Government Issues Forms ITR 1 and 4; Three Months Ahead Of AY2020-21

Mumbai, January 7: In order to tide over what has become a regular feature of shortfall in the income-tax revenue against its aggressive target, the Government seems to have tightened its seat belt. This time it has targeted not only to arrest the shortfall in its revenue for the next Assessment Year (AY) 2020-21 but has also pulled up its socks to increase the tax base, experts opined.

Every year, the government notifies income tax return form (ITR) either during March last week or early April. However, this time it has issued ITR-1 and ITR-4 well in advance to avoid any last minute rush. The government has also extended the due date of filling tax returns due to delay in issuance of ITR Forms.

During last year’s budget presentation, the government made income tax return filing mandatory for account holders who have deposited Rs 1 crore in current account in a year, or to people who have spent over Rs 2 lakh on international travel in a year or those who have paid more than Rs 1 lakh as electricity bill within a year.

The new ITR form requires taxpayer to provide details of her passport number, international travel, if spending is more than Rs. 2 lakh in a year, original electricity bills in aggregate if amount exceeds Rs 1 lakh or withdraws cash more than Rs10 lakh during previous year.

On the scope of Information enhanced under new tax returns forms,  Gopal Bohra, Partner, NA Shah Associates LLP says, “With Artificial Intelligence the tax department will be able to map the income declared by the taxpayer with lavish spending on international travel or electricity and on mismatch of profile will automatically select the cases for assessment. Further, due to mandatory filling, the tax base will also increase.” The new form requires an assesse to specify the amount spent during the previous year in above cases. It also includes changes in disclosure requirement under presumptive taxation.

Sharing his views, Shreyans Dudheria, FCA, Financial Advisor, says, “These changes will assist Individual assesses to engage with their financial planner and thus ensure compliance. This will increase taxpayer base as the new changes require compliance by even those who are below taxable limit.”

ITR-1, which is also known as “Sahaj" can be used by an individual whose income primarily include salary income and whose total income does not exceed Rs 50 lakh during the FY. On the other hand ITR-4 can be used to file returns by resident individuals, Hindu Undivided Family and firms (other than LLP) having a total income of up to Rs50 lakh from business and profession and filing return under presumptive taxation scheme.

There are two major changes in the forms - first, an individual taxpayer cannot file return either in ITR-1 or ITR4 if he is a joint-owner in house property; second, the ITR-1 form is not valid for those individuals who have deposited more than Rs1 crore in bank or has spent Rs 2 lakh or Rs1 lakh on an international vacation or electricity respectively.

Though the forms are notified, according to experts, it is not practical to file a return before end of the FY, even if utilities get updated. Ideally, one should file the return from April 1 onwards and before the due date, which is July 31.