Master guide on Requirements of ITR Filing for A.Y. 2019-20

Download below Presentation on Requirements of ITR Filing

The new Returns for filing has been notified and enabled for filing for the Assessment Year 2019-20. The presentation covers the changes in the Finance Act for reporting of Income as well as new requirements for filing of Return of Income.

Glance of General Changes of Income

Expansion of Scope of Definition of Income

• Meaning of income extended to include the fair market value of inventory on conversion into capital asset referred to in clause (via) of section 28. Relevant section 2(24) sub clause (xiia);
• any compensation or other payment due to or received by any person in connection with the termination of his employment or the modification of the terms and conditions relating thereto as referred to in section 56(2)(xi)).

Provision of section 40(a)(ia) and section 4A(3), 40A(3A) made applicable to religious/charitable institutions. Relevant section 1 1 explanation 3, and section 10 (23C) Thirteenth proviso.

A standard deduction of up to Rs. 40,000/- allowed out of salary income. Deduction on account of Transport allowance and reimbursement of medical expenses withdrawn.

Glance of General Changes in Presumptive Income

Computation of Income under Presumptive Taxation amended [Section 43CA and Section 43CB]

• Heavy Goods Vehicle Income deemed to be Rs. 1000 per ton of gross vehicle weight or unladen weight as the case may be per month or part of month or the amount actually claimed whichever is higher;

Gross vehicle Weight has been defined under the Motor Vehicle Act to mean in respect to any vehicle the total weight of the vehicle and load certified and registered by the registering authority as permissible for that vehicle.

Unladen Weight means the weight of a vehicle or trailer including all equipments ordinarily used with the vehicle or trailer when working, but excluding the weight of a driver or attendant: and where alternative parts or bodies are used the unladen weight of the vehicle means the weight of the vehicle with the heaviest such alternative part or body.

Glance of General Changes in Capital Gains

> Liberalization in Taxation of capital gains on transfer of immovable property. Third proviso that stamp duty value shall be deemed to be consideration for the purpose of section 48 only if it exceeds 105% of the declared consideration.

> Section 54EC amended w.e.f. 01.04.2019 to provide.

◊ Exemption of long term capital gain on investment in Capital  Gain Bonds restricted to immovable property only. Section 54EC (1) amended.

◊ The holding period of capital gain bonds u/s 54EC increased to 5 years from 3 years for capital gain arising in F.Y 201 7-18 and onwards (section 54EC).

> Long Term capital Gain on transfer of equity shares and units of equity oriented find has been subjected to tax (Section 1 12A).

◊ Exemption u/s 10(38) is withdrawn for transfer made after 01.04.2018.

◊ The rate of tax on such LTCG has been prescribed @ 10% in excess of Rs. 1,00,000/- subject to conditions of payment of STT on shares acquired after 01.10.2004.

◊ The method of calculation of cost of acquisition has been provided in newly inserted section 55(2)(ac)

◊ The new section 112A applies to all assesses i.e. corporate, non-corporate, resident and non-resident, it is not applicable to Foreign Institution Invertors (FII).

> Beneficial tax regimes for International Financial Services Centre (IFSC)

◊ to promote the development of world class financial infrastructure in India, it is proposed to amend the section 47 of the Act, to provide exemption for the capital gains arising from transactions entered into by a non-resident on a recognized stock exchange located in any IFSC;

◊ if the consideration is paid or payable in foreign currency for the bonds or GDRs, Rupee Denominated Bonds of an Indian company or Derivatives.

>  No indexation is allowed while calculating the capital gain on sale of equity share/units of equity oriented fund or a unit of business trust for sales effected after April 1, 2018;

> Computation of cost of acquisition of capital asset acquired before 01.02.2018 will be higher of

◊ Cost of acquisition of asset shall be the lower of

♦ The Actual Cost of the Asset or

♦The Fair Market value of such shares or the actual consideration received or accruing as a result of a transfer (Section 55(2) (ac))

> The Fair market value of listed equity share shall mean its highest price quoted on the stock exchange on January 3, 208. However, if there is no trading in such shares on such exchange on January 31, 2018, the highest price of such asset on such exchange on a date immediately preceding January 31, 2018. While in case of units which are not listed on recognized stock exchange, the net asset value of such units as on January 3, 2018 shall be deemed to be its FMV.

Provisions Applicable for AY 20 19-20 (Finance Act, 2018)

> Measures to curb strategies used by MNCs for artificial avoidance of PE, Loophole under Para 5 of Article 5 of India’s DTAA, BEPS recommendation to address the above loophole;

> Taxability of digital transactions on principles of Significant Economic Presence; Provisions for Section 9 to be studied in detailed before arriving at any conclusion;

> ‘Accumulated Profits’ redefined for purpose of Deemed Dividend- Section 2(22)(d)

> the accumulated profits/losses of an amalgamated company shall be increased by the accumulated profits of the amalgamating company (whether capitalized or not) on the date of amalgamation

> Dividend payouts of equity oriented mutual fund subject to DDT [Section 115R, Section 115T];

> Relaxation in provisions of carry forward and set off of losses for companies applied for Insolvency under IBC [Section 79];

> Relief from MAT for companies who have applied for Insolvency [Section 115JB];

> Non-Individual entity to obtain PAN, if they enter into a financial transaction of an amount aggregating to Rs. 2.50 lakhs or more in a financial year [Section 139A];

ICDS Amendments (Finance Act, 2018) 

> Marked to market losses

> any marked to market loss or other expected loss as computed in accordance with the ICDS shall be allowed as deduction;

> Foreign currency gains or losses

>  any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss on certain transactions;

> Construction contracts-

> Section 43CB which says that the profits and gains arising from construction contract or a contract for providing service is to be determined in accordance with the ICDS notified

> Revenue Recognition

> New section 145B to tax the export incentives as income of the previous year in which reasonable certainty of its realization is achieved;

> Valuation of Inventory

> necessary amendment in Section 145(2), and provides that the valuation of inventory shall be made at lower of cost or net realizable value in accordance with ICDS.

> No-deferment of tax on conversion of stock-in-trade into capital asset

> Any profit or gains arising from conversion of inventory into capital asset shall be charged to tax as business income under Section 28. the FMV of the inventory as on the date of conversion, shall be deemed to be the full value of the consideration of such inventory.

For the purposes of computation of capital gains arising from transfer of such converted capital assets, the FMV as on the date of conversion shall be the cost of acquisition as per Section 49 and the period of holding for such capital asset shall be reckoned from the date of conversion or treatment.

Provisions Applicable for AY 2018-19 (Finance Act, 2018)

> Section 115BA, a domestic company can opt to pay tax at the rate of 25% if they are engaged in the business of manufacturing or production etc;

> Section 56 to exclude the transfer of capital asset or money between a wholly owned subsidiary company and its holding Company out of ambit of residuary income;

> AMT chargeable at the rate of 9% instead of 18% for units located in IFSC;

Non applicability of MAT in case Foreign Companies opt for presumptive taxation if its total income comprises consists only profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB.

Provisions Applicable (Finance Act, 2018)

> Trading in agricultural commodity derivatives are not speculative transaction – Section 43(5) to provide that transaction in agricultural commodity derivatives done through a registered stock exchange or registered association would be treated as non-speculative transaction even if the same is not chargeable to CTT.

> Disallowance of expenditure paid in cash by Trusts;

> Royalty and FTS payments by NTRO to a non-resident is exempt from tax (AY 2018-19);

> NPS withdrawal exemption extended to non-employees;

> Deemed dividend isn’t taxable in hands of receivers- 30% Tax to be paid by the Payer.

Provisions relating to Assessments

> No adjustment under section 143(1) on account of mismatch with Form 26AS;

> No deduction of expenses even if unexplained income is determined by Assessing Officer;

> Chartered Accountants can file appeal to ITAT against the penalty order of Assessing Officer under section 271J;

> E-proceedings extended to all scrutiny assessments;

> Higher penalty for default in furnishing AIR [Section 271 FA]

Chapter VIA Deductions Amendments

> Section 80 D – Mediclaim Deductions

◊ In case of single premium health insurance policies which covers more than one year, deduction shall be allowed on proportionate basis for all those years for which health insurance cover is provided, subject to the specified monetary limit.

Chapter VIA Deductions Amendments

> Deduction limit under section 80DDB is enhanced to Rs. 1 Lac;

> Deductions under Section 80JJAA is extended to footwear and leather industry;

> New deduction introduced for Farm Producer Companies [Section 80PA];

> Deduction of Bank Interest under Section 80TTA up to Rs. 50,000 for Senior Citizens;

> Section 80IAC introduced to allow deductions to promote new start ups

Stringent Action on Non-Filers

> Section 80AC introduced to extend the disallowance of deductions under Section 80H to Section RRB, if return not filed within the due date specified under Section 139(1);

> Stringent prosecution for not filing the ITR [Section 276CC]

◊ Provides for imprisonment of up to 2 years in case a person doesn’t file the return of income;

◊ Exemption given if the return is furnished till end of assessment year or if the tax payable is up to Rs. 3,000- Companies excluded;

◊ Targets to prevent abuse of the exemption provided on the basis of amount of tax payable by shell companies or by companies holding Benami properties.

Glance of Changes in the Tax Rates

For Individuals

• Reduction in Tax Rates for small tax payers- marginal relief of 5%
• Relief under Section 87A reduced
• Slabs of Surcharge Introduced
  • Income exceeding Rs. 50 lacs- Surcharge @ 10%
  • Income exceeding Rs. 100 lacs- Surcharge @ 12%

For Individuals/HUF

• Introduction of TDS on monthly rent payment exceeding Rs 50,000/- @ 5%

For Companies

• Turnover does not exceed Rs. 50 Crores during FY 2016- 1 7, tax rate to be 25%

Issues Faced

DUE DATES (AS OF NOW)

• Individuals, Firms, Partners not liable for audit
• Companies, Assessee covered under Audit, Working partners of the firms covered for audit and Individuals covered for audit
• Assessee required to submit Report under Section 92E

PROVISIONS OF THE IT ACT

Section 139(4) Belated Return

• To be filed before the end of one year from the relevant AY or completion of assessment whichever is earlier;
• Loss cannot be carried forward

Section 139(5) Revised Return

• To be filed before the end of one year from the relevant AY or completion of assessment whichever is earlier;
• Belated Return can be revised (Changes in Finance Act, 2016)

Section 139(9) Defective Return

• Return treated as defective if
• All Annexures/columns in each head of income, computation of GTI and TI are not filled
• SA Tax u/s 140A has not been paid on or before the date of furnishing return
• Return signed by an un-authorised person; etc.

Remedies

• Opportunity by AO to rectify the defect within 15 days
• Beyond 15 days, AO may condone the delay

Significant Reasons for Changes in ITR

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CRISP ITR-1- INDIVIDUAL & HUF (1 PAGE SIMPLIFIED FORM)

Who Can File ITR-1

• Income from Salary/Pension;
• Income from One House Property;
• Income from Other Sources (only positive income);
• All aggregating up to Rs. 50,00,000/-; Agricultural Income up to Rs. 5000/-

Who Cannot File ITR-1

• Having Dividend Income exceeding Rs. 10,00,000/- (Section 115BBDA);
• Unexplained Tax Credit or Investment taxable @ 60% (Section 115BBE);
• Agriculture Income exceeding Rs. 5,000/-;
• Relief Claimed for Foreign Tax Credit;
• Having Assets/Bank Accounts out of India;
• Claiming Brought Forward Loss from earlier years;
• Individual holding Directorship in any Company;
• Individual who has Invested in Unlisted Equity Share Capital;
• Individual who has claimed deduction under Section 57 other than clause (iia);
• Individual who is assessable for whole or any part of the income on which TDS has been deducted in the hands of a person other than the assessee.

OTHER ITRS

ITR-2

• For Individuals or HUF not having income from business or profession under any proprietorship and who are not eligible to file ITR-1;
• Partners of partnership firm cannot use ITR-2

ITR-3

• For Individuals & HUF having income from a proprietary business or profession

ITR-4 (Sugam)

• Individual & Resident and Not Ordinary Resident HUF and Firm Only. For Presumptive Income business or profession. Separate columns available for computation of profits @ 8% and 6%;
• Should not have any assets/income from foreign country, No Income from Salary or Capital Gains; should not hold Directorship in any Company, should not hold equity shares in unlisted company at any time during year 2018-19,should not have income from more than one house property
• Aggregate Income should not exceed Rs. 50 Lakhs;
• Individual who is assessable for whole or any part of the income on which TDS has been deducted in the hands of a person other than the assessee.

OTHER ITRS

ITR-5

• Person other than Individual, HUF, company and person filing Form ITR-7

ITR-6

• For Companies other than companies claiming exemption under section 11

ITR-7

• Charitable Trust & Associations claiming benefit of exemption under Section 11;
• Political Parties
• Persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F)

ITR-7 (For Trust)

Changes in ITR-1

Income from Salary

• Salary details as to allowances exempt u/s. 10 and Sec. 80D deduction- Drop down to be provided
  in e-filing utility

Income from other sources

• Drop down to be provided in e-filing utility specifying nature of income

For 80G / GGA deductions

• Drop down to be provided in e-filing utility specifying name, address and PAN of donee amount of donation
  and amount eligible for deduction

Changes in ITR-2/ITR-3

Schedule	Changes
Part A –General The amended Form seeks comprehensive details with respect to Residential Status for individuals in India and requires assessee to tick on applicable option	The Form requires details as under: A. Resident _ You were in India for 182 days or more during the previous year [section 6(1)(a)] _ You were in India for 60 days or more during the previous year, and have been in India for 365 days or more within the 4 preceding years [section (6)(1)(c)] [where Explanation 1 is not applicable] B. Resident but not Ordinarily Resident _ You have been a non-resident in India in 9 out of 10 preceding years [section 6(6)(a)] _ You have been in India for 729 days or less during the 7 preceding years [section 6(6)(a)] C. Non-resident _ You were a non-resident during the previous year. (i)Please specify the jurisdiction(s) of residence during the previous year and the Taxpayer Identification Number(s) (ii) In case you are a Citizen of India or a Person of Indian Origin (POI), please specify – Total period of stay in India during the previous year (in days) Total period of stay in India during the 4 preceding years (in days)
Schedule Part –A General	Changes
In case of Representative assessee, the Form now seeks ‘Capacity of the Representative	Drop down to be provided
Sec. 94A details	Transactions with Countries falling under Notified Jurisdictional Areas u/s. 94A are no longer required to be disclosed in Income Tax Return.
Directorship details	The Form requires details as under: Whether you were Director in a company at any time during the previous year? (Tick) _ _ Yes _ No If yes, please furnish following information Name of Company PAN, Whether its shares are listed or unlisted, Director Identification Number (DIN)

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Changes in ITR-2/ITR-3/ITR-5/ITR-6/ITR-7

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Changes in ITR-2/ITR-3

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Changes in ITR-2/ITR-3/ITR-5/ITR6/ITR-7

Changes in ITR-2/ITR-3

Additional Information in ITR-3

Additional Information in ITR-4

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Additional Information in ITR-5

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Additional Information in ITR-6

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Check Points

Total Salary from all employers, irrespective of whether Form 16 has been issued or not, should be entered in
Income details in ITR 1 /ITR 4S or Schedule Salary in all other ITR’s.

Interest income from fixed deposits, savings bank account etc. should be entered in Income from other Sources of ITR 1 or in Schedule OS-Income from Other Sources in all other ITR’s

DEFECTIVE RETURNS UNDER EFILING 

ITR 3/4/5/6– has been filled but Code mentioned under Nature  of Business is 601 or 602 or  603 or 604 which are incorrect codes.

All ITR forms –No Income details or tax computation has been provided in ITR but details regarding taxes paid have been filled and filed

ITR 3,4,5 & 6 –In audit information 44AB flag is Y but Part A P&L and or Part A BS not filled

CONSEQUENCES OF LATE FILING

• Late Fee under Section 271F;
• Penal Interest @ 1% per month under Section 234A;
• Losses cannot be carried forward;
• Deductions under Section 10A, 10B, 80-IA, 80-IB etc. not allowed.

Various Alternative Mechanisms available for e-Verification of Returns

EVC- Through Net banking

• Bank Account Linked with PAN can opt for this facility

EVC –Through Bank Account Number

• Pre-Validate your Bank Account with ITD Portal and your cell number has to be registered.

EVC –Through Demat Account Number

• Pre-Validate your Demat Account with ITD Portal and your cell number has to be registered.

EVC- Through Registered E-mail ID & Mobile Number

• Available only if your income is <= 5 lacs & Refund <= 100

EVC –Through Aadhar OTP

• Link Aadhar on ITD Portal

New Changes Proposed

• Password for Login on ITD Webportal to be replaced with Aadhar OTP to prevent misuse
• Locking of PAN’s for unauthorised use;
• Expanding capturing of Information from earlier year in Returns through Prefill Option in Utility
• Validation of Bank Account before filing of Return itself to get the Refund credited without delay
• Real Time Processing of Returns

Avoid Last Days…

Some Useful Tips

• Returns generated from private software should not be considered as blindly accurate and final;
• Validation Utilities provided by ITD is more or less control oriented. Final Computation needs to be physically verified before filing;
• Compiled by CA Avinash Rawani Do not try to over-ride the utilities provided to suit the same as per the requirements since these are control based

Any Further Help Required

• Call Centre of Income Tax Department available/Helpdesk also available
• send e-mail [email protected] ov.in
• Tools for Help Available on the ITD Website

New Call Centre Numbers

For Income Tax Realted Queries: ASK: 1800 180 1961 For Rectification and Refund: CPC: 1800 425 2229 For E-Filing of Returns:
E-filing: 1800 4250 0025

E-Assessments