New ITR forms notified: Tax dept seeks more details of expenditures, gives relief for those with income up to Rs 5 lakh

This time some of the key changes notified in the forms includes declaration from taxpayers in detail if they have paid over Rs 1 lakh in electricity bills in a year, deposited Rs 1 crore in bank account and if incurred Rs 2 lakh expense on foreign travel, in forms Sahaj ITR-1, Form ITR-2, Form ITR-3 and Form Sugam (ITR-4).

Taxpayers have also been given a dedicated column to declare their expenditures/income/ investments/donations made between April 2020 till June 2020, for which they can claim I-T benefits.

However, these benefits or declarations can be claimed only once, thus, I-T department has left it open for the taxpayers to either claim/declare this for FY20 or for FY21.

"This column was a much needed clarity, which was awaited from the income tax department. The move comes after government had announced that taxpayers can claim their investments/donations and other such expenditures made between April 2020 till June 2020 while filing their income tax returns for last financial year,” said Mukesh Patel, independent tax expert and member of task force on simplification of direct tax legislation formed by the finance ministry.

“It seems that government will yet again come up with another such column while notifying ITR forms next year, asking taxpayers to clarify whether they claimed these expenses in last financial year or not,” Patel added.

Finance minister Nirmala Sitharaman had earlier extended various deadlines under income tax provisions by a quarter from March 31, to June 30, giving regulatory relief to taxpayers to make investments, payments or donations for claiming exemptions and deductions, besides the roll over benefit of capital gains during the lockdown period.

The due date of all income tax returns for FY20 has been extended to November 30 from July 31 and October 31. The tax audit deadline has also been extended by a month to October 31.

The central government had also extended the deadline for receiving Form 16 from June 20, 2020 to June 30, 2020 via an ordinance dated March 31, 2020.

Another key change notified in tax return forms is the rebate for those who have taxable income up to Rs 5 lakh announced by then finance minister Piyush Goyal as part of his interim budget speech in February 2019.

Other changes which have also kicked in through these forms are the deduction for interest paid on affordable housing loan/ purchase of Electric Vehicle, inter-changeability of PAN and Aadhaar, reporting by certain high spenders etc, which will be there for the taxpayers.

Calling the timely notification of the forma a welcome move Amarpal Chadha, Tax Partner & India Mobility Leader, EY India said: “Pursuant to the extension of tax return filing deadline to November 30, 2020, the CBDT has taken necessary steps to timely notify income tax return forms for the tax year 2019-20. To give relaxations due to COVID, CBDT had allowed claiming of investments made during the period April 2020 to June 2020 against income of tax year 2019-20.

“There were certain doubts on the modality to claim deduction for such investments. The notified forms provide for required mechanism to claim such deductions. Also, the new forms are enabled to capture Budget 2019 amendments such as deduction for interest paid on affordable housing loan/ purchase of electric vehicle, inter-changeability of PAN and Aadhaar, reporting by certain high spenders etc."

According to Archit Gupta, founder and CEO of Cleartax, the forms have brought in a breather for both tax practitioners and taxpayers as these forms have brought a lot of clarity.

"Taxpayers are likely to face practical difficulties with reporting amounts with respect to foreign travel and electricity consumption. Detailed instructions on ITR forms are awaited to understand how these amounts must be calculated," said Gupta.

Kapil Rana, chairman and founder of tax solutions provider firm HostBooks Limited, said: "There are few major changes incorporated in the Income Tax Return forms released by the government. In ITR-1, Government employees have been bifurcated in State, Central Government and a new type as ‘NA added to the list.

“A New Schedule "Schedule DA" has been added in relation to the investment deposited/payment made during April 2020 till June ,2020. In ITR-4, PAN number is made optional if Aadhar number is provided; in section 44AD, one new clause added as the electronic mode in addition to electronic clearance and reduced the presumptive income from 8 percent to 6 percent.

“In section 44AE for presumptive income from goods carriages, the celling of maximum row is removed and a new validation number of vehicles should not exceed 10 vehicles at any time during the year is added. It shows the intention that the government is putting all efforts to curb the tax leakages and also allowing law-abiding taxpayers to take benefit of the spent and investments made during the difficult time even if they are done after the completion of the assessment year.

“This also shows the intention to make the process simple and smoother."