The Central Board of Direct Taxes (CBDT) has recently notified two Income Tax Return (ITR) forms for the assessment year 2020-21. Usually, the tax department issues new ITR forms in the first week of April of the relevant assessment year. However, in contrast to the old tradition, it has notified two ITR forms ITR-1 and ITR-4 for the assessment year 2020-21 in the first week of January. The new forms incorporate the changes made in the last Finance Act.
The recently notified ITR forms will be applicable for filing of income-tax return in respect of income earned during the previous year 2019-20 (between April 1, 2019 to March 31, 2020).
Possibly this is the first time that the department has notified the ITR forms before the relevant assessment year begins. It may be noted that only the ITR forms have been notified without the corresponding return filing utility. Though the structure of new ITR-1 and 4 remains the same, the number of changes in these ITR forms are several.
What are these forms about?
Returns in ITR-1 Sahaj can be filed by an ordinarily resident individual whose total income does not exceed Rs 50 lakh.
On the other hand, form ITR-4 Sugam is meant for resident individuals, HUFs and firms (other than LLP) having a total income of up to Rs 50 lakh and having presumptive income from business and profession.
What are the significant changes this year?
Scope of ITR-1
According to the notification, individual taxpayers owning house property in joint ownership and those who have paid Rs 1 lakh in electricity bills in a year or incurred Rs 2 lakh expense on foreign travel cannot file their annual income return using the simple ITR-1 form.
ITR-1 form is not valid for those individuals who have deposited more than Rs 1 crore in a bank account or have incurred Rs 2 lakh or Rs 1 lakh on foreign travel or electricity respectively. Such taxpayers will have to use different forms, which is likely to be notified in due course.
Return in ITR-1 and ITR-4 cannot be filed by a person who owns a house property in joint-ownership
An individual or HUF (Hindu Undivided Family), who owns a house property in joint-ownership, cannot file return of income in ITR -1 or ITR-4. Such person, if eligible to file return in ITR-1 or ITR-4 till last assessment year, will now file return in ITR-2 or ITR-3, as the case may be.
Return in ITR-1 cannot be filed by an individual who has received a notice pursuant to search proceedings
Up to Assessment Year 2019-20, an individual taxpayer could even file his return of income (ITR) in Form ITR-1 in response to a notice issued by the Income-tax Department under section 153A or section 153C.
Section 153A contains provision for assessment in case of search or requisition, whereas section 153C deals with assessment of income of a person other than person referred to in section 153A.
The new provisions remove the option to file return in ITR-1 in response to notice issued under section 153A or section 153C. Thus, if a notice under these sections is issued to an individual taxpayer, he is required to file ITR-2 only.
Employer details in ITR-1 & ITR-4
The new ITR Forms ITR-1 & ITR-4 seek details of employer, i.e., TAN of employer, nature of employer and address of employer if taxpayer is feeding his salary income, which was required only in ITR-2 and ITR-3 till last year.
Further, new forms provide options to add more than one employer to compute the salary income. A taxpayer can add multiple rows to compute the salary income received from more than one employer.
“Existing forms ITR-1/4 (applicable up to Assessment Year 2019-20) did not have such functionality which forced the individual to aggregate the salary income received from multiple employers.
Furnishing of passport number in case of resident individuals
New ITR-1 and ITR-4 seek passport details from resident persons having an Indian passport. The following options have been inserted in the new forms:
a) Do you have a valid Indian passport?
b) If yes, provide the passport number
It is a possibility that passport details are asked to check if a taxpayer has travelled to a foreign country in the financial year 2019-20 and his declared income does not match with his ability to incur the expenses on such foreign travel.