Key Changes Introduced in New ITR Forms

On February 10, 2023, the Central Board of Direct Taxes (CBDT) released Notification No. 04/2023, introducing revised versions of Income Tax Return (ITR) forms and the ITR Acknowledgement for the Assessment Year 2023-24. The updated forms, which include ITR-1 SAHAJ, ITR-2, ITR-3, ITR-4 SUGAM, ITR-5, ITR-6, ITR-V, and ITR Acknowledgement, have been made available from April 01, 2023. Let's explore the key changes in introduced in New ITR Forms for AY 2023-24.

Types ITR Forms

Income Tax Return - ITR forms are specific for filing income tax returns with the tax authorities. The type of ITR forms to use depends on the taxpayer's income and amount. Let's explore the different types of ITR forms:

ITR-1 (SAHAJ): This form is suitable for individuals with income up to 50 lakh rupees. It applies to individuals who earn income from salary, one-house property, and other sources like interest and dividends. Salaried individuals and those with simple income sources commonly use this form.
ITR-2: Individuals with income exceeding Rs 50 lakh and earning income from residential property should use this form to file their returns. It is designed explicitly for reporting income and assets in such cases.
ITR-3: This form is meant for individuals deriving income as profits from business or profession. Sole proprietors, freelancers, and self-employed individuals use ITR-3 return filing to report their business income and related details.
ITR-4 (SUGAM): ITR-4 is a simplified form for small and medium taxpayers. It applies to individuals, Hindu Undivided Families (HUFs), and partnership firms opting for the presumptive taxation scheme. Taxpayers with income from businesses or professions who meet the eligibility criteria use this form.
ITR-5:Limited Liability Partnerships (LLPs), Association of Persons (AOPs), Body of Individuals (BOIs), and other artificial juridical persons (except those filing ITR-7) file ITR-5. It is for entities other than individuals, HUFs, companies, and those required to file ITR-7.
ITR-6: Companies, including those not claiming exemption under Section 11, use ITR-6. It applies to all companies, except those filing ITR-7, for filing their income tax returns.

Latest Update on the Pay Later Option for Income Tax Filing

The Income Tax e-filing portal has recently rolled out a 'Pay Later' option, allowing you to complete your tax filing process before making any tax payments. You can pay taxes after you are done filing. For additional information, please refer to our guide – Pay later option for the Income tax return filing.

Key Changes Introduced in New ITR Forms

While there are no significant changes in the ITR forms, it's essential to be aware of the following updates:

Disclosure of Income from Retirement Benefit Accounts in ITR Forms - [ITR 2, 3 and 4]

The updated Income Tax Return (ITR) forms now include a new disclosure requirement related to "Income from retirement benefit accounts." Taxpayers are now obligated to disclose any taxable income on which relief under section 89A of the Income Tax Act was claimed in any of the earlier years. Let's explore this new disclosure in more detail:

Income from Retirement Benefit Accounts: The ITR forms now feature a dedicated section that requires taxpayers to disclose their income derived from retirement benefit accounts. This includes income from pension funds, annuities, or other retirement benefit schemes.
Relief under Section 89A: Taxpayers are further required to disclose any taxable income on which relief under Section 89A of the Income Tax Act was claimed in any of the previous years. Section 89A relieves individuals who have received arrears or any other additional income in a particular financial year, ensuring that the tax liability is calculated appropriately.

Reporting Requirements for Crypto/VDA in the New Income Tax Forms [ITR 2, 3, 5, 6, and 7]

The updated income tax forms now include specific provisions for reporting profits from Virtual Digital Assets (VDA) or cryptocurrency. To ensure accurate reporting, the tax authorities have introduced a separate schedule known as "Schedule - VDA." Let's delve into the details of this reporting requirement:

Schedule - VDA: Taxpayers who have earned profits from Virtual Digital Assets (VDA) or cryptocurrency must report such income under the newly introduced "Schedule - VDA" in the income tax forms. This schedule provides a designated space to disclose the details of VDA-related income.
Capital Gains Schedule: If the VDA income is treated as capital gains, taxpayers must provide a quarterly breakup of their gains under the Capital Gains Schedule. This breakdown allows the tax authorities to assess capital gains accurately and determine applicable tax liabilities.
Transaction Reporting: Every transaction involving Virtual Digital Assets (VDA) must be reported in the income tax forms. Taxpayers are required to disclose the details of each VDA transaction, including the corresponding sale and purchase dates. This level of transaction reporting ensures transparency and enables the tax authorities to monitor VDA-related activities.

Reporting Requirements for Intraday Trading in the New Income Tax Forms [ITR 3 and 5 ]

With the introduction of the updated income tax forms, there is a specific provision that requires taxpayers to disclose their turnover and income from intraday trading. This reporting requirement is outlined under the newly introduced section called "Trading Account." Let's explore this new disclosure in detail:

Turnover and Income Reporting:
- Taxpayers engaged in intraday trading must report their turnover and income. The turnover refers to the total value of securities bought and sold during intraday trading transactions within a specified period.
Section - Trading Account:
- The income tax forms now feature a "Trading Account" section to facilitate reporting turnover and income from intraday trading. Taxpayers must provide details about their intraday trading activities within this section.

New Tax Regime Questions on ITR Forms - [ITR 3 and 4]

The revised Income Tax Return (ITR) forms for the Assessment Year 2023-24 have undergone specific changes to include questions regarding the choice of the new tax regime. In addition to the previously mentioned updates, the ITR forms now include specific inquiries to determine whether the taxpayer has opted for or opted out of the New Tax Regime in previous assessment years.

ITR-3 Questionnaire:
- The ITR-3 form now includes a questionnaire to ascertain whether the taxpayer has chosen the New Tax Regime in the most recent assessment year. Furthermore, taxpayers must indicate the specific assessment year they opted for the new regime.
ITR-4 Questionnaire:
- Like ITR-3, the ITR-4 form includes a questionnaire to determine if the taxpayer has opted out of the New Tax Regime in previous assessment years.

SEBI Registration Number Disclosure for Foreign Institutional Investors (FII/FPI) - [ITR 2, 3, and 5]

As part of the updated Income Tax Return (ITR) forms, foreign institutional investors (FIIs/FPIs) now have an additional disclosure requirement. They are required to provide their SEBI (Securities and Exchange Board of India) registration number. Let's delve into the details of this disclosure:

Foreign Institutional Investors (FIIs/FPIs):
- Foreign institutional investors, including Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs), play a significant role in the Indian financial markets. These entities invest in Indian securities such as stocks, bonds, and other financial instruments.
SEBI Registration Number:
- SEBI, the regulatory authority for the securities market in India, mandates that FIIs/FPIs obtain a registration number. This number serves as an identification code and is assigned to them by SEBI upon successful registration. It helps in tracking and monitoring the activities of FIIs/FPIs in the Indian markets.
Additional Disclosure Requirement:
- The updated ITR forms require FIIs/FPIs to disclose their SEBI registration number to enhance transparency and regulatory oversight. This additional disclosure measure ensures that the tax authorities have access to accurate and up-to-date information about these institutional investors.

Reporting Advances in the Balance Sheet: Changes in ITR Forms - [ITR 3]

The updated Income Tax Return (ITR) forms have brought about a slight change in the reporting of balance sheets. Specifically, advances received from individuals specified in Section 40A(2)(b) of the Income Tax Act and others must now be reported under the "Advances" heading in the Source of Funds section. Let's delve deeper into this reporting requirement:

Balance Sheet Reporting:

The balance sheet section of the ITR forms requires taxpayers to provide a comprehensive overview of their financial position, including assets, liabilities, and capital. It plays a crucial role in determining the taxpayer's financial health and assists the tax authorities in evaluating their tax liabilities accurately.

Advances from Specified Individuals:

Under the revised ITR forms, any advances received from individuals specified in Section 40A(2)(b) of the Income Tax Act must be reported separately. Section 40A(2)(b) of the Act refers to specified persons, such as relatives or related parties, who are subject to certain restrictions and regulations regarding financial transactions.

Reporting under "Advances" Heading:

To ensure transparency and accurate reporting, advances received from individuals specified in Section 40A(2)(b) and others must be reported under the dedicated "Advances" heading within the Source of Funds section of the balance sheet. This reporting requirement helps the tax authorities track and analyze advances received by taxpayers from these specified individuals.

Other Changes Introduced in New ITR Forms

In addition to the previously mentioned updates, the revised Income Tax Return (ITR) forms for the Assessment Year 2023-24 introduce several other changes. These changes enhance tax filings' accuracy, transparency, and compliance. Let's explore these changes in detail:

Deposit in Current Account - [ITR 1]

A notable change is that the ITR-1 form no longer allows the filing of returns if it is being done solely due to depositing more than Rs. 1 crore in the current account. This change ensures that the appropriate ITR form is used for reporting income and facilitates more accurate tax assessments.

Schedule HP for Companies - [ITR 6]

The checkbox for "self-occupied" has been omitted under Schedule HP (House Property) for companies. This omission implies that companies can no longer indicate whether a property is self-occupied or let out in the ITR forms.

Exclusion of Dividend Income - [ITR-6]

The Schedule OS (Income from Other Sources) no longer includes dividend income tax under Section 115BBD. This exclusion streamlines the reporting process by removing the need to report dividend income subject to specific tax provisions separately.

Reference to Section 153C - [ITR 1 to 7]

The ITR forms now reference Section 153C for returns filed in response to a notice. This reference ensures that taxpayers know the applicable legal provisions and assists the tax authorities in processing and evaluating such returns.

Donation Reference Number - [ITR 2, 3, 5, and 6]

If a donation is eligible for deduction under Section 80G, the ITR forms now require taxpayers to mention the ARN (Donation Reference Number). This additional disclosure facilitates verifying donations claimed for Section 80G deduction.

Consequential Changes for Section 80-IB Deduction - [ITR 2, 3, 5, and 6]

The ITR forms incorporate significant changes due to the sunset date for Section 80-IB deduction. These changes relate to the deduction available to industrial undertakings in Jammu & Kashmir or Ladakh. Taxpayers are required to comply with the updated reporting requirements for claiming this deduction.

Transfer of TCS Credit - [ITR 2, 3, 5, 6, and 7]

The revised ITR forms now include provisions for reporting the transfer of Tax Collected at Source (TCS) credit to another person. This reporting ensures proper documentation and tracking of TCS credits transferred between taxpayers.

Disclosure of Section 89A Relief - [ITR 2, 3 and 4]

Taxpayers are now required to disclose any income on which relief under Section 89A was claimed in the previous year. This disclosure enhances the accuracy and completeness of income reporting, ensuring that the relief claimed is appropriately accounted for.

Additional Disclosure for Change in Partnership - [ITR 5]

In case of a change in partnership, firms must make a further disclosure in the ITR forms. This disclosure ensures that any changes in the partnership are duly reported and recorded for tax purposes.

Disclosure of Advances in the Balance Sheet - [ITR 3]

The revised ITR forms introduce a specific disclosure requirement for advances in the balance sheet. Taxpayers must now disclose advances received from individuals specified in Section 40A(2)(b) of the Income Tax Act and others under the designated "Advances" section. This disclosure promotes transparency and accurate reporting of financial transactions. Taxpayers need to be aware of these changes in the ITR forms and ensure compliance with the revised reporting requirements.