CBDT has floated the idea of a new common income tax return (ITR) which will replace all except ITR 7 form. But for users’ convenience ITR 1 and 4 will also be available alongside the new common ITR form.
At the beginning of this month, the Central Board of Direct Taxes (CBDT) proposed the introduction of a common income tax return (ITR) form for all individuals. The common ITR will merge all the ITR forms except form 7, meant for trusts. However, existing ITR 1 and ITR 4 forms—meant for individual taxpayers—will continue and taxpayers will have the option to either go for them or the common ITR.
So, how will the new common ITR help taxpayers?
It Will Cut The Clutter
At present, there are seven types of ITR forms meant for different categories of taxpayers .
Aarti Raote, partner, Deloitte India, said in a statement, “Currently several individual taxpayers struggle while choosing the right ITR which may be based on income level, source of income, residential status etc and redoing the tax filing if an incorrect tax form is selected. Also, they fill in the sections that may not apply to them. For example, a non-resident individual with only salary income may choose to file ITR 1 and eventually realise that he has to file Form 2 as he is a non-resident.” The proposed common ITR form will hopefully eliminate these challenges, Raote added.
Simplify Process
CBDT has designed certain questions and placed them in such a manner that the answers to them will determine the ITR of the taxpayer. If a taxpayer enters no as the answer to any question, other questions linked to the original question will not be shown.
Also, at any point if a taxpayer needs assistance for ITR or directions regarding what schedules are applicable to them, CBDT will provide instructions regarding those too.
Provide Better User Interface
CBDT is trying to provide a better user interface (UI). It said that the new common ITR is designed in a manner which will show each row with only one distinct value. This has been done to simplify the taxpayer’s ITR filing experience.
Another update to improve the UI which CBDT has made is that only the applicable fields of any particular schedule will be visible as per the requirement.
CBDT explained this flow of UI with an example. It said that lets suppose that a taxpayer has more than one house property. So, the schedules relating to the house property will be repeated for each house property of the taxpayer. But say the taxpayer has only capital gains arising from Section 112A of the Income-tax Act, 1961, then only the schedules of fields which relate to Section 112A will be shown and not the others.
Reduce Compliance Burden
In addition, the common ITR will also facilitate proper reconciliation of third-party data available with the income tax department with the data reported in the ITR. This will help reduce the compliance burden on the taxpayers, CBDT said.
It will also improve the user interface aspect. CBDT said that the arrangement of the data will be better than the existing flow and the “scope of pre-filling” of data will be increased. Also schedules which do not apply to a particular taxpayer may not be displayed during the filing process.
Save Time
CBDT explained that this new common ITR will reduce the time taken by taxpayers in filing their ITRs for both individuals and non-business taxpayers. As discussed above, since there will be less number of forms to choose from, more help at hand and reduced compliance burden, filing ITR may take a lot less time than before.