Individual Tax Return Forms: New Changes to Observe

Considering that tax returns under the new forms have to be filed by July 31, 2019, it is important for taxpayers to be aware of the recent changes brought in by the authorities, in the Income Tax Return (ITR) forms notified for tax year 2018-19. The new ITR forms have enhanced disclosure requirements as compared to those of last year. The intent seems to bring in transparency and facilitate remote processing of tax returns, rather than seeking the same details through personal interface with taxpayers.

Let’s look at some of the important changes made in the ITR Forms for tax year 2018-19 applicable for individual taxpayers:

Key Changes in ITR-1 (Sahaj) Form

For this year, the tax authorities have made it mandatory for everyone to file their ITRs electronically except for super senior citizens aged 80 years or above. This includes taxpayers with income of less than Rs 5 lakh (with no refund) who are now required to file ITRs electronically even though they were allowed to file ITR- 1 (Sahaj) form manually in the paper format in the past years.

The ITR-1 (Sahaj) Form covers income source from salary, one house property or other sources. The ITR-1 Form is applicable to individual taxpayers qualifying as Resident and Ordinarily Resident (ROR) and having a total income of not more than Rs 50 lakh. From this year onwards, ITR-1 Form can no longer be used by the individuals who are directors in a company or have investments in unlisted equity shares.

ITR-1 Form requires additional disclosure for income from house property. Under this change, taxpayers are now required to specify whether the house was deemed to be let out or not (in addition to self-occupied or let out on rent during the year). Further, the detail of arrears or unrealised rent needs to be mentioned separately in the ITR-1 Form now.

Key Changes in ITR-2 Form

ITR-2 Form is applicable for individual taxpayers/ Hindu Undivided Family (HUF) who are not eligible to file ITR-1 and who do not have any business/ professional income.

ITR-2 Form now requires information on the number of days spent in India while declaring residential status. Until last year, a taxpayer had to simply select the option of residential status as Resident, Resident but not Ordinarily Resident and Non-Resident options. The taxpayers qualifying as Non-Residents are now required to disclose the jurisdiction of residence along with Taxpayer Identification Number of that country.

Another important change in the ITR-2 Form is regarding the reporting of salary income. The ITR-2 Form now requires detailed break up of salary into basic salary, various allowances, employer’s contribution towards NPS, taxable provident fund income, different perquisites, profit in lieu of salary and exemption. Till now, such information was required to be furnished in the tax withholding certificate (Form 16), but now these details have to be given under the tax return forms itself.

A new table under “Part-A” of Form ITR-2 has been introduced which seeks information of unlisted shares held by the taxpayer anytime during the tax year. The details such as name and PAN of company, cost of subscription or purchase, opening balance, shares acquired or transferred during the year and closing balance of shares are required to be reported in it.

The foreign assets disclosure requirement has been widened this year with details of foreign depository accounts, custodial accounts, foreign equity and debt interest, foreign cash value insurance contract and annuity contract held (including any beneficial interest) also required to be reported.

For relief sought to be claimed under Double Taxation Avoidance Agreement (DTAA), ITR-2 Form requires disclosure on whether a Tax Residency Certificate (TRC) from the country of residence has been obtained or not.

Some other additional reporting requirements that have been introduced in this year’s ITR Forms are as under:

1. Details of buyer in respect of immovable property sold: In case of sale of immovable property, details such as name, PAN, percentage share, sale value and address of the buyer are to be disclosed under the capital gains schedule.  

2. Details in respect of Directorships in a company: Individual taxpayers who are Directors of a company are required to furnish the Director Identification Number (DIN), name and PAN of the companies in which they are Directors and whether shares of the company are listed.

3. Agricultural income: In case the agricultural income exceeds Rs 5 lakh, details such as name of district along with PIN code, measurement of agricultural land, whether such land is owned or held on lease and whether such land is irrigated or rain-fed are to be provided under exempt income schedule.

As can be seen from the above, several changes have been introduced in the tax return Forms this year. Therefore, it is important for individual taxpayers to learn of the new reporting requirements, so that they can collate and furnish complete details in the tax return forms. This will ensure that taxpayers do not face subsequent penal implications for mis-reporting or non-reporting of information.

The author is Senior Director, Deloitte Haskins and Sells LLP.