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How the income tax department will track high spenders with new ITR forms
January, 13th 2020

The income tax department now wants to know not only about your earnings and investments but also about your expenses in new income tax return (ITR) forms. Although the finance ministry has relaxed eligibility conditions for filing ITR-1 and ITR-4 forms, yet no changes have been made in the new ITR forms which were notified last week. The changes are significant this time as the taxman is seeking more disclosures from the taxpayer.

Unlike earlier, you will be able to file your ITR on 1st April itself as the income tax department wants to ensure that the e-filing utility for filing of return for assessment year (AY) 2020-21 is available a day after the end of the financial year.

ITR-1, also known as Sahaj, is mainly for salaried individuals earning upto ?50 lakh annually. Those with income from house property, interest income, family pension income, etc can also use this ITR form.

However, the ITR-1 form is not meant for individuals who are either director in a company or have invested in unlisted equity shares or have carried forward any loss under the head ‘Income from House Property’. The income tax department has done away with the recently-introduced amendment which asked high-spenders on electricity and foreign travel to file ITR-4.

Who can fill ITR-4 form:

ITR-4 form, also known as Sugam, is meant for individuals, HUFs and firms (other than LLP) having total income upto ?50 lakh.

10 things to know about the new ITR forms:

1) Filing of ITR required only PAN and Aadhaar numbers, which are interlinked, so far. But now onwards, both ITR-1 and ITR-4 forms require you to also declare your passport number, in case you own one.

2) The new rules do not allow filing in ITR-1 when return is filed in response to notice u/s. 153A or 153C (i.e. search related assessment), Shailesh Kumar, Director, Nangia Andersen Consulting, said.

3) The new forms seeks comprehensive details of employer i.e. TAN, nature of employer, address.

4) In case of more than one employer during the financial year, you now have an option of adding multiple rows for gross salary. Also, ITR-1 form requires that any allowances exempt u/s. 10 are included in the total gross salary.

5) You will now have to give address of any house property you own in ITR forms. In case of let out property, the new form seeks tenant details i.e. name, PAN or Aadhaar number. You will also have to disclose the amount of rent which cannot be realized.

6) The new ITR-1 form requires to give separate disclosure of deductions under Sections 80CCC, 80CCD(1), 80CCD(1B), 80CCD(2), 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80GG, 80GGC and 80U.

7) ITR-4 form also wants to know whether the taxpayer spent more than ?2 lakh in foreign travels. Income tax expert Shailesh Kumar said the new disclosures will make it easier for the authorities to track whether their expenses are proportionate with disclosed income. "The new ITR forms seek additional details and disclosures from the taxpayers in a bid to plug the tax leakages. These alterations may even be because the government is slowly moving towards e-assessments and is thus seeking a greater clarification from the taxpayers in the return itself so as to save time and costs," Kumar said.

8) Those filling ITR-4 forms will need to specify whether they deposited more than ?1 crore in their current account during the financial year.

9) In ITR-4 form you will also need to declare details of your electric bill if you paid more than ?1 lakh as electricity consumption charges during the year. "With use of artificial intelligence the tax department will be able to map the income declared by the taxpayer with lavish spending on foreign travel or electricity and on mismatch of profile will automatically select the cases for assessment," Gopal Bohra, Partner, NA Shah Associates LLP.

10) In case of partnership firms who are filing ITR-4 form, you need to give details of the partnership firm (name and PAN), details of partner like remuneration paid, rate of interest on capital, etc.

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