Additional information sought may be used for better profiling of taxpayers, tracking cases of potential tax evasion and expanding the tax base using data analytics.

The income tax (I-T) department has notified the income tax return (ITR) form for assessment year 2019-20. There are a number of changes made in the new forms. On careful reading of these changes, it appears that tax authorities want taxpayers to provide more extensive details about their transactions, so that such information and details may be used for better profiling of taxpayers, for tracking cases of potential tax evasion and increasing the tax base using data analytics.

Further, the tax authorities may use such additional details to improve the Computer Aided Scrutiny Selection (CASS) process, while selecting cases for limited or complete scrutiny, based on exhaustive information provided by taxpayers in the ITR forms. Some of the key changes/ new disclosure requirements in ITR forms are explained below, which would be good for taxpayers to keep in mind while filing their ITRs.

Additional reporting for directors/ shareholders of unlisted firms
In a significant change, which apparently increases the income tax risk profile and monitoring of directors/ equity shareholders of unlisted companies, the I-T department now wants such directors/ shareholders to furnish additional details as to name, PAN of the concerned companies and their director identification number.

The benefit of simpler ITR forms Sahaj (ITR-1) and Sugam (ITR-4) is no more available for such directors, irrespective of their taxable income/ source of income. Having such details in ITR form may help department identify cases where taxable income/ source of income reported by such directors/ shareholders may not match up to directorship/ shares held by them (such as cases of dummy directors).

Additional reporting regarding residential status of individuals
Till now, residential status of an individual in the ITR forms was only a self-declaration and actual determination of such residential status by tax authorities was possible, only after such cases were selected for scrutiny. In the new forms (except those ITR forms meant only for residents and ITR forms for non-individuals), the individual taxpayers will now need to fill in complete details about number of days spent in and outside India in ITR form, based on which their residential status will be determined (and not just a self-declaration).

Additional reporting for agricultural income
Many would have heard recently about shocking amounts of agricultural income being reported by taxpayers, who are essentially not farmers. The temptation of reporting an income as ‘agriculture income’ stems from the fact that ‘agricultural income is exempt from income tax’ in India. In order to track bogus cases of agricultural income, the new ITR forms now require such persons to also declare name of district, size of land parcel, etc., in their ITR forms, so that such claim of agriculture income may be verified from land records.

Additional reporting regarding foreign assets
Scope of reporting of foreign assets is now enlarged to specifically include foreign depository accounts, foreign custodial accounts, foreign debt and equity interest (including beneficial interest) in any foreign entity, cash value of foreign insurance/ annuity contracts, in addition to existing details about foreign bank accounts, financial interest in any foreign entity, details of immovable property or any other capital asset or interest in any foreign trust as trustee, beneficiary or settlor.

Reporting for charitable trusts, educational institutions
Charitable trusts, educational institutions, etc., which claim I-T exemptions and are required to file ITR-7, are now required to furnish more detailed information about their expenditure for administrative purposes, expenditure for objects of trust/ institution, disallowable expenditure, source of fund to meet revenue expenditure, interest and other revenues received by them from various sources, etc.
Taxpayers need to collate additional details/ reporting requirements well in advance this year, in order to be able to fulfil the reporting requirements prescribed in new ITR forms. One may also expect greater automated scrutiny of ITRs, based on extensive data/ details required and furnished in ITRs. It is advisable for taxpayers to seek professional assistance, in case they are not clear about any reporting requirement or the appropriate ITR form for them.