Heres how the new income tax returns forms will simplify your tax life
June, 25th 2015
The government on Tuesday notified the new income tax returns forms. As per the new norms, an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income can file a shorter version of ITR2, i.e. ITR 2A.
In case you sold any asset during the year then old ITR form 2 needs to be filed. As the software for these forms is under preparation, they are likely to be available for e-filing shortly. ITR1 and ITR4S have been enabled. Therefore, the time limit for filing these returns is extended up to 31 August.
Actually, there would be less than 20 percent of the taxpayers who have capital gain or foreign assets in ITR 2 but one needs to file the bulky form. Hence, for approx 80 percent of these filers, ITR-2A would be more relevant and user friendly. ITR-2A has been introduced which will not ask for capital gains income or foreign assets information.
]ThinkStock ThinkStock For the last few years, the income tax department is trying to catch the tax evaders by introducing newer requirement in tax returns and simultaneously projecting itself to be taxpayer-friendly. It goes well with the political agenda of the government too, i.e. controlling black money and imparting effective governance.
But such hypes have a problem - only 5 percent of what is talked about is achieved and the rest 95 percent remain as before. The end result? Neither will the tax to GDP ratio improve, nor will the taxpayers' perception about the income tax department change.
Here's how the new ITR forms will change your life:
Passport number to be disclosed whereas travel expense details are not required (ITR2/2A): It seems that the income tax department will get some data from visa authorities based on passport number which will be matched with the return data to catch the tax evaders. To be sure, this is not a fool proof system or very effective one to control the use of black money in domestic travel. Only time will tell whether this hyped change, which actually delayed return filing by one month, is worth it or not.
All bank account numbers to be disclosed: In the current scenario, bank account details of any one of the operating bank account is required to be filled in the ITR Forms. With the passing of the black money Bill, it has become expedient to include details of all bank accounts held during the year. The closing bank balance as of 31 March 2015 is not required in the income tax returns, though.
After a lot of representations from various forums regarding such disclosures, the government now has come up only with the mandatory disclosure of IFS code, account number of all the current/savings account held at any time during the previous year. The balance in accounts will not be required to be furnished. Details of dormant accounts which are not operational during the last three years are not required to be furnished.
Exempt income from fully exempt source can file Sahaj without any ceiling: In the current scenario, individuals/HUFs having any exempt income like long-term capital gains, agricultural income or interest income have to file their returns in ITR-2 or ITR-4 depending on the nature of income. With a view to providing for a simplified form for individuals/HUFs who have earned exempt income without any limit, it is proposed to use ITR-1 Sahaj (Only individuals can use ITR-1) or ITR-4S (Both individuals and HUFs can use ITR-4S), the simplest of all forms. Exempt income without any ceiling refers to those incomes which are fully exempt from tax. Example of income which is fully exempt from tax is long-term capital gains on sale of shares. Example of income which is not fully exempt from tax is agricultural income.
Relief for foreign citizens: Those taxpayers who are not Indian citizens and have come to India on a business, employment or student visa (expatriate), have been exempt from reporting foreign assets acquired by him/her during the previous years in which he was non-resident if no income is derived from such assets during the relevant previous year. This is a relief for these assesses.
Aadhaar card holders need not send ITR-V to Bangalore: The government has come up with an idea of dispensing with the formality of posting the duly signed ITR-V form to CPC, Bengaluru, after e-filing of the income tax returns if the Aadhaar number of the assessee is furnished in the returns. Aadhar number is optional as of now.
The author is Co-Founder & CFO, TaxSpanner.com andhas been a practicing tax consultant for the last 17 years. He is a Fellow Chartered Accountant.