Introduction: The Income Tax Return (ITR) forms for the fiscal year 2023-24 have undergone significant revisions, impacting taxpayers across various categories. From filing deadlines to taxation updates, these changes demand attention and understanding. This article delves into the alterations in ITR Forms 2, 3, 5, and 6, offering a comprehensive analysis of each modification.
“Changes in ITR Form No. 2, 3, 5 and 6”
1. Filing Deadlines:
In ITR Forms 3, 5 and 6, A new column has been inserted seeking information on the deadline for submitting the income tax return. The taxpayer is required to select the applicable due date for filing the return from the provided dropdown options, namely, July 31st, October 31st or November 30th.
2. EVC for Tax Audits:
In Form ITR 3, Rule 12 has been amended to allow individuals and HUF who are liable to tax audits under Section 44AB to verify the return of income through an electronic verification code (EVC). Earlier, they could verify the returns only through digital signature.
3. Reasons of Tax Audit u/s 44AB:
Additional details are required from audited companies in Form ITR 3, 5 and 6 regarding the circumstances necessitating tax audits. This change enhances transparency and accountability in tax reporting.
4. Cash Receipts Reporting:
The Finance Act, 2023 has enhanced the turnover threshold limit from INR 2 crores to INR 3 crores for opting for the presumptive taxation scheme under Section 44AD if the receipts in cash do not exceed 5% of the total turnover or gross receipts for the previous year. Similarly, Section 44ADA was amended to enhance the threshold limit of gross receipts from INR 50 lakhs to INR 75 lakhs, if the receipts do not exceed 5% of the total gross receipts for the previous year. A new column for cash receipts reporting in Schedule BP- “Profits and gains from business and profession” has been added to claim the enhanced turnover limit in Form ITR 3, 4 and 5.
5. Capital Gains Accounts Scheme (CGAS) Reporting:
The Schedule-CG “Capital Gain” of ITR forms seeks information about the capital gains earned by the taxpayer. This schedule requires various details, including information about the capital asset sold, the particulars of the buyer, and specifics regarding the amount spent for claiming exemptions. In the newly notified ITR-2, Schedule-CG has been modified to gather more information pertaining to sums deposited in the Capital Gains Accounts scheme (CGAS). The revised schedule now requires the inclusion of the following additional details towards CGAS in addition to the existing requirement of reporting the amount deposited in CGAS:
- Date of deposit
- Account number
- IFS code
6. Details of Legal Entity Identifier (LEI):
The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code used to uniquely identify parties in financial transactions worldwide. It has been implemented to improve the quality and accuracy of financial data reporting systems for better risk management. As per the RBI Regulations, all single payment transactions of INR 50 crores and above undertaken by entities (non-individuals) should include remitter and beneficiary LEI information. This applies to transactions undertaken through the NEFT and RTGS payment systems. Entities seeking LEIs can access the comprehensive information and procedures provided on the official LEIL website (https://www.ccilindia-lei.co.in/). In order to be in line with the RBI regulations, Legal Entity Identifier (LEI) disclosure is now mandatory for refunds exceeding INR 50 crores in Form ITR 5 and 6 and LEI needs to updated on Income Tax Portal.
7. Political Party Contributions:
Section 80GGC allows for a deduction for contributions to a political party or electoral trust. The new ITR forms include a new Schedule 80GGC, which requires detailed disclosure of political party contributions as under:
- Date of Contribution
- Contribution Amount (with a breakdown of contributions made in cash and other modes)
- Eligible Contribution Amount
- Transaction Reference Number for UPI transfer or Cheque Number/ IMPS/ NEFT/ RTGS
- IFS Code of the Bank
8. Adjustment of Unabsorbed Depreciation:
An assessee opting for Section 115BAA/115BAC is not eligible to set off the unabsorbed depreciation attributable to additional depreciation. Such unabsorbed depreciation relating to additional depreciation which has not been given full effect shall be adjusted to the written down value (WDV) of the block of assets as on 01-04-2023 in the prescribed manner.
In the new ITR Form No. 3, 5 and 6, Schedule DPM which deals with depreciation on Plant and Machinery, has been amended. It provides that the WDV of the block as on 01-4-2023 shall be increased by the amount of unabsorbed depreciation (pertaining to additional depreciation), which was not allowed to be adjusted on account of opting for Section 115BAA/115BAC.
9. Online Gaming Winnings Taxation:
The Finance Act 2023 had inserted a new section 115BBJ to tax winnings from online games with effect from AY 2024-25. A corresponding section 194BA was inserted with effect from 01-04-2023 for the deduction of tax on net winnings from online games. Thus, all winnings from online games on or after 1-4-2023 shall be taxable @30% under Section 115BBJ and subject to TDS under Section 194BA. To report such income on ITR Form No. 2, 3, 5 and 6; Schedule OS (Income from other sources) has been amended to include reporting of income from Online Gaming.
10. Schedule 80DD:
In the previous ITR forms, the taxpayers were required to mention the amount claimed as a deduction under Section 80DD in Schedule VI-A. The new ITR forms (ITR 2 and 3) have introduced a new ‘Schedule 80DD’ seeking details of deduction in respect of maintenance, including medical treatment of a dependent with a disability.
11. Reporting of sums received by a unitholder from the Business Trust:
In order to avoid the dual non-taxation of certain sums distributed by the business trusts to its unitholders, the Finance Act, 2023, inserted clause (xii) to Section 56(2). To report income earned by the unitholder under Section 56(2)(xii), ITR forms have been amended to include a new column under Schedule-OS.
12. Dividend Income Reporting:
The Finance Act, 2023 has amended the provisions of Section 115A by inserting a proviso to Section 115A(1)(a)(A) to provide that the dividend income received from a unit in an International Financial Service Centre (IFSC), as referred to in Section 80LA(1A) shall be taxed at a reduced tax rate of 10% instead of 20%. “Schedule OS- Income from Other Sources” has been amended in new ITR Forms (2,3,5 and 6) to incorporate such change.
13. ESOP Tax Benefits:
‘Schedule – Tax Deferred on ESOP’ seeks information such as assessment year, amount of deferred tax brought forward, amount of tax payable in the current assessment year, balance amount of tax to be carried forward to next assessment year, etc. In order to enhance transparency, the new ITR forms (ITR 2 and 3) amended this schedule to seek additional details such as the PAN of the employer (an eligible start-up) and its DPIIT (Department of Promotion of Industry and Internal Trade) Registration number.
14. Start-up Deduction Details (Schedule 80IAC):
New ITR-5 has a new Schedule 80IAC seeking details with respect to the deductions claimed by companies under Section 80-IAC. This includes the following:
- Date of incorporation of the startup
- Nature of business
- Certificate number as obtained from Inter-Ministerial Board of Certification
- First AY in which deduction was claimed
- Amount of deduction claimed for current AY.
In the previous ITR Forms, only the information about the amount eligible for deduction under Section 80-IAC was sought.
15. Offshore Banking unit or IFSC (Schedule 80LA):
A new Schedule 80LA has been inserted in the ITR-5 seeking the following details from the company:
- Type of Entity,
- Type of income of the unit,
- Authority granting registration,
- Date of registration,
- Registration number,
- First AY during which deduction is claimed,
- Amount of deduction claimed for current AY.
Conclusion: The changes in ITR forms for FY 2023-24 signify a proactive approach towards enhancing transparency, compliance, and accuracy in tax reporting. Taxpayers must acquaint themselves with these modifications to fulfill their obligations effectively and avoid potential penalties. Stay informed and ensure meticulous adherence to the updated requirements outlined in the revised ITR forms.
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Authors:
Karan Vakharia | Partner
Nitesh Jha | Manager
Authors can be reached at Email: blogs@masd.co.in
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