For financial year 2020-21, the new ITR forms have been notified on 31st March 2021.
Taxpayers report their income in a form called ‘ITR’ (Income-Tax Return). This form is prescribed by the Central government every year. It accommodates changes made by the Budget of every year. For financial year 2020-21 (assessment year 2021-22) the new ITR forms have been notified on 31st March 2021. Returns for the current tax filing season are to be filed in these forms.
There are seven different ITR forms like ITR – 1 to ITR – 7 meant for different classes of taxpayers. The ITR – 1 (Sahaj) for salaried people and ITR – 4 (Sugam) for small businesses and professionals are filed most. In case of non-business income of Rs 50 lakh and more there is ITR-2. The ITR-3 is for individuals and HUFs with business income and corresponding return for Firm/LLPs is ITR-5. The companies file ITR-6 and trusts and societies use ITR – 7.
There are not many changes and ITRs are like those of preceding year. In aggregate there are 30 changes spread over all the ITR forms. The important changes are related to new tax regime, dividend taxation, reporting of ESOPs, TDS, and losses.
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The taxpayers can opt for the New Tax Regime from this tax season. They can pay tax at reduced rates if certain tax deductions are not claimed. The scheme is different for individuals and HUFs and other taxpayers. This has caused changes in all the ITR forms (except 7). In ITR, a taxpayer needs to indicate whether he/she is opting for the new tax regime. Only such mention is enough for ITR-1 whereas for others, a separate form 10IE or 10IF as applicable needs to be filed and date of such filing intimated in ITR.
On this issue there are changes in schedules related to depreciation and carried forward losses. Since additional depreciation is not allowed in the new tax regime, relevant changes are made in schedule DPM of ITR-3 and ITR-5. The WDV of the asset block may be affected, and hence onetime adjustment is allowed in the schedule DPM. Under new tax regime, carried forward losses attributable to unclaimed deductions are not to be set off. The schedule CFL of ITR form is amended not to allow such a set off.
Before FY-21, dividend was taxed in the hands of recipient after the amount crosses Rs 10 lakh. The dividend paying companies were required to pay dividend distribution tax (DDT). The DDT is abolished from FY-21. The amendments made in tax law are translated to changes in all ITR forms. Such changes are made in Schedule OS since dividend is taxed as income from other sources. Now, all the dividend income needs to be reported and instead of that above Rs 10 lakh. The references to section 115BBDA are removed from schedules OS, EI (exempt income), SI (Special Income) reference to section ‘dividend income’ is removed from schedule PTI. From this year, taxpayers reporting dividend income in ITR-1 are required to give quarterly break-up of such income to avoid penal interest. The ITR-6 for companies will no longer include the schedule on DDT.
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The employees receiving ESOPs and deferring tax payment on ESOP income will no longer file ITR – 1 and ITR – 4. In the Part-B of Schedule TTI the tax amount which has been deferred is required to be disclosed. This must be done carefully since the guidance on such computation is not given.
It is mandatory for banks, post offices and co-operatives to deduct TDS on the cash withdrawals of more than Rs 20 lakh in case of non-filers and Rs 1 crore in other cases. The taxpayers claiming such TDS cannot file ITR-1. Such TDS done on cash withdrawals can not be carried forward too, since it’s not related to any income. Changes not allowing this carry forward are made in TDS Schedule.
Other minor changes include specific reporting of donations made in cash (Schedule GGA), changes in reporting of pass-through income, complete disclosure of effect of marginal relief on tax payable, inclusion of TDS as per Form 16D.
