Income Tax

Changes Made in The New ITR Form

The Central Board of Direct Taxes (CBDT) has notified a new ITR form for the Assessment Year 2022-23. The new ITR form does not meddle with the applicability of the ITR form to different taxpayers and it also does not introduce any new condition to narrow down the applicability of simple ITR forms to the existing small taxpayers. The new ITR form seeks additional disclosures with respect to the date of sale and purchase of land and building. The taxpayer needs to choose a suitable option supporting selection of his residential status. The changes in the new ITR form have been introduced because of the changes brought by Finance Act^[1], 2021 and Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

The following discussion analyses the changes introduced in the new ITR forms (i.e ITR 1-6) and the new requirements to be made in such forms:  

Changes in the new ITR forms

The reporting of foreign assets will be made within the calendar year ending on 31^st December

A change has been introduced where the expression “calendar year ending as on 31^st December 2021” has replaced “accounting period”. This change means that the taxpayer has to furnish details of all the foreign assets held between the period of 1^st January 2021 till 31^st December 2021 in returns to be filed for the assessment year 2022-23. This change has been introduced to remove the scope of confusion or miscalculation of the reporting period. No matter what the fiscal period followed by other countries, the reporting of the same needs to be made if the assets have been held on 31^st December, 2021.

For example an employee receives stocks as part of ESOPs from a multinational company head quartered in USA. Here:

Situation 1

Relevant previous year	1st Apr 2021- 31st Mar 2022
Relevant calendar year	1st Jan 2021 – 31st Dec 2021
Date of purchase of stocks	February 2021
Does the liability accrue to furnish details of foreign assets?	Yes

Here, the liability to furnish details accrues because the foreign assets have been held by the taxpayer within the calendar year of 1^st Jan 2021 – 31^st Dec 2021 for the assessment year of 2022-23 even if the same has been held in the relevant previous year.

Situation 2

Relevant previous year	1st Apr 2021- 31st Mar 2022
Relevant calendar year	1st Jan 2021 – 31st Dec 2021
Date of purchase of stocks	February 2022
Does the liability accrue to furnish details of foreign assets?	No

Here, the liability does not accrue because even though the foreign assets have acquired in the relevant previous year but the same were not acquired in the relevant calendar year. These returns will be furnished in the assessment year of 2023-24.

Schedule of Capital Gains requires additional disclosures to be made

The additional disclosures to be made within the schedule of Capital Gains include:

It has been mandatory to furnish the details of the date of sale and date of purchase of any land or building if the income arising from such sale is taxable under the head of ‘Capital Gains’. The additional disclosures help tax authorities in verification of eligibility of the assessee and the allowability of exemptions under sections 54, 54EC and 54F of the Income Tax Act, 1961.

The new ITR forms require furnishing the details related to the country and ZIP code of the country in cases where the property is situated outside the country along with the details of the buyer and address of the property transferred.

Following the amendments made in the Finance Act, 2021, the CBDT introduced a new rule 11UAE which provides that higher of the following two on the date of slump sale shall be deemed to be the Full Value of consideration:

• Fair Market Value (FMV) of the capital assets transferred by way of slump sale
• FMV of the consideration received or accruing due to transfer by way of slump sale   

So the new ITR form requires reporting of the FMVs calculated according to Rule 11UAE.

Dividend income which is taxable under section 2(22)(e) to be reported separately [ITR 2, 3, 5,6]

The new ITR form makes it mandatory that the dividend income which is taxable under section 2(22)(e) needs to be reported separately.

Disclosures related to significant economic presence by a non-resident B [ITR 5]

A non-resident needs to confirm whether it has significant economic presence in India or not. If the non-resident discloses that there was significant economic presence then the following details related to the transactions and users have to be furnished in the ITR form:

• Systematic and continuous soliciting of business activities or engaging in interaction with three lakh users in India; or
• Any transaction in respect of any services, goods or property carried out by a non-resident with any person in India and also includes the provision of data or software in India if the aggregate of payments arising from such transactions during the previous year exceed Rupees 2 crores

Addition of Schedule 80GGA for the partners deriving only profit from firm [ITR 3]

Deduction is allowed under section 80GGA for the income contributed to a specified institution or associations. The deduction under this section is allowed to an assessee who doesn’t have taxable income under the head “profits and gains of business or profession”.

The new changes made in the ITR form allow for addition of Schedule 80GGA which asks for details of Donations for scientific research or rural development. This schedule is applicable to a partner of a firm who derives only profit from the firm. The following disclosures are required to be made under this schedule if the partner wants to claim deduction under section 80GGA where the partner doesn’t earn any business and professional income except the share in the profit of the firm:

• The relevant clause under which deduction is made
• Name and address of the Donee
• PAN of the done
• Donation amount (in cash and other mode) and
• Eligible amount of the donation 

Disclosures related to all the total secondary adjustments

The new ITR forms mandate disclosures to be made by the assessee indicating the total adjustments made in respect of all assessment years.

Disclosures relating to interest paid to systematically important non-deposit taking NBFCs or Deposit taking NBFCs

A new row has been inserted in Part A-OI “other information” in the new forms which requires the asssessee to disclose the amount of loan or advances or interest from a systematically important Non-Deposit Taking NBFCs or Deposit taking NBFCs which has been allowable during the previous year.

Requirement of additional disclosure in case of income that is exempt under section 10

In the previous ITR forms, there was no requirement of additional disclosures for the income exempt under Sections 10(23FB), 10(23FBA), 10(23FC), 10(23FCA), 10(23FE), 10(23FF), 10(4D).

However, the new ITR form requires disclosures of the following income in the schedule of Exempt Income:

• 10(23FB): Exemptions to Venture Capital Company or Venture Capital Fund
• 10(23FBA): Exemption to Unit Holder and Investment Fund
• 10(23FC)/ 10(23FCA): exemptions to business trust
• 10(23FE): Exemptions to pension fund or sovereign wealth fund or wholly owned subsidiary of ADIA
• 10(23FF): capital gains made from transfer of shares of a company which is resident in India on the pretext of relocation of offshore funds
• 10(4D): Exemption to Specified fund

Separate disclosures for the interest and dividend incomes which are taxable under 115AC [ITR 3, 5 & 6]

Amendments have been made in ‘Schedule Special Income’ where separate disclosure is sought of the following income under section 115AC:

• Interest income received by a non-resident from bonds purchased in foreign currency
• Dividend income received by a non-resident from GDRs purchased in foreign currency

For the purpose of reporting any other income taxable at a special rate, a residuary clause has been provided in Schedule Special Income.

Reference of section 152A and 153C for the return filed in response to a notice has been removed [ITRs 1-6]

The new form removes the reference check-boxes of sections 153A and 153C from the field of filing status of return income.

Further categorisation of nature of employment for pensioners [ITR 1, 2, 3 & 4]

In the older ITR forms, the person receiving had the only option of ‘Pensioners’ to choose. The new ITR forms have provided the following options for the pensioners:

• Pensioner- CG,
• Pensioner- SC,
• Pensioner- PSU and
• Pensioner- CG

Disclosures with respect to alternative tax regime u/s 115BAC [ITR 3 & 4]

An assessee needs to make the following disclosures under ITR 3 and ITR 4 with respect to the alternative tax regime under section 115BAC of Income Tax Act, 1961:

• If the assessee has chosen an alternative tax regime and filed form under Form 10-IE in the Assessment Year 2021-22
• For the assessment year 2022-23, the assessee needs to choose one of the following options:
  • Opting in now
  • Not opting
  • Continue to opt
  • Opt out

Disclosures with respect to alternative tax regime u/s 115BA/115BAA/115BAB   [ITR 6]

An assessee needs to make the following disclosures under ITR 6 with respect to the alternative tax regime under section 115BAD of Income Tax Act, 1961:

• In case a cooperative has opted for an alternative tax regime, it has to furnish the Assessment Year in which the said option is exercised for the first time along with the date of filing of form (10-IB, 10-IC, 10-ID) with the acknowledgement number;
• In case a cooperative society has decided to opt for an alternative tax regime this year, it has to provide the details of the date of filing the form (10-IB, 10-IC, 10-ID) along with the acknowledgement number. 

Disclosures with respect to alternative tax regime u/s 115BAD [ ITR 5]

An assessee needs to make the following disclosures under ITR 5 with respect to the alternative tax regime under section 115BAD of Income Tax Act, 1961:

• In case a cooperative has opted for an alternative tax regime, it has to furnish the Assessment Year in which the said option is exercised for the first time along with the date of filing of form 10-IF with the acknowledgement number;
• In case a cooperative society has decided to opt for an alternative tax regime this year, it has to provide the details of the date of filing the form 10=IF along with the acknowledgement number. 

Mandatory for the taxpayer to choose a suitable option in support of the residential status in India

The new ITR form has introduced changes to determine the residential status of an individual in India. The new form provides a suitable description for different clauses which helps an individual determine his residential status. These options are self-explanatory and the taxpayer can choose the most suitable option in support of selection of a residential status. Following are the options that have been provided:

• Resident and ordinarily resident
• Resident but not ordinarily resident
• Non-resident

New schedule titled IF inserted

The new ITR form 6 has inserted new schedule IF (information regarding investment in unincorporated entities) makes it mandatory for the companies to make disclosures related to the investments made by them in an unincorporated entity:

• Name of the entity;
• Type of the entity;
• PAN of the entity;
• Whether the entity is liable for audit;
• Whether section 92E is applicable to entity;
• Share in the profit of the entity; and
• Capital balance on 31^st March in the entity
• Share in the profit of the entity

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