Changes in ITR Forms AY 2020-21

Amendments made in the Income Tax Return Forms notified for Assessment  Year 2020-21

The Central Board of Direct Taxes has recently notified Income Tax Returns (“ITR”) forms applicable for Assessment Year 2020-21, vide Notification No.31/2020 dated May 29, 2020. Taxpayers are required to file their return of income in the applicable ITR form, based upon the prescribed criteria.

Certain changes have been made to the return forms as prescribed vis-à-vis last year, in respect of their applicability as well as disclosure requirements. The changes made are majorly due to amendments made in the Income-tax Act and extension of time limit allowed by the Government due to COVID-19 pandemic. Further, ITR 1 and ITR 4 which were earlier notified by Notification No. 01/2020 dated January 3, 2020 have also been re-notified with some modifications.

The amended applicability criteria has been provided hereunder:

ITR No.

ITR No. and Applicability criteria

ITR 1 (SAHAJ)

For Individuals being a resident other than not ordinarily resident having Income from Salaries/ Pension or one house property or income from other sources and having total income upto Rs. 50 lakh.

   ITR 1 is not applicable to:

  • an individual who is a director in a company

  • an individual who has held unlisted equity shares at any time during the year

  • Income from business/ profession and capital gains

  • Agricultural income exceeding Rs. 5,000/-.

  • Assessees having foreign assets/ income/ signing authority in any foreign account.

  • Double taxation relief claim under section 90/91/90A

  • where there is brought forward loss or loss is to be carried forward

  • income from other sources such as winnings from lottery, race horses or dividend income taxable under section 115BBDA, income under section 115BBE i.e. (cash credits, unexplained investments/money/ expenditure etc) or person claiming deduction under section 57 other than u/s 57(iia),

  • loss under the head income from other sources

  • Individual who is taxable for an income in respect of which tax is deducted in the name of other person

ITR 2

For Individuals and HUFs (other than whom ITR-1 is applicable) not having income from profits and gains of business or profession.

ITR 3

For individuals and HUFs (including partner in a firm) having income from profits and gains of business or profession [other than to whom ITR 1, 2 and 4 is applicable]

ITR 4 (SUGAM)

For resident and ordinarily resident individuals and HUFs as well as Resident firms (other than LLP) having presumptive income from business & profession under section 44AD (eligible business), 44AE (business of plying, hiring or leasing goods carriages) and 44ADA (specified professions) and having total income upto Rs. 50 lakh.

ITR 4 (Sugam) is not applicable to:

  • Individual who is a director in a company

  • has held unlisted equity shares at any time during the year

  • Agricultural income exceeding Rs. 5,000/-

  • Assessee having foreign assets/ income/ signing authority in any account located outside India.

  • Income from speculative business/ agency business/ commission/ brokerage/ special income

  • income from Capital Gains,

  • Income from more than one House Property

  • income from other sources such as winnings from lottery, race horses or dividend income taxable under section 115BBDA, income under section 115BBE i.e. (cash credits, unexplained investments/money/ expenditure etc) and person claiming deduction under section 57,

  • where there is brought forward loss or loss is to be carried forward

  • Double taxation relief claim under section 90/90A/91

  • Individual who is taxable for an income in respect of which tax is deducted in the name of other person

ITR 5

For persons other than, (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR 7 (i.e. for firm, LLPs, AOP, BOI, Local Authority, Artificial Juridical Person etc.).

ITR 6

For Companies other than companies claiming exemption under section 11

ITR 7

For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D). (i.e. for charitable trust, research associations, universities, political parties etc.)

 

The key changes made in the ITR forms prescribed for the AY 2020-21 have been summarised as under:

1. Information of specified transactions to be disclosed by persons liable to file return under                 seventh proviso to Section 139(1)

Individuals covered under the seventh proviso to section 139(1) i.e. (a) who have deposited more than Rs. 1 crore in one or more current accounts (b) who have spent more than Rs. 2 lakhs on foreign travel on himself or any other person and (c) who have incurred more than Rs. 1 lakh on electricity bill, are compulsorily required to file return of income.

Under the new ITR Form 1,2,3,4 and 5, the persons who are filing return under seventh proviso to section 139(1) and are otherwise not required to file return of income, have to specifically state as to which criterion (i.e. the specified transaction undertaken by him) under seventh proviso to section 139(1) has been satisfied by him and thereafter the amount of the specified transaction undertaken by him is also required to be stated in the return.

Earlier, CBDT in its notification dated January 03, 2020 restricted filing of ITR 1 and 4 by persons covered under the seventh proviso to section 139(1). However, the said notification was subsequently withdrawn by CBDT. In the renotified ITR 1 and ITR 4, there is no such restriction on the individuals covered under seventh proviso to section 139(1).

2. Insertion of new ‘Schedule DI- Details of Investment’

Due to COVID-19 pandemic, the last date for making certain tax saving investments for FY 2019-20 was extended by the Government from 31st March, 2020 to 30th June, 2020 (now further extended to 31st July, 2020). In order to give effect to the said amendment ITR 1, 2, 3, 4, 5 and 6 have been amended to seek details of investments, deposits, payments etc for claiming deduction made during the extended period.

3. Use of PAN and Aadhaar interchangeably

The Finance (No.2) Act, 2019 introduced amendment to provide for inter- changeability of PAN with the Aadhaar number. To give effect to the same, interchangeability of PAN and Aadhaar Number has been introduced in the new ITR Forms 1, 2, 3, 4, 5, 6, and 7 in case of assessee, auditor, tenants, shareholders etc wherever quoting of PAN is mandatory as per the Income Tax Act. As such, various schedules of ITR, where assessee is required to furnish the PAN of the second party have accordingly been updated to use PAN and Aadhaar interchangeably.

While filing ITR-1, 2, 3 and 4, an individual assessee having Aadhaar Number but not having a PAN can also file his/her Return of Income by simply quoting his/her Aadhaar Number.

4. Change in threshold limit under section 44AB

Finance Act, 2020 has increased the threshold limit for mandatory audit under section 44AB from Rs. 1 crore to Rs. 5 crores provided more than 95% of the business transactions are done through banking channels. Under new ITR forms 3, 5 and 6 an assessee whose total sales/turnover/gross receipts of business exceeds Rs. 1 crores but does not exceed Rs. 5 crore is required to give declaration regarding satisfaction of this criteria so as to attract higher monetary limit for tax audit.

5. New Schedule for tax on Secondary Adjustment as per section 92CE(2A) 

Where, as a result of primary adjustment to the transfer price, there is an increase in the total income or reduction in the loss of the assessee, the excess money which is available with its associated enterprise, if not repatriated to India within the time prescribed, is deemed as an advance made by the assessee to such associated enterprise. 

In order to align the transfer pricing provisions with international best practices, section 92CE of the Act provides for secondary adjustments in certain cases. It provides that where the primary adjustment to transfer pricing has been made, the assessee shall be required to carry out secondary adjustment and the assessee will have the option to pay additional income-tax at the rate of 18% (plus surcharge of 12%) on such excess money or part thereof in addition to the existing requirement of calculation of interest till the date of payment of this additional tax. If the assessee pays the additional income-tax, he will not be required to make secondary adjustment or compute interest from the date of payment of such tax.

A new Schedule TPSA has been incorporated in ITR 3, 5 and 6 to include details of tax paid on secondary adjustment. The new schedule includes details of amount of primary adjustment, additional income tax payable @ 18% on primary adjustment, surcharge @ 12% and cess @ 4%.

6. New depreciation rate of 45% on motor car

CBDT vide Notification No. 69/2019 dated 20.09.2019 provided a higher rate of depreciation on motor cars and other motor vehicles acquired between 23.08.2019 and 31.03.2020 and put to use on or before 31.03.2020. By virtue of the said notification, motor cars acquired during the aforesaid period are entitled for higher depreciation rate of 30 percent as against 15 percent applicable for other motor cars. Similarly, in the case of Motor buses, motor lorries and motor taxis used in a business of running them on hire acquired during the aforesaid period, the rate of depreciation has been increased from 30 percent to 45 percent.

In order to give effect to the CBDT Notification, a new column of depreciation @ 45% has been added in schedule DPM Depreciation on Plant and Machinery in ITR 3, 5 and 6.

7. Pass Through Income / Loss in the nature of Long Term Capital Gain

Section 115UB allowed Pass through status to the income earned by Investment Fund except for business income which was taxed at the Fund level. The Finance (No. 2) Act, 2019 allowed pass through of losses (other than business losses) also to their unitholders. Loss distributed among the unit holders will not be available to be carried forward by the investment funds and shall be reduced proportionately.

In order to give effect to the amendment, existing schedules have been amended in ITR 2, 3, 5, 6 and 7. As such, loss other than business loss can be transferred to unitholders and unitholders can report pass through losses under the head house property, capital gains and other sources. Accordingly, Schedule OS (Income from Other Sources), Schedule HP (Income from House Property), Schedule CG (Income from Capital Gains), Schedule SI (Income chargeable to tax at special rates), Schedule EI (Details of Exempt Income) and Schedule PTI (Pass Through Income) has been updated to incorporate the changes.

8. Changes applicable only to ITR-6

  • Reporting of alternate/ concessional tax regime- In new ITR 6, Part-A of General Schedule, company is required to report if it is opting for any Concessional tax regime under section 115BA, 115BAA or 115BAB available for various specified domestic companies.

  • Co-owned land and building to be reported- Companies are now required to report their share in co-owned land or building in addition to any capital gain/ loss arising from the sale of land or building or both in ITR 6.

9. Changes applicable only to Trusts in ITR 7

  • Details of re-registration as per new provisions to be furnished- The Finance Act, 2020 introduced new section 12AB replacing section 12AA and also bringing similar changes in section 10(23C) and 80G. As per the amendment, trusts already registered under section 12A/12AA or approved under section 10(23C) or 80G are again required to make an application under section 12AB by 31.12.2020. The new form requires furnishing of the following details in respect of application of registration under new provisions:

    • Whether application for registration is made as per new provisions

    • Section under which the registration is applied

    • Date on which the application for registration/ approval as per new provisions is made

    • Section of exemption opted for under the new provisions

 

  • Corpus donation to entities claiming exemption under section 10(23C) to be shown under disallowable expenditure

In order to rationalise section 10(23C) and introduce a similar provision as under section 11, the Finance Act, 2020 introduced an amendment to provide that corpus donation shall not be included in the income of entities claiming exemption under section 10(23C) and consequently, corpus donation made by such entities to any other entity claiming exemption under section 10(23C) shall not be considered as application of income. In order to give effect to such amendment, ITR Form 7 has been accordingly modified to include details of only ‘Donation- other than corpus’.

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