Income Tax

Proposal for Common ITR by Merging all Existing Forms by CBDT

CBDT issued a notification on 1^st November 2022 requesting inputs in respect of the proposal for introducing a common ITR by merging all the existing income returns. Except for ITR7 and ITR-1  and 4 will continue. The suggestions regarding the same must be sent in the prescribed manner by 15th December 2022.

The article discusses the contents of the proposal to provide clarity in respect of the same.

Background

The taxpayers were required to furnish their Income tax return for ITR-1 to ITR-7 as per the type of person and the nature of their  income. The forms had a designated format wherein the taxpayer had to mandatorily go through all the schedules even if the particular schedule wasn’t applicable in case of the taxpayer which in turn used to increase the time consumed in filling the  return creating avoidable difficulties for taxpayers

In order to address this issue, the Central Board of Direct Taxes (CBDT)^[1] has relooked at the income tax return filing system and proposed introducing a common ITR by merging the existing forms except ITR -7. However, it must be noted that ITR-1 and 4 shall continue providing an option to the taxpayer for filling the same either as per the current form, i.e. ITR 1 and 4 or the system proposed by the CBDT.

Objectives of the New ITR Form

The objectives of the new ITR Form are –

• The main objective is to promote ease of filing returns, thereby considerably reducing the time for filing the return by individuals and non-business-type taxpayers as the taxpayers won’t be required to go through the schedule of the ITR Form, which is not applicable to them.
• Another objective of this new form is to smart design the schedules in a user-friendly manner, having a better arrangement, logical flow, and increased scope of pre-filling
• Facilitation of the proper reconciliation of third-party data available with the IT Department vis a vis the data that should be reported in the ITR for the purpose of reducing the compliance burden on the taxpayers is also one of the objectives of introducing the common form.

What is the Scheme of the Proposed common ITR?

The scheme for the proposed common ITR is elaborated as under 

(a) Basic information that contains parts A to E, a Schedule for computing total income (Schedule TI), a Schedule for computing tax (schedule TTI), and Details regarding bank accounts (schedule TXP) applies for all the assessees 

(b) The  form is customized for the assessees with applicable schedules on the basis of the questions answered by the taxpayers (wizard questions).

(c) The questions have been designed in a way and order that in case the answer to any of the questions is ‘no’, all the other questions linked to the same would not be displayed to the taxpayer

(d) In order to provide assistance regarding the filing of the return comprising of the directions regarding the applicable schedules, certain Instructions have been added to provide such assistance

(e) The design of the proposed ITR is in a way that each row comprises just one distinct value only for the purpose of simplifying the process of return filing

(f) The utility for the Income Tax Return will be formulated in a way wherein only the applicable fields of the schedule would be visible, and the set of fields will appear more than once whenever necessary.

 Therefore the taxpayer must answer the prescribed questions and fill out the relevant information in the schedules shown to him, which has been visible to the taxpayer for allowing the questions to answer as ‘yes’ by him. This can reduce the burn and save the time of filing the income tax return and avoid the hassle of going through every schedule as required in the current ITR forms.

The Board has also provided various samples to assist the taxpayers in the whole ITR filing process through the new ITR forms with various annexures.

List of ITR Forms for Assessment Year 2022-23

The list of Income Tax Return  forms is provided below.

ITR 1

The ITR 1 Form is for the residents of India who fall  in the categories mentioned below

• A salaried person or a person receiving a pension
• Income generated from single house property excluding the loss brought forward from the last year
• Agricultural Income not exceeding Rs 5000
• Income from Other Sources except in case of Winning from Lottery and Income ho

Persons not eligible to file ITR 1 Form

The following persons are not eligible to file the ITR 1 Form.

• Income exceeds Rs.50 Lakhs and Rs 5000 in case of Agricultural Income.
• Taxable capital gains
• The income is generated from a profession or business.
• Income from more than one house property
• The person is the Director of a company.
•  Investments in the unlisted shares (equity) at any point of time during the FY 
• Ownership of assets (including financial interest in any entity) outside India, along with signing authority in any account located outside India
• An (RNOR) and non-resident having any foreign income
• The person is assessable for the income of another person, regarding which the tax is deducted from the hands of the other person.
• Deduction of tax u/s 194N
• Payment or deduction of tax-deferred on ESOP
• Any loss that has been brought forward or loss that needs to be carried forward under any income head.

ITR-2

ITR-2 is required to be used by (HUF), or an individual having total income for the AY 2022-23 and includes the same particulars as in case of ineligible taxpayers for ITR 1 as they can file a return under ITR 2. However, in addition to the same, in case the taxpayer’s child or spouse’s income is clubbed with this income, this form must be used wherein such income falls in any of the above categories, and the income can be more than 50 lakhs

Who are not eligible to file ITR under this Form?

This form cannot be utilized by an individual whose total income for the AY 2022-23 is generated from Business or Profession.

ITR-3

The current  Form is utilized by an individual or a Hindu Undivided Family where the income is generated from a proprietary business or any profession. The persons with income from the below-mentioned sources are eligible to file the return under the form :

• Business or profession
• Individual Director in a company
• Investments in equity shares (unlisted) at any time during the FY 
• The return can include income from Salary/Pension, House property, as well as Income from other sources.
• Income earned by a person as a partner in the firm

 Precisely individuals or HUFs that are not eligible to file ITRs 1,2 and 4 should file the return as per this format

ITR 4 or Sugam

 Also known as the Sugam , it applies to individuals and HUFs, Partnership firms except LLPs), being the residents and having.

Business income as described in the presumptive income scheme u/s 44AD or 44AE

• Professional income as per presumptive income scheme under section 44ADA
• Income from salary/ pension not exceeding Rs 50 lakh
• Income from one house property, not exceeding Rs 50 lakh (excluding the amount of b/d loss or loss to be c/d 
• Income from other sources having income not exceeding Rs 50 Lakh (excluding the income generated from lottery and race-horses

 It must be noted that the income of a freelancer from the above-mentioned sources can also come under the presumptive scheme if their gross receipts do not exceed Rs 50 lakhs.

A presumptive income scheme u/s 44AD, 44AE and 44ADA refers to a situation where in the income of the individual or an entity is derived on a presumptive basis, i.e. during the time, the income is presumed at a minimum rate on the basis of a percentage of gross receipts / gross turnover or on ownership of commercial vehicles. However, if the business turnover exceeds the amount of Rs 2 crore, the taxpayer will have to file  this form

Persons Ineligible to use  the Form

The following persons are ineligible to file the return under such form If the total income is exceeding Rs 50,00,000

• Having income from more than 1 house property
• Ownership of any foreign asset
• The assessee has signing authority in any account located outside of India.
• Income is derived from any source outside India.
• Director in a company
• Investments in equity shares ( unlisted) at any time during the FY
• Resident not ordinarily resident (RNOR) and non-resident
• Foreign Income
• Assessee is assessable for the income of another person for which tax is deducted in the hands of the other person.
• If the payment or deduction of tax has been deferred on ESOP
• In case of loss, b/d or loss needs to be c/d under any income head.

ITR-5

 The form is for firms, LLPs, AOPs (Association of Persons), Bois (Body of Individuals), Artificial Juridical Persons (AJP), Estates of deceased, Estates of insolvent, Business trusts and investment funds.

ITR-6

This form is electronically filed by companies other than the one claiming exemption under sec-11

ITR-7

 This form is for the assessee, including companies that need to file returns under section 139(4A,B, C,D) 

Conclusion

The merging of various income tax return forms can be quite beneficial for the taxpayers as well as the tax authorities as it can reduce the time of filing the ITR and promote the timely filing of the same , thereby avoiding any punitive action against the taxpayer.

Read our Article:All Types of Income Tax Return Filing In India