All about new income tax returns

One should note that for income tax purposes, all assessees are required to follow the aforesaid uniform financial year irrespective of closing of their books of accounts either calendar- or any other twelve-month period. 

good news is that there are no major changes this year, say, the applicability of the income tax returns to different taxpayers. The income tax department’s new e-filing portal, Form 26AS, Taxpayer Information Summary (TIS) and Annual Information Statement have made the filing of the return of income easier.

On February 1, 2022, the Union finance minister, while presenting the Budget 2022, announced a TDS on digital currency transactions. Adequate changes were expected in these new returns for reporting the same. However, there is ambiguity on how to report them.

Apart from that, a considerable amount of additional information and disclosures is being sought from taxpayers.

Let’s look at some of the details.  

New income tax returns

ITR-1: This Return also known as SAHAJ and is applicable to a resident and ordinary resident individual taxpayer having total income up to Rs 50 lakhs and satisfying other conditions

The newly released ITR 1 seeks a breakup of the salary income into salary, perquisites, and exemptions among others. A taxpayer is also required to furnish details of income earned from such ‘Retirement Benefit Accounts’ maintained in foreign countries such as Canada, the UK, the US and Northern Ireland. Also, the quarterly breakup of retirement benefits for availing relief under section 234C will have to be furnished.

ITR-2: It is applicable to those individuals and Hindu Undivided Families(HUFS) not having income from profits and gains of business or profession. Now, it is mandated to disclose both the ‘cost of acquisition’ and the ‘indexed cost of acquisition’ while calculating capital gains. All these changes are reflected in ITR 3, 5 and 6 also.

ITR-3: It is applicable to an individual or HUF having income from ‘Profits and gains of business or profession’. All the incomes covered under ITR 1 and 2 are valid for this form as well. However, if an individual is a partner, then he must use ITR 3.

ITR-4: This Return is also known as SUGAM. It is applicable to individuals, HUFS and firms having total income upto Rs 50 lakhs and having income from business or profession who have specifically opted for the Presumptive taxation Scheme under Sections 44AD, 44ADA and 44AE. The following disclosures are required in respect of the alternative tax regime of Section 115 BAC: whether the assessee has opted for an alternative tax regime thereunder and whether the assessee has filed Form 10-IE in Assessment Year 2021-22 or not. While filing this year’s return, the assessee has to choose either one – opting in now or not opting or continue to opt or opt out, this also applies to ITR-3, as the case may be.

ITR-U: To reduce the litigation and to provide an opportunity to correct the bonafide mistakes that occurred while filing returns, the Union Budget 2022 has introduced a new concept ‘Updated Return’ with effect from 1st April, 2022. It will allow the filing of an updated return within 24 months from the end of the relevant assessment year with an applicable late fee, say, a person can now file an updated return for the Assessment Year 2020-21 /2021-22 and correct his previously filed returns.

Accordingly, a new Form ITR-U has been notified on April 29, 2022 and is required to be filed along with the applicable ITR. Reasons for filing such updated returns are ‘income not reported correctly, fresh disclosure of escaped income, chosen wrong heads of income, reduction of tax credit or unabsorbed depreciation, wrong rate of taxes. However, filing of nil return, increase in refund or reduction of tax liability is not allowed.

Concluding remarks

As a result of new e-filing portal, nearly 5.89 crore returns have been filed as of 31st December, 2021, the extended due date for that assessment year. More than 45.5% of returns have been filed using the new e-filing portal and the balance by using the offline software utilities. Though filing income returns is becoming easier day by day, it is advisable to avail a tax professional’s advice on critical aspects such as capital gains, stocks, shares, investment related claims and disclosure of foreign assets to avoid future unforeseen consequences.

(The writer is the Founder and CEO of Shree Tax Chambers)