Understanding the implications of the new ITR form for individuals - Motilal Oswal
Understanding the implications of the new ITR form for individuals - Motilal Oswal

Understanding the implications of the new ITR form for individuals

When you get ready to file your income tax returns for financial year 2017-18 corresponding to assessment year 2018-19, there are some key changes in the ITR forms that you need to keep in mind. While the forms have been simplified to some extent, the forms have also added some levels of details. These are the new forms that you need to use when you file the returns before the deadline of July 31st 2018. Let us look at the new ITR forms for AY 2018-19 and also the specific types of ITR forms for AY 2018-19. What are the key changes in new ITR forms and what are the implications?

 

ITR Form-1 (Sahaj) for assessment year 2018-19

Nearly 3 crore Indian income tax assessees have used the ITR-1 Sahaj form in the last year and it remains the most popular form for individuals who do not have any incomes other than salary, one house property and interest on deposits. Normally, when you file ITR under Form-1, you are only required to provide your total income details. Effective AY 2018-19, you will also be required to furnish the break-up of your salary like basic salary, HRA, allowances, perquisites etc. Formerly, this break-up was only provided in the Form-16 provided by your employer. Effective this year, the Sahaj form will also contain details of your break-up of salary in granular detail. Sahaj can be used by individuals with total income up to Rs.50 lakhs. Apart from the break-up of the salary details, the Form-1 will now also call for break-up for income under house property. Remember, Sahaj can only be filed by individuals with a single house property.

 

ITR Form-2 for assessment year 2018-19

There is a small difference in the applicability of Form-2 from the assessment year 2018-19. Till last year, Residents but not ordinarily residents (RNOR) could also file under Sahaj, but from this assessment year the RNORs and NRIs will have to necessarily file their ITR returns under Form-2 only. Form-2 will be used by individuals like RNORs and by resident individuals who also have capital gains income, which makes them ineligible to file their returns under Form-1. The facility of filing returns for profits and gains from business has been removed from Part-B of this form and taken to a separate form. Even in case of ITR Form-2, much more granular details are sought for. Individuals with any kind of business interests will now have to file their ITR under Form-3 where the maximum depreciation will be restricted to 40% for all schedules.

 

ITR Form-4 for assessment years 2018-19

This is the most important form that people earning profits and gains from business need to file their returns under. A major structural change has happened in this form. Till last year the income declared was purely based on declaration of the business owner and the audit ratification by the auditor. Effective the assessment year 2018-19, the assessee will also have to disclose the GST Registration Number and show the relevant income filings under GST. This will not only plug any gaps in GST assessment but also ensure that the actual income shown in the ITR assessment is also in sync with the GST assessment. This is a very important shift and basically creates an audit trail by combining your GST returns with the ITR returns.

 

Some changes in ITR filing process for all forms
To the credit of the Income Tax department, it has also undertaken some reform measures which will enable the process of ITR filing to become seamless and also simpler. Here are 3 such changes in the ITR filing for this assessment year..

The filing of details of cash deposits that was required till last assessment year has been done away with. With most cash accounted for under the demonetization scheme, this was obviously redundant and will save a lot of clerical hassles for filers.

Any delay in filing returns effective this year will attract penalty and this penalty will not be imposed separately but will have to be paid at the time of the late filing itself. Such fees payable will have to be separately disclosed under Section 234 of the Income Tax Act and these ITR returns will only be accepted after payment of penalty.

All filers will have to mandatorily file returns through the electronic E-Filing mode only. The only exceptions to electronic filing of Form-1 and Form-4 will be senior citizens above the age of 80 and individuals and HUFs where the total annual income does not exceed Rs.5 lakhs.

The new ITR form has marked a clear rationalization of the filing process. It surely calls for more details and information but the exemption from filing cash deposit details will be a big boon for tax filers.
 

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