedule 80GGA which requires separate reporting of the donation made in cash and donation made through other modes. The ITR forms notified for Assessment year 2021-2022 require additional disclosures of the date on which such cash donation has been made.
- No separate reporting of income from life insurance business [ITR 5 & 6]
The ITR forms notified for Assessment Year 2021-2022 have removed separate reporting requirements in respect of income from the life insurance business in Schedule BP.
- 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.
- Ceiling to claim deduction under section 54EC specifically provided [ITR 5]
All the ITR Forms (except ITR 5) contained the ceiling for deduction under this section. The ITR-5 for the Assessment year 2021-22 also provides that deduction under section 54EC shall not exceed Rs. 50 lakhs.
- Nature of business code to be mentioned if assessees are claiming deduction under Section 80P [ITR 5]
Schedule 80P of the ITR requires the assessee to furnish various information relating to income and the amount of deduction. ITR form for the assessment year 2021-22 has inserted one more column in the Schedule 80P. This column requires the assessee to provide the nature of the business code in front of various types of income of such person.
- 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.
- Reference of distribution of accumulated loss by Investment fund has been removed [ITR 5 & 6]
Adjustment of such accumulated losses was allowed to be made in the Assessment Year 2020-2021 only, the ITR forms for Assessment Year 2021-2022 have removed the reference for adjustment of such losses.
- 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.