Get a fix on key changes in the new Income Tax Return Forms for AY 2022-23

The forms are quite elaborate and seek a lot of information, so get the documentation and paperwork ready, and make complete disclosures while filing returns

The Central Board of Direct Taxes (CBDT) had notified the income tax return (ITR) forms for FY 2021-22 (Assessment Year 2022-23) in the first week of April. The new forms are quite elaborate, and their early notification will give assessees more time to get the documentation and paperwork ready. Hence you must ensure that you make complete disclosures while filing your returns. There are around 30 changes in the new ITR forms, and while all may not be relevant to you, there are some that you need to know about. Business Standard spoke to tax experts to find out the most important changes you need to know.

Old and new: In the previous year, there was an option to choose between the old and the new tax regimes. Now, in ITR form 3, there is an option to specify the chosen tax regime and whether or not one wants to choose the new tax regime now. The tax department also wants to know whether you wants to continue with the new tax regime or are opting out. In order to provide this information, you will have to mention the form (10IE) filing date. Moiz K Rafique, managing partner, Privy Legal Services LLP, says, “This gives the tax payer the flexibility of choosing the tax slab rate that works best for him or her. And in the same form, if you don’t opt for the presumptive tax scheme, you’ll now have to provide further information in the form for the purpose of checking the applicability of audit.” This additional information will help in checking the applicability of audit more efficiently.

Furnishing details of interest on Employees' Provident Fund (ITR 2 & ITR 3): As per the amendment brought by The Finance Act, every employee whose contribution to EPF exceeds the threshold limit of Rs 2.5 lakh per financial year (from FY 2021-22), shall be liable to pay tax on interest earned on contribution over the said limit. Such a limit would be raised to Rs 5 lakh where the employer is not making any contribution to such a fund. Suresh Surana, founder RSM India says, “Thus, accordingly, the new ITR has made room for such changes in the Income from Other Sources schedule and such employees must report the amount of excess contribution and interest earned thereon.” In other words, the taxable interest earned above the applicable amount on EPF will be regarded as income from other sources.

Foreign assets in Schedule FA: In the old ITR forms, Schedule FA (Foreign Assets) required one to report foreign assets only if one had held them at any time during the “relevant accounting period”. The accounting period was not defined. The new ITR forms have replaced the expression “accounting period” with “calendar year ending as on 31st December 2021”.

Naveen Wadhwa, deputy general manager, Taxmann said, “This change implies that the assessee shall furnish details of all foreign assets held between April 1, 2021 and December 31, 2021 in the return to be filed for AY 2022-23.”

This change removes all scope for misunderstanding or miscalculating the reporting period. Reporting is required even if the taxpayer is a beneficial owner of such foreign assets or has a financial interest in a foreign entity. Disclosure in Schedule FA of various foreign assets such as Foreign Depository Account, Immovable Property, trusts created outside India, etc, is required. Wadhwa says, “The reporting requirement is mandatory only for a taxpayer who is a resident in India. Schedule FA is not required to be filed by a taxpayer who is ‘not ordinarily resident’ or is a ‘non-resident’.”

Another big change is regarding foreign retirement accounts. “In all ITR forms, new rows have been included where details have to be reported (by those to whom it applies) of income accrued on foreign retirement accounts, and any such income, which has been claimed for tax relief under Section 89A.

Part A-OI (Other Information): Disclosure of interest paid on loans or advances availed from deposit-taking Non Banking Finance Companies (NBFCs) or Systemically Important Non-Deposit Taking NBFCs (under Section 43B). 

The new ITR forms have inserted a new row in Part A-OI, requiring the assessee to disclose the amount of interest paid on any loan or advances taken from a Deposit-taking NBFCs or Systemically Important Non-Deposit taking NBFCs, which was disallowed in the earlier year, but it is allowable during the previous year.

Maneet Pal Singh, partner, IP Pasricha & Co says, “With such disclosures, the taxpayer would be able to report the amount deductible in the current financial year which was disallowed in the preceding financial year under the specific head, mitigating the chances for furnishing inaccurate particulars.”

Nature of employment for pensioners: The relevant information has to be provided in ITR forms 1 and 4. There are four categories under the section: pensioners of the central government, of state governments, public sector units and others. Anushkaa Arora, principal & founder, ABA Law Office, says, “Though the reason for such change can’t be ascertained accurately, it helps trace the source of pension by the authorities. The information can be used for future amendments and speculation arises whether the income source will be further streamlined in the years ahead.”

Separate disclosure of deemed dividend earned under Section 2(22)(e) of the IT Act: While more disclosures are welcome, the balance with respect to additional disclosure vis-a-vis compliance burdens has to be kept in mind. Kumarmanglam Vijay, partner, JSA, says, ”Given that tax is deducted on such deemed dividends and details of such deemed dividends will be available with the Tax Authorities in Form 26AS, this change seems to add to compliance burden for a taxpayer with little additional benefit to the Income Tax Authorities.” Under the old regime, no separate disclosure was required of dividend income taxable under the law. Suvigya Awasthy, associate partner, PSL Advocates & Solicitors says, “However, under the novel regime, there is a requirement of separate disclosure for such type of dividend in the form of ‘deemed dividend’. This move reflects the exhaustive approach being adopted by the Government and increases the work for the assessee. But it is also likely to yield benefits for them."

Declarations regarding date of purchase and sale of land/building: If you sold land/building in the financial year 2021-2022, then it is mandatory to declare the purchase and sale dates in the 'Capital Gains' schedule of the amended ITR form. Bharath Gangadharan, senior associate, SKV Law Offices says, "Majority of the changes include those in the nature of the declarations and disclosures in respect of purchase and sale of land/building, and residential status of the taxpayer." 

He adds, “This additional disclosure is aimed at helping the tax authorities to verify the eligibility of the taxpayer and the permissibility for exemption under Section 54, 54EC and 54F of the Income-tax Act, 1961 (‘the Act’). The said amendments have come into force with effect from 01 April 2022.” Section 54 and its sub-sections offer the seller of a residential property relief from capital gains tax.

Non-residents: The concept of Significant Economic Presence (SEP) of a non-resident in India has been introduced. The new ITR Form requires an NRI to disclose whether or not he or she has SEP in India. Aditya Chopra, managing partner, Victoriam Legalis-advocates and solicitors says, "In order to determine Significant Economic Presence, the following parameters are to be referred: Transaction in respect of any goods, services or property carried out by a non-resident with any person in India, including the provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeding Rs 2 crore; Systemic and continuous soliciting of business activities or engagement in interaction with 300,000 users in India."

Accordingly, all non-residents should ascertain whether or not they would be falling within the purview of SEP in terms of the said parameters and fill out the new ITR Form making the necessary disclosures.

Declare cost incurred on improving land or building

• Taxpayers are required to provide three pieces of information: cost of improvement, year of improvement, and indexed cost of improvement
• Expenses towards renovation or improvement done on land or building will be taken as cost
• To calculate long-term capital gains, this cost has to be indexed and deducted from the sale price of the land or building
• If the cost of improvement has been incurred in different financial years, then year-wise details have to be provided while filing ITR

Source: SKV Law Offices

Nature of income	ITR 1*	ITR 2	ITR 3	ITR 4 *
Salary Income
Income from salary/pension (for ordinarily resident person)	Yes	Yes	Yes	Yes
Income from salary/pension (for not ordinarily resident and non-resident person)	.	Yes	Yes	.
Any individual who is a Director in any company	,	Yes	Yes	.
If payment of tax in respect of ESOPs allotted by an eligible start-up has been deferred	,	Yes	Yes	.
Income from House Property
Income or loss from one house property (excluding brought forward losses and losses to be carried forward)	Yes	Yes	Yes	Yes
Individual has brought forward loss or losses to be carried forward under the head House Property	.	Yes	Yes	.
Income or loss from more than one house property	,	Yes	Yes	.
Income from Business or Profession

Income from business or profession . . Yes . Income from presumptive business or profession covered under section 44AD, 44ADA and 44AE (for person resident in India) . , . Yes Income from presumptive business or profession covered under section 44AD, 44ADA and 44AE (for not ordinarily resident and non-resident person) . . Yes . Interest, salary, bonus, commission or share of profit received by a partner from a partnership firm , . Yes ,

Capital Gains

Taxpayer has held unlisted equity shares at any time during the previous year . Yes Yes . Capital gains/loss on sale of investments/property . Yes Yes .

Income from Other Sources

Family Pension (for ordinarily resident person) Yes Yes Yes Yes Family Pension (for not ordinarily resident and non-resident person) . Yes Yes . Income from other sources (other than income chargeable to tax at special rates including winnings from lottery and race horses or losses under this head) Yes Yes Yes Yes Income from other sources (including income chargeable to tax at special rates including winnings from lottery and race horses or losses under this head) . Yes Yes . Dividend income exceeding Rs 10 lakh taxable under Section 115BBDA . Yes Yes . Unexplained income (i.e., cash credit, unexplained investment, etc) taxable at 60% under Section 115BBE . Yes Yes . Person claiming deduction under Section 57 from income taxable under the head ‘Other Sources’ (other than deduction allowed from family pension) . Yes Yes . Deductions Person claiming deduction under Section 80QQB or 80RRB in respect of royalty from patent or books . Yes Yes . Person claiming deduction under section 10AA or Part-C of Chapter VI-A . . Yes .

Total Income

Agricultural income exceeding Rs 5,000 . Yes Yes . Total income exceeding Rs 50 lakh . Yes Yes . Assessee has any brought forward losses or losses to be carried forward under any head of income . Yes Yes .

Computation of Tax liability

If an individual is taxable in respect of an income but TDS in respect of such income has been deducted in hands of any other person (i.e., clubbing of income, Portuguese Civil Code, etc.) . Yes Yes . Claiming relief of tax under sections 90, 90A or 91 . Yes Yes . Others        

Assessee has:

- Income from foreign sources

- Foreign Assets including financial interest in any foreign entity
- Signing authority in any account outside India

. Yes Yes . Income has to be apportioned in accordance with Section 5A , Yes Yes . If the tax has been deducted on cash withdrawal under Section 194N . Yes Yes Yes * ITR-1 can be filed by an Individual only who is ordinarily resident in India. ITR-4 can be filed only by an Individual or HUF who is ordinarily resident in India and by a firm (other than LLP) resident in India Source: Taxmann