Income Tax Return Introduction
An Income Tax Return or ITR as many people call it is a form where the taxpayers are expected to declare their taxable income and the tax due to the government as per the income tax laws. Besides, the taxpayer is also expected to mention all the eligible deductions and tax payments if any. In India, a taxpayer has to file an Income Tax Return for a particular Financial Year i.e. April to March, irrespective of the accounting year adopted by the taxpayer. Income Tax Department has notified 7 forms i.e. Form ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 for filing tax returns according to different types of income and types of entities. The taxpayers must file their returns before the due date applicable. In this article, we are discussing all that need to know about the income tax return filing for the financial year 2022.
Form to be used by the taxpayer
The form that must be used by taxpayers is as follows:
ITR 1 (Sahaj)
A resident individual or Hindu undivided family with income from salary or pension, or income from a single house property located in India (no brought forward losses from the previous year), or agricultural income up to INR 5,000, and income from other sources, where the total income does not exceed INR 50 lakhs, can file ITR-1. In the case of capital gains, income from a business, or investment in unlisted equity shares this form cannot be used. Further, people with the tax status of Non-resident or Resident not ordinarily resident (RNOR) are also not allowed to use this form. A taxpayer who is a partner in a partnership firm or director of a company, or has assets in a foreign country or income from a foreign country also cannot opt to file this form. ITR-1 is a simple tax return requiring minimum details.
Individuals or HUFs who do not qualify to file ITR-1, are required to file ITR-2, except those who earn income from business or profession. This is a detailed income tax return.
Individuals or HUFs who have income from business or profession are required to file ITR-3. This is a detailed income tax return.
ITR 4 (Sugam)
In the case of Individuals, HUFs and partnership firms who are Indian residents and generate income from business or profession, they can file ITR-4 if they choose to declare their income under the presumptive income scheme according to section 44AD, 44ADA or 44AE. However, if a person has income more than INR 50 lakh, has brought forward losses from previous years, is not a resident in India (as per the income tax act), owns unlisted equity shares, or have foreign assets or foreign income, they cannot file ITR-4. Further, taxpayers with income from more than one house property, or who are the director of a company are also not allowed to file ITR-3. ITR-4 is a much simpler form as compared to ITR-3.
In case of Partnerships, Limited Liability Partnerships (LLP), Investment funds, Business trusts, local authority, Estate of insolvent, Estate of deceased, Artificial Juridical Person (AJP), Body of Individuals (BOIs) and Associations of Persons (AOPs), ITR-5 is required to be filed. Partnership firms can also opt to file ITR-4 if they fulfil the criteria. ITR-5 is a detailed income tax return.
ITR-6 is for all domestic or foreign companies, whether public or private. However, this form cannot be opted by companies who are claiming exemptions under Section 11.
ITR-7 is a special income tax return required to be filed by taxpayers who are mandated to file the return under Section 139(4A) where individuals receive income from a property that belongs to trust or income generated solely for religious or charitable purposes; under section 139(4B) where a taxpayer is a political party; under section 139(4C) where a taxpayer is a Scientific Research Association, Institutions or association that come under Section 10(23A), Medical institutions, hospitals, universities, funds, and other educational institutions, News agencies, institutions that come under section 10(23B); under section 139(4D), where a taxpayer is a college, university, or other institutions; under section 139(4E) where a taxpayer is a business trust; under section 139(4F) where a taxpayer is an investment fund under Section 115UB.
The due date for filing returns
The due date for filing an income tax return for FY 2021-22, unless extended, is July 31, 2022. However, for taxpayers who are required to comply with tax audit provisions, the due date is October 31, 2022, after filing tax audit reports on or before September 30, 2022. In the case of taxpayers who are required to submit a transfer pricing report under section 92E, the due date for filing the report is October 31, 2022, and the due date for filing an income tax return is November 30, 2022.
After filing the income tax returns, returns can be revised up to December 31, 2022. The last date to file an income tax return, in case a taxpayer has missed filing a return, is also December 31, 2022.
Changes in income tax forms for FY 2022
The Central Board of Direct Taxes (CBDT) has notified the forms for income tax return filing for FY 2022 with some changes. These forms will be soon made available on the income tax portal for the electronic filing of returns. The changes in the income tax return are as follows:
1. Concerning declaration of foreign assets, the new income tax returns now require taxpayers to declare assets as per calendar year i.e. as of December 31, 2021, irrespective of the financial year followed by other countries.
2. New ITR forms now require the additional disclosures in the Schedule Capital Gains: a) Date of purchase and sale of land/building b) Country and zip code if the property is situated in a foreign country 3) Fair market value of capital assets and consideration received in a slump sale transaction 4) Yearwise details of the cost of improvement to land/building 5) Separate disclosure of the cost of acquisition and indexed cost of acquisition.
3. In new forms, Schedule Capital Gains has been amended to disclose the deduction allowable under Section 48(iii) in respect of the capital gains under section 45(4) attributable to the capital asset remaining with a partnership firm. (ITR-5)
4. Dividend income taxable under section 2(22)(e) is now required to be reported separately. Payment by way of loan or advance, by a closely held company, to a shareholder who owns 10% or more equity, or to a concern in which the shareholder has a substantial interest is deemed to be a dividend under the income tax act and such dividend is taxable under section 2(22)(e).
5. Section 9(1)(i) Explanation 2A provides that the ‘Significant Economic Presence (SEP) of a non-resident in India shall constitute a business connection in India. In the new ITR forms, a non-resident has to provide details of Significant Economic Presence (SEP) in India
6. In ITR-2 and ITR-3, disclosure of interest accrued on the provident fund which is taxable is now required to be entered separately in the schedule of other sources.
7. Taxpayers who opt for Section 115BAC are not eligible to set off unabsorbed depreciation attributable to additional depreciation. In the Schedule DPM, the written down value of the block at on beginning of the year is to be increased by the amount of unabsorbed depreciation not allowed to be adjusted on account of opting for Section 115BAC and similarly under Section 115BAD.
8. A new schedule ‘Tax on Deferred ESOP’ has been inserted for reporting tax-deferred on ESOP. The details to be disclosed are – Amount of tax-deferred in previous return, date of sale of securities and tax attributable to such sale; Date on which cease to be an employee; tax payable in the current year; and balance tax-deferred to next year. This schedule will now keep track of the tax-deferred by the employee and the year it should be taxed.
9. The Finance Act 2020 abolished the Dividend Distribution Tax and moved to the traditional system of taxation wherein the shareholders are liable to pay tax on such dividends. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has removed the enhanced surcharge on such dividend income. Thus, changes have been made in Schedule Part B – TTI to limit the rate of surcharge on dividends.
10. Section 89A with effect from the AY 2022-23 has provided that the income of a specified person from the specified account shall be taxed as prescribed by rules which are not been notified yet. However, the ITR Forms have amended Schedule Salary to disclose – Income from retirement benefits in a notified country under Section 89A and income from retirement benefits account in a country other than notified country
11. Schedule BP (Computation of income from business or profession) allows exclusion of certain incomes which are credited to the profit and loss account but are taxable under other heads of income. The new income tax return Forms have added dividends in the list to exclude them from the Schedule BP if it is credited to the Profit and Loss account, in line with section 56(2)(i).
12. A new row has been inserted in the Schedule Other Sources to allow disclosure of the interest referred to in Section 194LC.
13. Schedule MAT and Schedule AMT now require separate disclosure of adjusted total income under Section 115JC for Units located in IFSC, and other units.
14. Schedule 80GGA has been inserted for the partners deriving only profit from the firm. Section 80GGA allows a deduction for the amount contributed to specified associations or institutions, to taxpayers who do not have any income under the head PGBP. The schedule seeks details such as the Name and address of Donee, PAN of Donee, Amount of donation (In cash and another mode) and eligible amount of donation.
15. Changes have been made in Schedule 80-IA and 80-IB as the sunset clause has been incorporated for eligibility to claim the deduction.
16. The Schedule TPSA now requires taxpayers to indicate the total adjustments made in respect of all the assessment years.
17. In Part A OI Other Information, the taxpayers are now required to disclose the interest on any loan or advances from Deposit-taking NBFCs or Systemically Important Non-deposit Taking NBFCs, disallowed in the earlier year, but it is allowable now.
18. Schedule Exempt income now requires separate disclosure for income exempt under Sections 10(23FB), 10(23FBA), 10(23FC), 10(23FCA), 10(23FE), 10(23FF), 10(4D).
19. Schedule Special income requires separate disclosure of the income taxable under Section 115AC – Income by way of interest received by a non-resident from bonds purchased in foreign currency; and Income by way of dividend received by a non-resident from GDRs purchased in foreign currency.
20. Reference to Section 153A and 153C for the income tax return filed in response to a notice, in the filing status of return income, has been removed.
21. Nature of employment for pensioners has been further categorised into Pensioners – CG, Pensioners – SC, Pensioners – PSU and Pensioners – Others.
22. Following new disclosures are required in ITR 3 and ITR 4 in respect of Section 115BAC – 1) Whether the assessee has opted for an alternative tax regime and has filed Form 10-IE in the previous year, 2) Whether the assessee is Opting in now, Not opting, Continue to opt, Opt-out in the current assessment year. A similar disclosure is required in respect of the alternative tax regime under Section 115BA/115BAA/115BAB/115BAD.
23. Audit under Section 44AB is mandatory if the sales turnover exceeds INR 1 crore. However, if the cash receipt and cash payment do not exceed 5%, the threshold is INR 10 crore. The old ITR Forms required the assessee to furnish a response regarding cash receipts and payments only, and it did not seek information concerning receipt or payment through non-account payee cheque or demand draft. This anomaly has now been removed.
24. New Schedule IF has been inserted to disclose investment made in an unincorporated entity requiring details such as the Name of the entity, type of the entity, PAN of the entity, and whether the entity is liable for the audit? Whether section 92E applies to the entity?, Share in the profit of the entity, Amount of share in the profit; and Capital balance on March 31 in the entity.