Filing your Income Tax Return (ITR) for the financial year 2023-24 (assessment year 2024-25) promises to be a more intricate affair, challenging taxpayers to navigate through a maze of new requirements. Despite the Income Tax (I-T) department’s previous efforts in leveraging artificial intelligence to simplify the filing process, the latest changes in the ITR forms, released on February 2, signal an increased need for comprehensive details. As the government aims to streamline the taxation system, taxpayers must brace themselves for additional scrutiny and a more thorough reporting mechanism come July 2024.
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I. Increased Scrutiny on Deductions
The Income Tax Department, leveraging artificial intelligence, has tightened the reins on tax deductions. Taxpayers are now required to furnish additional details on various fronts, including political party donations, disabled dependents, and high-value life insurance policies. The objective is clear – preventing false claims and ensuring the accuracy of deductions claimed under Section 80GGC.
II. Political Party Donations under the Scanner
Donations to political parties under Section 80GGC now demand a meticulous breakdown. Taxpayers must provide not only the contribution amount but also details such as the mode of payment and the transaction number linked to bank transfers. This granular scrutiny aims to thwart any attempts at inflating claims for tax deductions.
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III. In-depth Reporting on Life Insurance Policies
Taxpayers receiving annual bonuses from life insurance policies face a new reporting requirement. The ITR forms now feature a dedicated column for declaring bonus payments received during the financial year. Additionally, individuals must disclose whether money received from high-premium life insurance policies is taxable, ushering in greater clarity on the taxation of life insurance proceeds.
IV. Comprehensive ESOP Reporting
Employees with stock options from select startups now face a more comprehensive reporting process. Alongside tax amounts and linked years, taxpayers must provide the PAN of the eligible startup and the Department for Promotion of Industry and Internal Trade (DPIIT) registration number to claim ESOP-related tax benefits.
V. Crypto Investments and Online Winnings Disclosure
The rising prominence of virtual assets and online earnings has prompted the tax department to seek detailed disclosures. Taxpayers must now provide quarter-wise breakdowns of their crypto investments under ITR-1, 2, and 4. Moreover, online game winnings are now explicitly addressed in Schedule OS, ensuring a thorough examination of income from online games.
VI. Cash Turnover Disclosure in ITR-4
For businesses filing under ITR-4, a new column requires the disclosure of cash turnover or gross receipts. This aims to ensure transparency in financial transactions, with the turnover threshold for presumptive taxation under Section 44AD raised to INR 3 crores.
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VII. Companies Face Enhanced Reporting Requirements
ITR-6, tailored for companies, introduces several additional reporting requirements. These include the Legal Entity Identifier (LEI), MSME registration number, reasons for tax audits under Section 44AB, disclosure of winnings from online games taxable under Section 115BBJ, and details on virtual digital assets.
VIII. Emphasis on Timely Payments to MSMEs
Acknowledging the importance of timely payments to micro or small enterprises, ITR-6 now incorporates clauses requiring companies to report sums payable to such entities.
As taxpayers gear up for the ITR filing season, the changes introduced by the CBDT demand meticulous attention.
