- 1. ITR – 1 and ITR – 4 cannot be filed in case of postponement of tax on ESOPs
- 2. ITR – 1 cannot be filed in case tax has been deducted under Section 194N
- 3. No option under section 194N to forward TDS deducted
- 4. Increased tax audit threshold
- 5. Introduction of Section 80M
- 6. Adjustment of unabsorbed depreciation if the assessee has opted for Section 115BAC or 115BAD [ITR 3 & 5]
- 7. Interest taxable under Section 115A read with Section 194LC: clause-by-clause disclosure [ITR 2, 3, 5, 6 & 7]
- 8. Section 50C’s safe harbor limit has been increased
- 9. Exercise of choice directed under section 115BAD
- 10. Date of cash donation in case of deduction under Section 80GGA
- 11. Undertakings not eligible for deductions excluded from Schedule Section 80-IB
- 12. Nature of security to be provided in Schedule 112A and Schedule 115AD
In a form called ‘Income Tax Returns,’ taxpayers report revenue (Income-Tax Return). The Central Government prescribes this form annually. It takes into account annual changes in the budget. New ITR forms were notified on 31 March 2021 for the 2020-21 financial year (the assessment year 2021-22). These forms must be submitted with returns for the current tax filing season.
There are seven ITR forms – 1 to ITR – 7 for various taxpayers’ groups. The ITR –1 (Sahaj) for employees and ITR–4 (Sugam) are the most commonly registered for small companies and professionals. In the case of Rs 50 lakh and more non-business income, ITR-2 is available. ITR-3 is for persons and HUFs with business income. For companies and LLPs, ITR-5 is the corresponding return. ITR-6 and trusts and companies use ITR-7. They are not registered.
1. ITR – 1 and ITR – 4 cannot be filed in case of postponement of tax on ESOPs
Finance Act 2020 allows ESOPs allocated by a qualifying start-up referred to in Section 80-IAC for payment or withdrawal of taxation. In respect of such ESOPs, the tax is to be paid or deducted within 14 days from the earliest time limit:
- After expiry of 48 months from the end of evaluation year related to the business year in which ESOPs are allotted.
- From the date, the assessee stops being an employee of the organization.
- From the date of sale of shares allocated under ESOP.
Accordingly, Rule 12 was amended to make it clear to the assessee that his return of revenues in ITR-1 and ITR-4, in whose case payment or deduction of tax was deferred in relation to these ESOPs. ITR-1 and ITR-4 have been modified accordingly.
2. ITR – 1 cannot be filed in case tax has been deducted under Section 194N
Under Section 194N, each banking company (including any bank or bank) that is responsible for paying cash to an individual from a single or more account maintained by him, co-operative bank, and Post Office is subject to this provision. In the case of certain non-return filers and of Rs 1, in other cases, taxes are to be deducted under this provision where the amount of cash withdrawn during the year exceeds Rs. 20 lakhs.
Revenue-tax Rule 12 Rules have been modified to limit the furnishing return of revenues under ITR–1 to the assessee in whose case tax was deducted according to the provision. ITR-1 has undergone significant changes.
3. No option under section 194N to forward TDS deducted
The credit of tax deducted from the source in the assessment year where the income is assessable under Rule 37BA is provided for in section 199. Where such income is valid for several years, however, the loan for taxes at source is permitted over the years to the same extent that the income is taxable.
As TDS is deducted from cash withdrawal under section 194N and cannot be directly associated with the assessee’s relevant income. Thus the tax credit deducted in accordance with Section194N is granted in the year of assessment of the previous year of deduction of that tax. Therefore, when an excess TDD is deducted during the year referred to in that section, it is requested only in the same year as a refund. In other words, it is not permitted to be carried forward to subsequent years by the TDS deducted under Section 194N. In ITR-2 to ITR-7, the respective modifications have been made to restrict the transit of TDS withheld from the provisions of Section 194N.
4. Increased tax audit threshold
In accordance with section 44AB, if its gross turnovers or receipts exceed the threshold limit laid down in this name, an assessee is to audit the books of accounts. Section 44AB has been modified by the Finance Act 2020 to reduce the compliance burden for small and medium-sized enterprises by increasing the threshold limit if the following conditions are fulfilled for the business from Rs. 1 Crore to Rs. 5 Crore.
- The cash receipt does not exceed five percent of the total amount received over the preceding year, including sales, turnover, or gross revenues.
- Cash payments not exceeding 5 percent of the total amount paid during the year preceding, including the amount incurred in respect of expenditure.
By the Finance Act of 2021 on Rs. 10 crores with impact from the evaluation year 2021-22, the Rs. 5 crore ceiling limit has also been increased.
The income tax return forms of the previous year required that the assessee declare whether the total sales/turnover / brutal business revenue during the year is over Rs. 1 crore but not more than Rs. 5 crores. Required modifications have been introduced in the income tax return forms notified to improve the limit for the evaluation year 2021-22.
5. Introduction of Section 80M
Under the Finance Act of 2020, the amount received as a dividend from another domestic company, an external corporation, or a business trust was introduced in Section 80M. The allowance is made when the company distributes the dividend additionally to the shareholders.
A deduction may be claimed by means of a dividend, to the extent that the dividend is further distributed as a dividend within one month of its due date. Income Tax Return forms have been amended to cover Section 80M in Annex VI for the assessment year 2021-22 in order to allow the company to claim the said deduction.
6. Adjustment of unabsorbed depreciation if the assessee has opted for Section 115BAC or 115BAD [ITR 3 & 5]
Individuals or HUFs are subject to a unique taxing regime under Section 115BAC. Similarly, co-operative societies are subject to a unique taxing structure under Section 115BAD. An assessee can choose one of these regimes if certain conditions are met. One of these is that the taxpayer is not allowed to claim additional depreciation. Furthermore, any unabsorbed depreciation relating to such increased depreciation is presumed to have been fully applied, and no further deduction for such depreciation is allowed in any later year. The caveat to sub-section (3) of Section 115BAC and Section 115BAD.Therefore, if the assessee opts for the alternate tax regime in the assessment year 2021-22, the provision to sub-section (3) of Section 115BAC and Section 115BAD allows him to enhance the WDV of the block of an asset by the amount of unabsorbed depreciation as a one-time relief. Rule 5 must be followed when making such a change.
As a result, Schedule DPM (Depreciation on Plant and Machinery) has been changed in the Income Tax Return forms for Assessment Year 2021-2022 to make such a one-time adjustment to the WDV of the appropriate block of the asset. In addition, Schedule UD [Unabsorbed Depreciation and Allowance under Section 35(4)] has been updated to reflect the corresponding adjustment to the unabsorbed depreciation for the amount of depreciation already adjusted with the WDV of the individual block of the asset.
7. Interest taxable under Section 115A read with Section 194LC: clause-by-clause disclosure [ITR 2, 3, 5, 6 & 7]
Section 115A establishes the tax rates on certain non-resident assessee incomes, such as dividends, interest, royalties, and fees for technical services. It states that interest income referred to in section 194LC is taxable at the rate specified in that section.
Section 194LC of the Finance Act of 2020 has been amended to provide that tax deductions shall be made at a rate of 5%, except where interest is payable in respect of monies borrowed from a source outside India by way of issue of any long-term bond or rupee-denominated bond, in which case TDS is required to be deducted at a rate of 4%, subject to certain conditions. Prior to the modification, the tax was required to be deducted at a flat rate of 5% under Section 194LC. Previously, in the Income Tax Return, just a single disclosure was required for income tax under Section 115A and Section 194LC.
Since two different rates (4 percent and 5 percent) have been imposed under Section 194LC, ITR forms have been changed to demand a separate disclosure regarding income taxable at the rates of 4 percent and 5 percent.
8. Section 50C’s safe harbor limit has been increased
In the case of a transfer of land, a structure, or both, Section 50C makes a unique provision for determining the full value of consideration. According to the clause above, if the consideration received/accrued is less than the state government’s stamp duty value (SDV), the stamp duty represents the full value of consideration. This clause was not applicable until Assessment Year 2020-2021 if the stamp duty payment value was up to 105 percent of the consideration received. From Assessment Year 2021-2022, the Finance Act of 2020 increased the acceptable maximum from 105 percent to 110 percent. ITR-2, 3, 5, and 6 have all been updated as a result of the revisions.
9. Exercise of choice directed under section 115BAD
A new Section 115BAD has been included in the Finance Act of 2020, which allows for a specific tax regime (sometimes known as a “alternative tax regime”) for cooperative societies. This provision gives people the option of paying taxes at a lower rate if they meet specified criteria. The co-operative society must utilize this option by filing Form 10-IF on or before the due date for submitting income tax returns.
A co-operative society must determine whether to opt for the alternative tax scheme under Sections 115BAD in Part-A (General Information). If it is using the Section 115BAD option, it must also include the date of Form 10-IF filing and the Acknowledgement number.
10. Date of cash donation in case of deduction under Section 80GGA
Section 80GGA allows an assessee who is not making income to deduct donations made under the heading “earnings and gains of business or profession.” A cash donation in exceeding of Rs 2,000 is not eligible for a deduction.
Schedule 80GGA is found in ITR-2, 5, and 6, and it mandates separate reporting of financial donations and donations made in other ways. Additional disclosures of the date on which such a cash donation was made are required on the ITR forms issued for Assessment year 2021-2022.
11. Undertakings not eligible for deductions excluded from Schedule Section 80-IB
Section 80-IB allows an assessee who derives profits and gains from designated enterprises to claim a deduction. Industrial undertakings in underserved areas, undertakings engaged in the manufacturing or refining of mineral oil, housing projects, and the processing, preservation, and packaging of specific food products are all examples of these firms.
Due to sunset requirements, deduction under this section is not available for the following business:
- Industrial undertakings located in industrially backward states are eligible for a deduction under the Eighth Schedule [Section 80-IB(4)].
- Deduction for a company that operates a cold storage facility [Section 80-IB(5)].
- Deduction for industrial enterprises located in industrially depressed areas [Section 80-IB(11)].
The applicable rows permitting deduction under the above obsolete sub-sections have been removed from Schedule 80-IB.
12. Nature of security to be provided in Schedule 112A and Schedule 115AD
Section 112A applies to long-term capital gains deriving from the transfer of securities, such as equity shares, units of an equity-oriented mutual fund, or business trust units, if the transfer is subject to the Securities Transaction Tax (STT). Long-term capital gains in excess of Rs. 1 lakh will be taxed at a rate of ten percent.
Long-term capital gains resulting from the above-mentioned securities in the hands of the FPI shall be taxed at a rate of 10% in excess of Rs. 1 lakh, according to a proviso to section 115AD(1)(b)(iii).
If the consequent capital gains are taxable under these sections, Schedule 112A and Schedule 115AD require the assessee to provide various details of the securities so transferred. The number of shares/units transferred, the cost of acquisition, the fair market value, and the sale consideration were among the details.
In both schedules of the ITR forms notified for the Assessment year 2021-2022, a new column requiring the assessee to provide the type of the securities transferred has been added (shares or units).
For all single taxpayers, this year (2021-2022) will be crucial. This is the first time that taxpayers will have the option of selecting a more advantageous tax regime. For any guidance on ITR Filing, feel free to ask the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help filing an income tax return. You can also use the option of Business Return, Bulk Return, or Revised Return Filing.