In January 2020 the CBDT has notified the amendment to Rule 12 and new ITR Forms (ITR 1 and ITR 4) for the assessment year 2020-21. The amended Rule 12 provided that ITR-1 cannot be used by a person falling under the two categories, namely person who owns a house property in joint-ownership and another who has entered into specified transactions mentioned in the seventh proviso to section 139(1), that is, payment of electricity bill in excess of Rs. 1 lakh, a deposit of more than Rs. 1 crore in one or more current accounts, and foreign travel expense of Rs 2 lakhs etc. However, a person falling under the second category is allowed to furnish a return in ITR-4. The recent amendment notification nullifies the amendment of January and allows an Individual/HUF, owning a property in joint ownership or covered under the seventh proviso, to file return in ITR-1 or ITR-4 if they fulfil other conditions.
‘Schedule DI’ to furnish details of investments made from 01.04.2020-30.06.2020
The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, has extended the time-limit till 30-06-2020 to make investments, deposits, payments, etc. for the financial year 2019-20 for claiming deduction under Chapter VI-A, section 10AA and section 54 to 54GB. due to COVID-19 pandemic. A new Schedule DI has been inserted in the ITR forms to allow taxpayers to avail the deduction for the investments/deposits made during the extended period.
‘Schedule DI’ is bifurcated into the following three parts:
(a) Part A seeks details of the investment, deposit, or payments made to claim deduction under Chapter VI-A;
(b) Part B seeks detail of eligible amount of deduction available under section 10AA; and
(c) Part C seeks details of payment, acquisition, purchase or construction made to claim deduction under Sections 54 to 54GB.
It must be noted that though the time limit for making investments has been extended by 3 months, but there is no increase in the threshold limit available under respective sections.
Additional details to be furnished by a person who is filing return under the Seventh proviso to section 139(1)
To ensure that individuals, entering into certain high-value transactions, furnish the Income-tax return, the seventh proviso to section 139 was inserted by the Finance (No. 2) Act, 2019. The provision requires every person, who is otherwise not required to file the return due to the reason that his income does not the maximum exemption limit, to file the return of income if during the previous year he has:
(a) deposited more than Rs. 1 crore in one or more current account maintained with a bank or a co-operative bank;
(b) incurred more than Rs. 2 lakh for himself or any other person for travel to a foreign country; or
(c) incurred more than Rs. 1 lakh towards payment of electricity bill.
If an assessee is required to file the return of income in the circumstances covered under the seventh proviso to Section 139(1), he is required to furnish the relevant details in ITR form, that is, amount deposited in the current account, the amount incurred on the foreign travel or amount paid toward electricity bill.
Interchangability of PAN or Aadhaar in various schedules
The Finance (No. 2) Act, 2019 inserted sub-section (5E) to Section 139A to allow the interchangeability of Aadhaar with PAN. Thus, where a person has not been allotted PAN, but he possesses the Aadhaar, he may furnish his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner. Accordingly, the assessee can furnish Aadhaar or PAN in respect to the following person:
(a) A person filing the Income-tax return as a representative assessee;
(b) Auditor (proprietorship/ firm);
(c) Debtors, in respect of whom bad-debt of Rs. 1 lakh or more is claimed;
(d) Co-owner of the house property;
(e) Tenant(s) of the house property;
(f) Buyer of the immovable property transferred during the year;
(g) A person whose tax credit is being claimed by the assessee;
(h) Tenants/buyer who has deducted tax at source;
(i) Key person and person verifying the return of a company;
(j) Person holding 10% or more of the voting power in case of unlisted company;
(k) Shareholders of unlisted companies including start-ups;
(l) Person whose income is clubbed with the income of assessee; and
(m) Spouse governed by Portuguese Civil Code.
Reporting of income or loss from pass-through entities
The Income-tax Act provides the pass-through status to certain entities, inter-alia, Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InVITs), Category
I and Category II Alternative Investment Funds (AIFs). If an entity is provided passthrough status under the Income-tax Act then such entity is allowed to pass its income to its investors without paying taxes and, consequently, investors are liable to pay tax on such income as if they have directly made the investments. Thus, in simple words, tax is charged at the level of the investor and not in the hands of the entity.
Reporting of dividend received from the specified foreign company
As per section 115BBD of the Income-tax Act, dividend received by a domestic company from a foreign company, in which such domestic company has 26% or more equity shareholding, is taxable at a special rate of 15% plus Surcharge and Health and Education Cess. Such tax is computed on a gross basis without allowing a deduction for any expenditure. In the new ITR forms, a domestic company is required to separately report such income in Schedule OS (Income from other sources). Consequential change has also been made to Schedule SI (Special Income) to reflect such dividend income.
Companies opting for section 115BAA and 115BAB
Section 115BAA and Section 115BAB were introduced by the Taxation Laws (Amendment) Act, 2019 to provide special tax regimes for various specified domestic companies (also known as ‘alternate tax regimes’). There are some disallowances under the alternate tax regimes. Thus, in Part-A of General Schedule, the company is required to choose whether it is opting for any of the alternative tax regimes of sections 115BA, 115BAA or 115BAB
Additional Amendments
1. A depreciation rate of 45% added in the block of plant and machinery
2. Assessee can choose multiple bank accounts for payment of refund
3. Foreign companies to report income from royalty or FTS
chargeable to tax at the rate of 50%
4. Trust to furnish details of re-registration made under the new provisions
5. Corpus donation not to be considered as an application of Income
6. Separate reporting to be made of interest payable on loan taken from a Deposit Taking NBFC or Systematically Important NBFC
7. Option to choose ‘Self-occupied property’ introduced in ITR-5 and ITR-6.
8. Reporting of disallowance under section 40(ba)
9. Type of company to be reported if the assessee is a director in a company or holding unlisted equity shares
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Very helpful and detailed analysis.