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Changes in ITR Forms for AY 2022-23

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.

3. Salary:

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 cou