Synopsis
The income tax return (ITR) notified for FY 2021-22 does not have any major changes. However, finer/additional details have been asked in the tax return forms from the taxpayers. Here is a look at 9 changes that a taxpayer has to mention while filing an income tax return this year.
The income tax department has notified the income tax return (ITR) forms for FY 2021-22 or AY 2022-23. An assessment year (AY) is the year followed by the financial year and AY is the year in which income earned by an individual during the FY is reported to the government and taxes are paid accordingly.
For FY2021-22, no major changes have been made in the ITR forms. However, few changes have been made which require the taxpayer to provide additional information while filing ITR.
Here is a look at the additional information you are required to provide while filing your income tax return this year.
Nature of pensioners further categorised
ITR forms for FY 2021-22 require pensioners to further specify the source of their pension. In the ‘Nature of Employment’ drop-down menu, pensioners are required to choose as follows:
a) Pensioners – CG for central government pensioners
b) Pensioners – SC for state government pensioners
c) Pensioners – PSU for individuals receiving pension from public sector companies
d) Pensioners – Others. This includes pension received by individual as family pension, EPF etc.
- Reporting of taxable interest accrued on EPF accounts
Effective from FY 2021-22, if an employee’s contribution to the Employees’ Provident Fund (EPF) account exceeds Rs 2.5 lakh in a financial year, then the interest earned on the excess contribution is taxable in the hands of an employee.
Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, “Individuals who have contributed more than Rs 2.5 lakh in FY 2021-22 are required to report interest earned on the excess contribution. The excess interest must be reported in Schedule OS (other sources).”
- Date of purchase and sale of land/building
If you sold land/building between April 1, 2021 and March 31, 2022, then from this year onwards, it is mandatory to enter the purchase and sale dates in the ‘Capital Gains’ schedule of the ITR form.
Wadhwa says, “The mandatory disclosure of date of purchase and sale is done so that the income tax department can verify if the individual is eligible to claim exemption on capital gains under sections 54, 54EC and 54F of the Income-tax Act, 1961.”
- Year-wise details of cost of improvement to land/building
Any renovation or improvement done on house property will be taken as cost. This cost has to be indexed and deducted from the sale price to compute long-term capital gains. This year, an individual has to provide year-wise details of the cost of improvements done on the house property while filing their ITR.
Wadhwa says, “In this year’s ITR forms, an individual is required to provide three information namely – cost of improvement, year of improvement and Indexed cost of improvement. Further, if an individual has incurred the cost of improvement in different financial years, then year-wise details have to be provided.”
Read More: Your Queries – Income Tax: You can disclose capital gains from mutual funds and shares in ITR-4
- Details of cost of acquisition and indexed cost of acquisition
While reporting capital gains incurred during an FY, an individual was required to mention only indexed cost of acquisition of the asset. However, this year individuals are required to provide both original cost of acquisition and indexed cost of acquisition.
- Additional information to support residential status while filing ITR
It is mandatory to provide your residential status while filing ITR. This year if you are filing your tax return using ITR-2 or ITR-3, then you will have to choose the relevant option in support of your residential status. The options that one is required to choose from are self-explanatory. For instance, where an individual opts for ‘resident and ordinarily resident’ status, he/she will be required to choose from any one of the following options:
a) You were in India for 182 days or more during the FY 2021-22,
b) You were in India for 60 days or more during the FY 2021-22 and have been in India for 365 days or more within the 4 preceding years, or
c) You are a citizen of India, who left India, for purpose of employment, as a member of the crew of an Indian Ship and were in India for 182 days or more during FY 2021-22 and 365 days or more within the preceding 4 years or
d) You are a citizen of India or person of Indian origin and have come on a visit to India during FY 2021-22 and were in India for:
i) 182 days or more during FY 2021-22 and 365 days or more within the preceding 4 years, or
ii) 120 days or more during FY 2021-22 and 365 days or more within the preceding 4 years, if the total income, other than income from foreign sources, exceeds Rs 15 lakh.
Earlier also, ITR forms requested for details related to residential status of an individual. However, this year, finer details are requested from taxpayers to ensure that correct residential status is entered.
- Reporting of tax-deferred on ESOPs
As announced in Budget 2020, an employee of a start-up, as referred under section 80-IAC of the Income-tax Act, 1961, can defer the payment or deduction of tax with respect to shares allotted under ESOPs, as per the specified conditions.
If an employee has opted to defer the payment or deduction of tax, he/she has to report the deferred tax amount in the ITR.
Wadhwa says, “In the ITR forms for FY 2021-22, a schedule (Tax deferred on the ESOPs) has been inserted. An individual will be required to provide the following information:
a) Amount of tax deferred in FY 2020-21 or AY 2021-22,
b) Date of sale of specified securities and amount of tax credit to such sale,
c) Date on which he/she ceased to be an employee,
d) Amount of tax payable in FY 2021-22, and
e) Balance amount of tax deferred to be carried forward to next assessment years”
- Foreign assets and income earned on them have to be reported for calendar year 2021
Any individual holding foreign assets and income earned on it by way of dividend, interest etc. must be reported while filing ITR. An individual can use ITR-2 or ITR-3 as applicable to them. A resident taxpayer is required to report his/her foreign assets in Schedule FA of the ITR form. Reporting of foreign asset is mandatory even if a taxpayer is a beneficial owner or has interest in a foreign entity.
Wadhwa says, “In the previous year’s ITR forms, an individual was required to disclose foreign assets as per the relevant accounting period. However, the relevant accounting period was not defined. This year the ITR form has defined the relevant accounting period, which is January 1, 2021 and December 31, 2021. Thus, any foreign assets held during the calendar year 2021 is mandatorily required to be reported in the ITR.”
- Details of the property sold outside India
If an individual has sold a property that is situated outside India, then the individual will be mandatorily required to furnish details of the buyer and complete address of the property sold.
