Recent Changes in ITR Forms for AY 2022-23

The Income-tax department has recently notified the Income tax Return Forms applicable for Assessment Year 2022-23. The new ITR forms do not alter the criteria for their applicability to different classes of assessees. However, a lot of modifications have been introduced in the new forms in respect of the disclosure requirements. Some of them are consequential to the amendments made by the Finance Act 2021.

In this article, we have highlighted the key differences in current year’s ITR Forms vis-a-vis the last year’s ITR Forms. Let us understand these variations one by one by walking through the same:

1: Additional disclosures needed in the Capital Gains Schedule

[ITR 2, 3, 5 & 6]

The new ITR Forms need the following additional disclosures in the Schedule CG:

* Year-wise details of the cost of improvement

The assessee is now required to provide year-wise details of the cost of improvement (if any) incurred on the immovable property (land/building) transferred during the relevant financial year. The new ITR forms require the following additional details from the assessees:

* Year of improvement;

* Cost of improvement; and

* Indexed cost of improvement.

These details need to be given year-wise if the assessee has incurred the cost of improvement in different financial years.

* Date of acquisition and transfer of land/building

The new ITR forms require the taxpayers to furnish the date of purchase/acquisition and date of transfer of land or building if the income arising from the transfer is being reported under the head ‘Capital Gains’.

* Separate disclosures of cost of acquisition and indexed cost of acquisition

The new ITR Forms require the taxpayer to mention both the ‘cost of acquisition’ and the ‘indexed cost of acquisition’ of the property, unlike the previous ITR Forms, in which the assessee was supposed to disclose only the indexed cost of acquisition of the property transferred.

* Country Code and Zip Code if the property is situated in a foreign country

It has now been made compulsory to furnish in the ITR forms the Country Code and ZIP Code along with the details of the buyers and the address of the property transferred if such property is situated outside India.

2: Reporting of interest accrued on Provident Fund on which no exemption is available

[ITR 2 & 3]

The interest income accruing in respect of an employee’s contribution over Rs. 2,50,000 p.a. in the recognised and statutory provident fund is now taxable under the head ‘income from other sources’. However, if such an individual has contributed to a fund in which his employer has not made any contribution, then this limit of Rs. 2,50,000 shall get increased to Rs. 5,00,000.

Change in the new ITR Form

In the new ITR forms, applicable for AY 2022-23, the Schedule OS (Other Sources) has been amended to enable the taxpayers to report such interest income.

3: New Schedule inserted for reporting of deferred tax on ESOP

[ITR 2 & 3]

An employee can defer the payment/deduction of tax on shares allotted under ESOP for specified securities by an eligible start-up referred to under section 80-IAC.The Part B of Schedule TTI in ITR Forms for AY 2021-22 shows the reporting of the tax amount deferred in this regard.

Change in the new ITR Form

A ‘Schedule: Tax Deferred on ESOP’ has been inserted in the new ITR Forms. This schedule requires the following disclosures:

* Tax deferred in ITR filed for FY 2020-21;

* Date of sale of the specified securities and the amount of tax payable on such sale;

* The date on which the assessee ceased to be an employee of the organisation;

* Amount of tax payable in current AY;

* Balance tax amount deferred to be carried forward to the next AY.

The tax payable in the current AY is exported in a new row inserted in Part B of TTI (Computation of tax liability on total income).

4: Relief u/s 89A from taxation of income from retirement benefits account maintained in a notified country

[ITR 1, 2, 3 & 4]

When a non-resident becomes a resident of India, the income from his foreign retirement benefits account maintained in a foreign country becomes liable to tax in India on an accrual basis. But, some countries tax such an income on receipt basis. Due to an inconsistency in the year of taxability of such income from the retirement benefits account, the assessees face difficulties in availing of the foreign tax credit in respect of tax paid outside India on such income.

Section 89A was inserted with effect from the assessment year 2022-23 to remove the difficulty mentioned above. The CBDT has notified the United Kingdom of Great Britain and Northern Ireland, Canada and the United States of America to be notified countries for the purpose of section 89A.

Change in the new ITR Form

In the new ITR Forms, Schedule S (Details of Income from Salary) has been amended to disclose the following:

* Income from the retirement benefits account maintained in a notified country under Section 89A.

* Income from the retirement benefits account maintained in a country other than notified country under Section 89A.

The eligible assessee is allowed to claim a deduction of ‘Income claimed for relief from taxation on the application of Section 89A’.

5: Bifurcation of ‘Income from Other Sources’ into ‘Dividend Income’ and ‘Other than Dividend Income’ in Schedule BP

[ITR 3, 5 & 6]

Schedule BP provides for the exclusion of certain incomes/receipts that are credited to the Profit & Loss Account but are chargeable to tax under the other heads of income. This list includes incomes/receipts taxable under:

* Salaries

* Capital Gains

* House Property

* Other Sources

* Section 115BBF

* Section 115BBG

Change in the new ITR Form

The new ITR Forms have bifurcated the income credited to the Profit & Loss Account but taxable under the head ‘Other Sources’ into ‘dividend income’ and ‘other than dividend income' in the list of incomes to be excluded from business or professional income under Schedule BP.

6: Reporting of interest paid to Deposit-Taking NBFCs or Systemically Important Non-Deposit Taking NBFCs

[ITR 3, 5 & 6]

As per section 43B, certain expenditures are allowed as deductions only on the basis of actual payment, even if the taxpayer follows the mercantile system of accounting. However, these expenditures are allowed in the year of accrual if the payment thereof is made either in the relevant financial year itself or in the subsequent year on or before the due date of filing the return of income or the actual date of filing the ITR, whichever is earlier.

The Finance Act, 2019 amended section 43B to include in its scope any interest payable by the taxpayer on any loan or advances from a Deposit-Taking NBFCs or Systemically Important Non-Deposit Taking NBFCs.

Change in the new ITR Form

In the new ITR Forms, a new row has been inserted in Part A-OI ‘Other Information’ requiring the taxpayer to disclose the interest amount on any loan or advances from a Deposit-taking NBFCs or Systemically Important Non-Deposit Taking NBFCs that was disallowed in the earlier year but is allowable during the previous year.

7: Schedule 80GGA inserted for the partners deriving only profit from the firm

[ITR 3]

Section 80GGA of the Act allows a deduction for the amount contributed to specified institutions or associations. This deduction is entitled to a taxpayer who is not having any income taxable under the head ‘profits and gains from business or profession’.

Change in the new ITR Form

In ITR-3, a Schedule 80GGA (Details of donations for scientific research or rural development) has been inserted. This schedule applies in the case of a partner of a firm receiving only profit from such a firm. The following disclosures are needed in this schedule if the partner of a firm wants to claim deduction u/s 80GGA and he is not earning any business or professional income other than the share of profit from the firm:

* The relevant clause under which the deduction is claimed;

* Name and address of the donee;

* PAN of the donee;

* Amount of donation; and

* The eligible amount of donation.

8: Additional disclosure required regarding income exempt under certain clauses of Section 10

[ITR 5 & 6]

Earlier, no separate reporting was required for income exempt under clauses 23FB, 23FBA, 23FC, 23FCA, 23FE, 23FF and 4D of section 10.

Now, the new ITR Forms need separate disclosure of the following income in Schedule EI (Details of Exempt Income):

* Section 10(4D): Exemption to Specified Fund

* Section 10(23FB): Exemption to Venture Capital Company or Venture Capital Fund

* Section 10(23FBA): Exemption on Income from Investment Fund

* Section 10(23FC)/10(23FCA): Exemption to a Business Trust

* Section 10(23FE): Exemption to a wholly-owned subsidiary of ADIA or pension fund or Sovereign wealth fund

*Section 10(23FF): Capital gains arising from transfer of shares of a company resident in India on account of relocation of offshore funds

9: Separate disclosure required of interest and dividend incomes chargeable to tax u/s 115AC

[ITR 3, 5 & 6]

Schedule SI (Special Income) requires details of the income taxable at special rates. Earlier, this schedule sought the combined disclosure of total income taxable under Section 115AC.

In the new ITR Forms, Schedule SI has been amended to provide separate disclosure of the following income chargeable u/s 115AC:

* Interest income received by a non-resident from the bonds purchased in foreign currency; and

* Dividend income received by a non-resident from the GDRs purchased in foreign currency.

Also, a residuary clause has been provided in Schedule SI to report any other income taxable at a special rate.

10: Further classification of nature of employment for pensioners

[ITR 1, 2, 3 & 4]

Earlier, in the dropdown of ‘Nature of Employment’, an assessee receiving a pension had to select the option of ‘Pensioners’. In the new ITR forms, the following options have been incorporated for pensioners:

* Pensioners – CG,

* Pensioners – SC,

* Pensioners – PSU and

* Pensioners – Others.

11: Disclosures for alternative tax regime opted u/s 115BAC

[ITR 3 & 4]

The following disclosures are needed in ITR-3 and ITR-4 regarding the alternative tax regime under section 115BAC:

* Whether the assessee has opted for the alternative tax regime u/s 115BAC and filed Form 10-IE in Assessment Year 2021-22;

* For the Assessment Year 2022-23, the assessee has to choose from the following options:

* Opting in now

* Not opting

* Continue to opt

* Opt out

12: Disclosure for alternative tax regime opted u/s 115BA/115BAA/115BAB

[ITR 6]

The following disclosures are needed in ITR 6 regarding the alternative tax regime opted under section 115BA/115BAA/115BAB:

* Where the domestic company has already opted for the alternative tax regime, it has to specify the AY in which the said option was exercised for the first time and the date of filing of the relevant form (i.e., 10-IB/10-IC/10-ID) with its acknowledgement number;

* Where the domestic company is opting for the alternative tax regime in the current year, it has to specify the date of filing of the relevant form (10-IB/10-IC/10-ID) with its acknowledgement number.

13: New Schedule IF inserted requiring the disclosure of investment made in an unincorporated entity

[ITR 6]

A Schedule IF (Information regarding investment in unincorporated entities) has been inserted in the new ITR Form 6 that mandates the companies to report the following information regarding the investment made in the unincorporated entity:

* Name of the entity;

* PAN of the entity;

* Type of the entity;

* Whether section 92E applies to the entity?;

* Whether the entity is liable for the audit?;

* Percentage share in the profit of the entity;

* Amount of share in the profit;

* Capital balance as on 31^stMarch in the entity.

14: Schedule FA requires disclosure of foreign assets held during the calendar year

[ITR 2, 3, 5 & 6]

CBDT requires a resident taxpayer to disclose his foreign assets and any foreign income earned in Schedule FA of the ITR Forms. Reporting is needed even if the assessee is a beneficial owner of such foreign asset or has a financial interest in any foreign entity. Disclosure in Schedule FA of different foreign assets such as foreign equity and debt interest held, trusts created outside India, Foreign Depository Account, etc., is required.

Change in the new ITR Form

In the new ITR Forms, the phrase ‘accounting period’ has been replaced with ‘calendar year ending as on 31^stDecember 2021’. This change implies that the assessee has to furnish the details of all the foreign assets held between 1^stJanuary, 2021 and 31^stDecember, 2021 in return to be filed for the AY 2022-23. Irrespective of the fiscal year followed in the foreign country; the reporting is to be made if the specified foreign assets are in the relevant calendar year.

In conclusion, the Income-tax department has introduced several modifications in the new ITR forms for Assessment Year 2022-23. These changes include additional disclosures in the Capital Gains Schedule, reporting of interest accrued on Provident Fund, a new schedule for reporting deferred tax on ESOP, relief from taxation of income from retirement benefits account in a notified country, bifurcation of income from Other Sources, reporting of interest paid to NBFCs, and more. It is important for taxpayers to be aware of these variations and accurately fill out the new forms to ensure compliance with tax regulations.

Stay updated on the new changes in ITR Forms! File your return accurately and on time. Contact us at info@manishanilgupta.com for assistance.

Disclaimer: This article is meant purely for knowledge and educational purposes. It contains only general information and references to legal content. It is not legal advice, and should not be treated as such.