Now Get Used To ITRs, No More Form 16,
What will the new tax return forms mean to you? Check out the new features and implications
Individual income tax return (ITR) forms have witnessed many changes over the past few years. This year, the government proposes to introduce new tax return forms, in lieu of the existing ones, including the Saral (Form 2D). In this connection, new forms have been drafted by the Central Board of Direct Taxes (CBDT). These forms are expected to be notified in mid-May.
New tax return forms
For assessment year ’07-08 (financial year ’06-07), the following forms are proposed to be introduced for individual/Hindu Undivided Family (HUF) taxpayers:
ITR -1: This form can be used by individuals having salary and interest income only and no other income. This form is primarily to be used by salaried individuals who do not have any other income except interest income.
ITR -2: This form can be used by individuals/HUF having income from any source except from business or profession.
This form is to be used if besides salary and interest income, the individuals/HUF have income from house property, capital gains (short-term and long-term) and income from other sources.
ITR -3: This form is to be used by individuals and HUF who are partners of firms and don’t have proprietary business or profession. This form is to be used by partners of the firms for filing their personal tax returns.
ITR -4: This form is to be used by individuals/HUF having proprietary business or profession.
It will be interesting to note a few of the important features of the proposed forms for individual taxpayers, as follows:
No cash flow statement: Form 2F introduced last year required individuals to furnish their cash flow details.
Due to various representations made to the government, the said form was not made compulsory and an option was given to individual taxpayers to use other forms.
The new individual tax return forms do not contain any such requirement of furnishing cash flow statements/details. New requirement: Annual Information Return (AIR) transaction, a new requirement in respect of specified transactions, is being introduced in the proposed tax return forms.
Accordingly, an individual/HUF will be required to furnish information in respect of specified transactions undertaken by him, that are reported through AIR by the other parties.
Therefore, it will be important to take note of the transactions that are currently being reported to the tax authorities under AIR by companies, banks and mutual funds (MFs).
These include: cash deposits of Rs 10 lakh or more in a year in savings account (by banks); credit card payments exceeding Rs 2 lakh (by banks/ credit card companies); purchase of mutual funds for Rs 2 lakh or more (by mutual funds); purchase of bonds or debentures for Rs 5 lakh or more (by company/ institution issuing such bonds or debentures); purchase of shares for Rs 1 lakh or more (by company issuing shares through public or rights shares); purchase or sale of immovable property for Rs 30 lakh or more (by registrar or sub-registrar) and purchase of RBI bonds for Rs 5 lakh or more (by RBI).
Form 16 may not be filed: The individual tax returns have been designed to be annexure-less. Unlike in the past, no separate annexure for computation/other information is to be furnished along with the return. Therefore, it is likely that once complete information in respect of tax withheld at source as contained in Form 16 is furnished in the return, then Form 16 may not be required to be filed along with the return.
All the necessary information is to be furnished in the specified schedules of the tax return form only. These schedules also provide guidance regarding the step-by-step method of computing the taxable income under each head — salaries, income from house property, capital gains, etc.
Electronic filing: The individual tax return forms can be filed electronically, even though this has not been made compulsory for the current tax year.
Tax return preparer information : If the tax return has been prepared by a tax return preparer (TRP), then his/her name and identification is to be furnished in the tax return form. Further, the TRP is also required to sign the tax return form.
What’s the final word?
The basic information required to be furnished in the proposed return forms remains the same as the old forms. Nevertheless, there are a few important deviations which should be taken note of.
Source
Individual income tax return (ITR) forms have witnessed many changes over the past few years. This year, the government proposes to introduce new tax return forms, in lieu of the existing ones, including the Saral (Form 2D). In this connection, new forms have been drafted by the Central Board of Direct Taxes (CBDT). These forms are expected to be notified in mid-May.
New tax return forms
For assessment year ’07-08 (financial year ’06-07), the following forms are proposed to be introduced for individual/Hindu Undivided Family (HUF) taxpayers:
ITR -1: This form can be used by individuals having salary and interest income only and no other income. This form is primarily to be used by salaried individuals who do not have any other income except interest income.
ITR -2: This form can be used by individuals/HUF having income from any source except from business or profession.
This form is to be used if besides salary and interest income, the individuals/HUF have income from house property, capital gains (short-term and long-term) and income from other sources.
ITR -3: This form is to be used by individuals and HUF who are partners of firms and don’t have proprietary business or profession. This form is to be used by partners of the firms for filing their personal tax returns.
ITR -4: This form is to be used by individuals/HUF having proprietary business or profession.
It will be interesting to note a few of the important features of the proposed forms for individual taxpayers, as follows:
No cash flow statement: Form 2F introduced last year required individuals to furnish their cash flow details.
Due to various representations made to the government, the said form was not made compulsory and an option was given to individual taxpayers to use other forms.
The new individual tax return forms do not contain any such requirement of furnishing cash flow statements/details. New requirement: Annual Information Return (AIR) transaction, a new requirement in respect of specified transactions, is being introduced in the proposed tax return forms.
Accordingly, an individual/HUF will be required to furnish information in respect of specified transactions undertaken by him, that are reported through AIR by the other parties.
Therefore, it will be important to take note of the transactions that are currently being reported to the tax authorities under AIR by companies, banks and mutual funds (MFs).
These include: cash deposits of Rs 10 lakh or more in a year in savings account (by banks); credit card payments exceeding Rs 2 lakh (by banks/ credit card companies); purchase of mutual funds for Rs 2 lakh or more (by mutual funds); purchase of bonds or debentures for Rs 5 lakh or more (by company/ institution issuing such bonds or debentures); purchase of shares for Rs 1 lakh or more (by company issuing shares through public or rights shares); purchase or sale of immovable property for Rs 30 lakh or more (by registrar or sub-registrar) and purchase of RBI bonds for Rs 5 lakh or more (by RBI).
Form 16 may not be filed: The individual tax returns have been designed to be annexure-less. Unlike in the past, no separate annexure for computation/other information is to be furnished along with the return. Therefore, it is likely that once complete information in respect of tax withheld at source as contained in Form 16 is furnished in the return, then Form 16 may not be required to be filed along with the return.
All the necessary information is to be furnished in the specified schedules of the tax return form only. These schedules also provide guidance regarding the step-by-step method of computing the taxable income under each head — salaries, income from house property, capital gains, etc.
Electronic filing: The individual tax return forms can be filed electronically, even though this has not been made compulsory for the current tax year.
Tax return preparer information : If the tax return has been prepared by a tax return preparer (TRP), then his/her name and identification is to be furnished in the tax return form. Further, the TRP is also required to sign the tax return form.
What’s the final word?
The basic information required to be furnished in the proposed return forms remains the same as the old forms. Nevertheless, there are a few important deviations which should be taken note of.
Source
Labels: Form 16, Income Tax Return, ITR, Tax
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