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Will CBDT proposal simplify taxpayers' job? Common Income tax return form
November, 16th 2022

Income tax return: In a bid to make taxpayers' job easier, the Central Board of Direct Taxes (DBDT) has proposed common income tax return (ITR) form for all taxpayers. The CBDT has proposed to merge all ITR forms except Form-7. At present, taxpayers are required to furnish their income tax returns in ITR-1 to ITR-7 depending upon the type of person and nature of income. The current ITRs are in the form of designated forms wherein the taxpayer is mandatorily required to go through all the schedules, irrespective of the fact whether that particular schedule is applicable or not, which increases the time taken to file the ITRs.

On common ITR form proposal, the CBDT said, "The proposed draft ITR takes a relook at the return filing system in tandem with international best practices. It proposes to introduce a common ITR by merging all the existing returns of income except ITR-7. However, the current ITR-1 and ITR-4 will continue. This will give an option to such taxpayers to file the return either in the existing form (ITR-1 or ITR-4), or the proposed common ITR, at their convenience."

The scheme of the proposed common ITR form is as follows:

(a) Basic information (comprising parts A to E), Schedule for computation of total income (Schedule TI), Schedule for computation of tax (schedule TTI), Details of bank accounts, and a schedule for the tax payments (schedule TXP) is applicable for all taxpayers.

(b) The ITR is customized for taxpayers with applicable schedules based on certain questions answered by the taxpayers (wizard questions).

(c) The questions have been designed in such a manner and order that if the answer to any question is ‘no’, the other questions linked to this question will not be shown to the taxpayer.

(d) Instructions have been added to assist the filing of the return containing the directions regarding the applicable schedules.

(e) The proposed ITR has been designed in such a manner that each row contains one distinct value only. This will simplify the return filing process.

(f) The utility for the ITR will be rolled out in such a manner that only applicable fields of the schedule will be visible and wherever necessary, the set of fields will appear more than once.

See CBDT tweet below:

Will it make taxpayers' job easier? Alok Agrawal, Partner at Deloitte India said, "The Government has made it easy for taxpayers by getting some relevant details auto-populated into the ITR. Recent announcement on common ITR may further help taxpayers, but the extent to which this will simplify the tax filing process will be fully known once the utility is released by the Department. Another measure which may help taxpayers is by simplifying the text of disclosure requirements on the ITR forms, eg by using some examples which can be understood by laymen who don't understand various Section number references."

Vinit Khandare, CEO and Founder, MyFundBazaar said, "Aiming to seamlessly reduce the time for filing returns by individuals and taxpayers, ITR intends smart design schedules in a user-friendly manner with the effective arrangement and a logical flow. With a relevant questionnaire, the information provided by the taxpayer would be more concise and accurate, allowing the taxpayer to analyse the details shared with the tax department's records to ensure credibility. Ultimately, CBDT intends to ease filing, reducing unnecessary data with the proposed common ITR – envisioning an efficient automated tax-filing process." Common ITR form: Major features of CBDT proposal Highlighting the major features of the common ITR form, Archit Gupta, Founder & CEO at Clear listed out the following:

1] Disclosure of income in relation to Virtual Digital Asset as business income and the tax on them;

2] Determination of tax residential status in details;

3] Determination of tax audit applicability in details; and

4] Disclosure of pass-through income in details.

However, the taxpayer needs to be careful while answering the question which will customize the ITR Utility as incorrect answers can disable certain schedules which may be applicable for him.

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