All taxpayers, except trusts and non-profit organisations, can file returns with the proposed new common ITR form, on which the Central Board of Direct Taxes (CBDT) has invited stakeholder comments by December 15.IN WHAT would mark a significant shift in the taxation regime, the Finance Ministry has proposed a common income tax return (ITR) form for all taxpayers. Currently, there are seven types of ITR forms which are filed by different categories of taxpayers.
On Tuesday, the Central Board of Direct Taxes (CBDT), under the Finance Ministry, released a draft common ITR form, inviting inputs from stakeholders and the public by December 15.
According to the proposal, all taxpayers, barring trusts and non-profit organisations, can use the common ITR form, which also includes a separate head for disclosure of income from virtual digital assets.
“The proposed draft ITR takes a relook at the return filing system in tandem with international best practices. It proposes to introduce a common ITR by merging all the existing returns of income except ITR-7. However, the current ITR-1 and ITR-4 will continue. This will give an option to such taxpayers to file the return either in the existing form (ITR-1 or ITR-4), or the proposed common ITR, at their convenience,” the CBDT said.
Currently, of the seven types of ITR forms, ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) are simpler forms, for small and medium taxpayers. Sahaj can be filed by an individual with income up to Rs 50 lakh, with earnings from salary, one house property/ other sources (interest etc). ITR-4 can be filed by individuals, Hindu Undivided Families (HUFs) and firms with total income up to Rs 50 lakh from business and profession.
ITR-2 is filed by people with income from residential property, ITR-3 by people with income as profits from business/ profession, ITR-5 and 6 by LLPs and businesses respectively, while ITR-7 is filed by trusts.
The draft ITR form aims to bring ease of filing returns and reduce the time for filing the ITR by individuals and non-business-type taxpayers considerably, it said. “The taxpayers will not be required to see the schedules that do not apply to them. It intends the smart design of schedules in a user-friendly manner with a better arrangement, logical flow, and increased scope of pre-filling. It will also facilitate the proper reconciliation of third-party data available with the Income-Tax department vis-à-vis the data to be reported in the ITR to reduce the compliance burden on the taxpayers,” the CBDT said.
The proposed ITR form would be customised for taxpayers with applicable schedules, based on certain questions answered by them. Once the common ITR form is notified, after taking into account the inputs received from stakeholders, the online utility will be released by the Income Tax department. “In such a utility, a customised ITR containing only the applicable questions and schedules will be available to the taxpayer,” it said.
Nangia Andersen LLP Partner, Sandeep Jhunjhunwala, said the new ITR form would be available alongside old forms ITR-1 and ITR-4, while taxpayers filing ITR-2, ITR-3, ITR-5 and ITR-6 would not have the option to file the old forms. “The proposed draft of the new ITR form is designed to facilitate suitable reconciliation of third-party data available with the Income-Tax department vis-à-vis data to be reported in ITR, to reduce compliance burden on taxpayers. Contemporary reporting requirements such as pass through income or loss under various heads, income from virtual digital assets, declaration and details of business connection, permanent establishment and significant economic presence in India for non-residents, and details of foreign equity and debt interest held remain key highlights of the new common ITR form,” Jhunjhunwala said.