The CBDT Vide its notification no 21/2022 dated 30/03/2022 has notified the Income-tax Return (ITR) Forms (‘New ITR Forms’) for the Assessment Year 2022-23 . The changes in ITR Forms are as follows :
1. Capital Gain:
Additional disclosures are required in the Schedule of Capital Gains [ITR 2, 3, 5 & 6]
a. Date of purchase and sale of land/building
If there is any income arising from the transfer of land or building is taxable under the head of ‘Capital Gains’. It will be mandatory to furnish the date of purchase and date of sale of such land or building in the ITR. This additional disclosure will be to verify the eligibility of the assessee to claim of exemption under Section 54, 54EC and 54F of the Income-tax Act, 1961 (‘the Act’).
b. Disclosure of Fair Market Value (FMV) of capital assets and consideration received in a slum sale transaction:
CBDT vide its Notification NO 68 dated 24-05-2021 has inserted a new Rule 11UAE. It provides that the higher of the following on the date of slump sale shall be deemed as Full value of consideration:
i. Fair Market Value of the capital assets transferred by way of slump sale; or
ii. Fair Market Value of the consideration received or accruing due to transfer by way of slump sale.
The new ITR forms require reporting of the FMVs calculated as per Rule 11UAE.
c. Year-wise details of the cost of improvement to land/building
The assessee is required to give year-wise details of the cost of improvement (if any) incurred on the land/building transferred during the relevant year. The new ITR forms seek the following additional details from the taxpayers:
i. Cost of improvement;
ii. Year of improvement; and
iii. Cost of improvement with indexation.
These details are required to be given year-wise if the assessee has incurred the cost of improvement in different financial years.
d. Separate disclosure of cost of acquisition and indexed cost of acquisition:
In the previous ITR forms, the assessee was required to disclose only the indexed cost of acquisition of property transferred. The new ITR Forms require the assessee to mention both the ‘cost of acquisition’ and the ‘indexed cost of acquisition’.
e. Deduction in respect of capital gains charged under Section 45(4) which is attributable to assets, remained with firm
The Finance Act 2021 has made the partnership firm liable to pay tax on the business income or the capital gains arising from the transfer of assets to the partner on dissolution or reconstitution of the firm. The computation of income from such distribution shall be made as per Section 9B and Section 45(4). Section 48(iii) allows an additional deduction for the capital gains charged to tax under section 45(4), which is attributable to the capital asset remaining with the firm. The CBDT has inserted Rule 8AB to prescribe the manner in which such attributable amount is to be computed.
The new ITR 5 has amended Schedule CG (Capital Gains) to disclose the deduction allowable under Section 48(iii) in respect of the capital gains charged to tax under section 45(4), which is attributable to the capital asset remaining with the firm.
2. Other Sources:
a. Dividend income taxable as per section 2(22)(e) [ITR 2, 3, 5 & 6].
Deemed Dividend Income U/s 2(22)(e):
As per Section 2 clause ( 22)( e) of Income tax act , Dividend includes ,any payment by way of loan or advance, by a closely held company, to a shareholder who is the beneficial owner of 10% or more equity capital of the company, or to a concern in which the shareholder has a substantial interest is deemed to be a dividend to the extent it is covered by the accumulated profits, excluding capitalized profits.
Until last year, there was no separate disclosure of dividend income taxable under Section 2(22)(e).
As per New ITR, separate disclosure is required for such type of dividend i.e. Deemed Dividend U/s 2(22)(e) of Income Tax Act 1961.
b. Disclosures in respect of Significant Economic Presence [ITR 3, 5 & 6] _ In case of only Non-Resident.
'Significant Economic Presence’ shall mean:
i. 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 exceeds Rs. 2 crores; or
ii. Systematic and continuous soliciting of business activities or engaging in interaction with 3 lakh users in India.
In the new ITR forms, the non-resident must confirm if there is a Significant Economic Presence (SEP) in India or not. If there is a SEP in India, the above-mentioned details of transactions and assessee have to be provided in the ITR Form.
c. Disclosure of interest income taxable at a concessional rate of 4% under Section 194LC [ITR-6]
Section 194LC provides a specified company or a business trust to deduct tax at a concessional rate of 5% from interest paid to the non-residents. The tax is deducted at the concessional rate if the borrowing is made before 01-07-2023. The Finance Act 2020 has reduced the rate of TDS to 4% in respect of interest payment to a non-resident against borrowings in foreign currency through issues of long-term bonds and Rupee Denominated Bonds, which are listed on a recognized stock exchange in any IFSC.
Change in New ITR Form :
The new ITR form makes the consequential changes in Schedule OS (Other Sources). A new row has been inserted in the Schedule to disclose the interest referred to in Section 194LC, which is taxable at the rate of 4%.
d. Disclosure of income of FII and specified fund chargeable under section 115AD [ITR-6]
Section 115AD contains a special regime for taxation of Foreign Institutional Investor (FII) and Specified Fund.
It provides that the dividend or interest income earned by the FPIs is chargeable to tax at a concessional rate of 20%. Where interest income is received or receivable in respect of investment made by an FPI in Rupee-Denominated Bond of an Indian company, Government Securities or municipal debt securities as referred to in Section 194LD, the tax shall be charged at the reduced rate of 5%.
In the case of a specified fund, the dividend or interest income earned by the specified fund is chargeable to tax at a concessional rate of 10%.
Change in New ITR Form
The new ITR forms have been amended to incorporate the above changes introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the Finance Act, 2021 in Schedule OS (Other Sources).
e. Separate disclosure is required of interest and dividend incomes taxable under Section 115AC [ITR 3, 5 & 6]
Schedule SI (Special Income) seeks details of the income chargeable to tax at special rates. Earlier, this Schedule required the combined disclosure of total income taxable Section 115AC (Income of a non-resident from bonds or GDR purchased in foreign currency).
Now, the new ITR Forms have amended ‘Schedule SI’ to seek separate disclosure of the following income taxable under Section 115AC:
(i) Income by way of interest received by a non-resident from bonds purchased in foreign currency; and
(ii) Income by way of dividend received by a non-resident from GDRs purchased in foreign currency.
Further, a residuary clause has been provided in Schedule SI to report any other income taxable at a special rate.
a. Relief under Section 89A from taxation in income from retirement benefit account maintained in a notified country [ITR 1, 2, 3 & 4]
Where a non-resident becomes a resident in India, the amount of income in his foreign retirement benefits account is chargeable to tax in India on an accrual basis. However, some countries tax such an amount at the time of receipt. Due to a mismatch in the year of taxability of such income in retirement funds, the taxpayers (generally non-residents who have permanently returned to India) face difficulties in availing of the foreign tax credit in respect of tax paid outside India on such income.
Section 89A, inserted with effect from the assessment year 2022-23, removed the aforesaid difficulty by providing that the income of a specified person from the specified account shall be taxed in such manner and for such year as may be prescribed by rules. The Board has not notified any rules yet. However, the new ITR Forms have amended Schedule S (Details of Income from Salary) to disclose:
(i) Income from retirement benefits account maintained in a notified country under Section 89A.
(ii) Income from retirement benefit account maintained in a country other than notified country under Section 89A.
The eligible taxpayer is allowed to claim a deduction of ‘Income claimed for relief from taxation on the application of Section 89A. It is not clear yet how such a deduction shall be computed?
A similar disclosure has to be made in the Schedule OS (Income from Other Sources) in respect of the family pension.
4. Income from Business and Profession:
a. Adjustment of unabsorbed depreciation (pertaining to additional depreciation) from WDV of the block of assets as on 01-4-2020 [ITR 3 & 6]
An assessee opting for Section 115BAC is not eligible to set off the unabsorbed depreciation attributable to additional depreciation. Such unabsorbed depreciation relating to additional depreciation which has not been given full effect shall be adjusted to the written down value (WDV) of the block of assets as on 01-04-2020 in the prescribed manner. Third proviso to Rule 5(1) provides that the WDV of the block of asset as on 01-04-2020 shall be increased by such depreciation not allowed to set off.
In the new ITR Forms, Schedule DPM, which deals with depreciation on Plant and Machinery, has been amended. It provides that the WDV of the block as on 01-04-2020 shall be increased by the amount of unabsorbed depreciation (pertaining to additional depreciation), which was not allowed to be adjusted on account of opting for Section 115BAC.
Similar changes have been made in Schedule DPM of ITR-5, if a co-operative society has opted for the alternative tax regime under Section 115BAD.
a. Schedule FA requires reporting of foreign assets held and foreign income earned during the calendar ending 31st December [ITR 2, 3, 5 & 6]
Schedule FA in the old ITR Forms required the reporting of foreign assets only if the person had held them at any time during the ‘relevant accounting period’. The ‘accounting period’ is not defined in the Act. However, the instructions issued by the CBDT for filing of ITR Forms had provided the meaning of the term. For example, for AY 2021-22, the accounting period means from 1st January 2020 to 31st December 2020 in respect of foreign assets or accounts, etc.
Example 1 : Relevant previous year 01-04-2021 to 31-03-2022 Relevant calendar year 01-01-2021 to 31-12-2021 Date of purchase of shares of Google LLC January 2021. Is the assessee required to furnish the details regarding the foreign assets acquired? Yes.
The assessee is required to furnish the details of Google LLC’s share in ITR applicable for Assessment Year 2022-23 even if he has not held the foreign asset in the relevant previous year.
b. Schedule OS (Other Sources): Reporting of interest accrued on Provident Fund to which no exemption is available. [ITR 2 & 3]
The Finance Act 2021 has amended Sections 10(11) and 10(12) to provide that no exemption shall be allowed in respect of interest income accrued during the previous year in the recognized and statutory provident fund to the extent it relates to the amount or the aggregate of amounts of the contribution made by the employee exceeding Rs. 2,50,000 in any previous year on or after 01-04-2021. The interest income accruing in respect of the employee’s contribution over Rs. 2,50,000 shall be taxable under the head of “income from other sources”.
In the new ITR forms, the Schedule OS (Other Sources) has been amended to incorporate the reporting requirement of such interest income from PF Contribution.
c. New Schedule: Tax deferred on ESOP: [ ITR 2 & 3]
The New ITR Forms have inserted a “Schedule: Tax Deferred on ESOP”. The Schedule seeks the following disclosures:
(i) Amount of tax deferred in ITR filed for AY 2021-22
(ii) Date of sale of specified securities and amount of tax attributable to such sale
(iii) Date on which he ceased to be an employee of the organization
(vi) Amount of tax payable in current assessment year
(v) Balance amount of tax deferred to be carried forward to next assessment years.
As the outer limitation period of 48 months from the end of assessment year relevant to the financial year in which ESOPs are allotted is not yet over, the employee shall be liable to pay tax deferred in the assessment year 2021-22 in the previous year 2025-26.
The new Schedule has been inserted to keep track of the amount of tax deferred by the employee and the year it should be taxed. The tax payable in the current assessment year is exported in a new row introduced in Schedule Part B – TTI (Computation of tax liability on total income).
d. Schedule –TTI: Limiting the rate of surcharge on dividend income [ITR 2, 3 & 5]
The Finance Act 2020 abolished the Dividend Distribution Tax (DDT) consequently shareholders or unit-holders are liable to pay tax on dividend income. As the dividend income is taxable in the hands of the investors, the Finance Act 2020 and Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 removed the enhanced surcharge on the dividend income.
Thus, in case of Individual, HUF, AOP, BOI, or AJP the surcharge on tax on dividend income shall be levied at the rate of 10% if it exceeds Rs. 50 lakh but does not exceed Rs. 1 crore and at the rate of 15% when it exceeds Rs. 1 crore.
e. Schedule-BP: Exclusion of ‘Dividend income’. [ITR 3, 5 & 6]
Schedule BP (Computation of income from business or profession) provides for the exclusion of certain incomes/receipts, which are credited to the profit and loss account but are taxable under other heads of income. This list includes income/receipt taxable under:
i) House Property
ii) Capital Gains
iii) Other Sources
vi) Section 115BBF (income from patent)
v) Section 115BBG (income from transfer of carbon credits)
New ITR Form: The new ITR Forms specifically added “DIVIDEND” in the list to exclude it from the Schedule BP if it is credited to the Profit and Loss account. This categorical exclusion of dividend income from Schedule BP is in line with Section 56(2)(i), which provides that the dividend income is taxable under the head of “income from other sources”.
f. Schedule- 80-IA & 80-IB: Changes due to sun set clause: [ITR 3, 5 & 6]
An assessee deriving profit from the eligible business can claim a deduction under Section 80-IA / Section 80-IB. There are specific sun set clauses are available in respect of each eligible business. Due to the sun-set date, the deduction under this section is not available for certain businesses, like, telecommunication services, cross-country natural gas distribution network, multiplex theatres, convention Centre, etc.
New ITR Form: Schedule 80-IA and 80-IB have been amended to remove the rows allowing deduction under the above obsolete provisions.
g. Part-A – OI: Other Information: Disclosure of interest paid to Deposit-taking NBFCs or Systemically Important Non- deposit Taking NBFCs (u/s 43B).
Section 43B specifies that certain expenditures are allowed as deduction only on actual payment, even if the assessee follows the mercantile system of accounting. However, these expenditures are allowed as deduction in the year of accrual if the payment thereof is made either in the previous year itself or in the subsequent year on or before the due date specified for the filing of return of income. Section 43B (da) was amended vide Finance act 2019 to includes any sum payable by the assessee as interest on any loan or advances from a Deposit-taking NBFCs or Systemically Important Non-deposit Taking NBFCs.
New ITR Form: The new ITR Forms have inserted a new row in Part A-OI “Other Information” requiring the assessee to disclose the amount of interest on any loan or advances 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.
h. Schedule EI (Details of Exempt Income): Additional disclosure required of income exempt under certain clauses of Section [ ITR 5 &6]
1. Section 10(23FB): Exemption to Venture Capital Fund or Venture Capital Company
2. Section 10(23FBA): Exemption to Investment Fund
3. Section 10(23FC)/10(23FCA): Exemption to Business Trust
4. Section 10(23FE): Exemption to wholly owned subsidiary of ADIA or Sovereign wealth fund or pension fund
5. Section 10(23FF): Capital gains from transfer of shares of a company resident in India on account of relocation of offshore funds
6. Section 10(4D): Exemption to Specified Fund.
i. Withdrawal of Option U/s 153A & 153C [ ITR 1 TO 6]
Prior to amendment in Finance Act 2021, where the search is initiated under Section 132 or books of account, other documents, or any assets are requisitioned under Section 132A, an assessment was made in the case of the assessee, or any other person, under Sections 153A, and 153C.
The Finance Act, 2021 had introduced a sun-set clause and accordingly, the provisions of Section 153A/153C were made inapplicable from 01-04-2021.
The new ITR Forms remove the check-boxes of Sections 153A and 153C from the field of filing status of return income.
j. Part-A: general Information: Nature of employment for pensioners [ITR 1 & 4].
An individual receiving pension had to choose the option of ‘Pensioners’ in Part A general Information, Now ITR provide following option
1. Pensioners – CG
2. Pensioners – SG
3. Pensioners – PSU
4. Pensioners – Others.
k. Part-A: GENERAL INFORMATION: Filling Status: Disclosure for alternative tax regime opted under Section 115BA/115BAA/115BAB [ ITR 6].
The following disclosures are required in ITR 6 in respect of the alternative tax regime of Section 115BA/115BAA/115BAB:
1. Where the domestic company has opted for the alternative tax regime, it has to furnish the AY in which said option is exercised for the first time and the date of filing of the relevant form (10-IB/ 10-IC/ 10-ID) with acknowledgement number
2. Where the domestic company is choosing to opt for alternative tax regime this year, it has to furnish the date of filing of the relevant form (10-IB/ 10-IC/ 10-ID) with acknowledgement number.
l. Part-A: Audit Information: Additional information sought from the assessee not opting for the presumptive tax scheme [ ITR 3,5 &6]
The following additional disclosures are required regarding Audit Information:
1. Whether total sales, turnover or gross receipt is between Rs. 1 crore and Rs. 10 crores. If not, is it below Rs. 1 crore or exceeds Rs. 10 crores?
2. The new ITR forms require aggregation of receipts and payment in cash and non-account payee cheque or DD while computing the limit of 5% as mentioned above.
m. New Schedule IF: Information regarding investment in unincorporated entities [ ITR 6]
The new ITR Form 6 inserted a new Schedule IF (Information regarding investment in unincorporated entities) that requires the companies to disclose the following information in respect of the investment made in the unincorporated entity:
1. Name of the entity
2. Type of the entity
3. PAN of the entity
4. Whether the entity is liable for the audit?
5. Whether section 92E is applicable to the entity?
6. Share in the profit of the entity
7. Amount of share in the profit and
8. Capital balance on 31stMarch in the entity.
n. Separate disclosure of Income from Units located in IFSC in Schedule AMT [ITR 3 & 5]
Alternative Minimum Tax (AMT) is payable by a non-company assessee whose regular tax on total income is less than 18.5% of 'Adjusted total income'. However, if an assessee is a unit in an International Financial Services Center (IFSC) deriving income solely in convertible foreign exchange, the alternative minimum tax rate shall be 9% instead of 18.5%.
Change in New ITR Form
The new ITR forms in 'Schedule AMT' have sought separate disclosure of computation of adjusted total income under Section 115JC in respect of:
(i) Units located in IFSC; and
(ii) Other Units. Now, the income from units located in IFSC shall be reported separately in the Schedule AMT for computing the adjusted total income and tax payable thereon.
o. Separate disclosure of Income from Units located in IFSC in Schedule MAT [ITR 6]
Minimum Alternate Tax (MAT) is payable by companies whose tax on total income is less than 15% of 'book profit'. However, if the company is a unit in an International Financial Services Center (IFSC) deriving income solely in convertible foreign exchange, the alternative minimum tax rate shall be 9% instead of 15%.
Change in New ITR Form
The new ITR forms in 'Schedule MAT' have sought separate disclosure of computation of adjusted total income under Section 115JB in respect of:
(i) Units located in IFSC; and
(ii) Other Units. Now, the income from units located in IFSC shall be reported separately in the Schedule MAT for computing the book profit and tax payable thereon.
p. Schedule 80GGA has been inserted for the partners deriving only profit from firm [ITR 3]
Section 80GGA of the Act allows deduction in respect of amount contributed to specified association or institutions. This deduction is allowed to an assessee who is not having any income taxable under the head "profits and gains of business or profession".
Change in New ITR Form
A Schedule 80GGA (Details of donations for scientific research or rural development) has been inserted in ITR-3. This Schedule is applicable in the case of a partner of a firm deriving only profit from the firm. The following disclosures are required in this Schedule if partner of a firm seeks to claim deduction under Section 80GGA, and he is not earning any business or professional income except the share of profit from the firm:
(i) Relevant clause under which deduction is claimed
(ii) Name and address of Donee
(iii) PAN of Donee
(vi) Amount of donation (In cash and other mode); and
(v) Eligible amount of donation.
q. Total secondary adjustments made to be disclosed [ITR 3, 5 & 6]
Section 92CE provides that the assessee shall be required to carry out secondary adjustment where primary adjustment to transfer price has been made. If due to primary adjustment, there is an increase in total income or reduction in the loss of the assessee, the excess money shall be deemed to be an advance made to associated enterprise and the interest on such advance, shall be computed. Section 92CE(2A) also provides that where the excess money has not been repatriated in time, then the assessee will have an option to pay additional income tax at the rate of 18% plus surcharge on such excess money or part thereof. The old ITR Forms require the details of such tax on secondary adjustment.
Change in New ITR Form
In the new ITR forms, the Schedule TPSA provides that the assessee needs to indicate the total adjustments made in respect of all the assessment years.
r. Disclosure for alternative tax regime opted under Section 115BAC [ITR 3 & 4]
The following disclosures are required in ITR 3 and ITR 4 in respect of the alternative tax regime of Section 115BAC:
(a) Whether the assessee has opted for an alternative tax regime under Section 115BAC and filed Form 10-IE in AY 2021-22
(b) For the AY 2022-23, the assessee has to choose from the following options:
· Opting in now
· Not opting
· Continue to opt
· Opt out
s. Disclosure for alternative tax regime opted under Section 115BAD [ITR 5]
The following disclosures are required in ITR 5 in respect of the alternative tax regime of Section 115BAD:
(i) Where a co-operative society has opted for an alternative tax regime, it has to furnish the AY in which said option is exercised for the first time and the date of filing of form 10-IF with acknowledgement number
(ii) Where a co-operative society is choosing to opt for an alternative tax regime this year, it has to furnish the date of filing of the form 10-IF with acknowledgement number.
t. Mandatory to choose the suitable option in support of residential status in India [ITR 2 & 3]
The new ITR forms give a suitable description of different clauses due to which the residential status is determined. The assessee has to choose the relevant option in support of his selection of a residential status. The following options are available for selection:
A. Resident and Ordinarily Resident
You were in India for 182 days or more during the previous year [Section 6(1)(a)];
You were in India for 60 days or more during the previous year, and have been in India for 365 days or more within the 4 preceding years [section (6)(1)(c)] [where Explanation 1 to section 6 is not applicable];
You are a citizen of India, who left India, for the purpose of employment, as a member of the crew of an Indian ship and were in India for 182 days or more during the previous year and 365 days or more within the preceding 4 years [Explanation 1(a) of section (6)(1)(c)];
You are a citizen of India or a person of Indian origin and have come on a visit to India during the previous year and were in India for:
182 days or more during the previous year and 365 days or more within the preceding 4 years; or
120 days or more during the previous year and 365 days or more within the preceding 4 years if the total income, other than income from foreign sources, exceeds Rs. 15 lakhs
[Explanation 1(b) of section (6)(1)(c)]
B. Resident but not Ordinarily Resident
You have been a non-resident in India in 9 out of 10 preceding years [section 6(6)(a)];
You have been in India for 729 days or less during the 7 preceding years [section 6(6)(a)];
You are a citizen of India or person of Indian origin, who comes on a visit to India, having total income, other than the income from foreign sources, exceeding Rs. 15 lakh and have been in India for 120 days or more but less than 182 days during the previous year [section 6(6)(c)]
You are a citizen of India having total income, other than the income from foreign sources, exceeding Rs. 15 lakhs during the previous year and not liable to tax in any other country or territory by reason of your domicile or residence or any other criteria of similar nature [section 6(6)(d) read with section 6(1A)].
If individual declares that he is a non-resident in India during the previous year, he has to disclose the following information (same as in old ITR Forms):
· Jurisdiction(s) of residence during the previous year and Taxpayer Identification Number
· If he is a Citizen of India or a Person of Indian Origin (POI), he has to specify:
i. Total period of stay in India during the previous year (in days); and
ii. Total period of stay in Indisa during the 4 preceding years (in days).
There are lot of changes introduced by the new ITR forms. Taxpayers should go through the ITR forms carefully before submitting the same.
- Compiled by Amruta Sohani