The Income Tax department introduced many changes to the ITR filing process and forms this Assessment Year (AY). Find out all about them.
Even if you have diligently saved taxes with the help of your Home Loan, tax-saver Fixed Deposit, Life/Health Insurance or National Pension Scheme, you have to know the changes made to Income Tax Return (ITR) forms and processes, especially if you are filing your taxes on your own. Note that the last date for filing your ITR is July 31, 2019, and this hasn’t been extended yet.
This has been a year of modifications when it comes to filing taxes. At first, the ITR forms were changed, e-filing was made compulsory for everyone, and then, the way income is specified in the forms were changed. Here’s all that you need to know.
Not everyone can file ITR-1. Only a resident salaried individual with an income of less than Rs. 50 lakhs a year can file this form. However, if you have any capital gains and/or income from agricultural sources, you cannot use ITR-1. You have to check if it is ITR-2 or ITR-3 that’s applicable for you.
Those who have made capital gains during the year can use ITR-2. Have income from more than one house property? Then, you can file ITR-2. For those who have business income, it will be ITR-3.
The most important change this year is that ITR-1 cannot be used by a resident who is either a director in a company or has unlisted equity shares. This is even if their income is below Rs. 50 lakhs.
Additional Reading: The New ITR Forms: Up Close And Personal
If you are the director of a company, you need to file ITR-2/ITR-3. This will have disclosures on the company in which you are a director. You need to give details like the name of the company, the company’s PAN and your Director’s Identification Number (DIN). Also, you need to disclose the category of listed/unlisted shares of the company in which you are a director.
The deadline for Form 16 and Form 24Q was recently extended. If you didn’t know, your employer will deduct TDS and then deposit it to the government. They have to submit Form 24Q for this. The deadline for Form 24Q was extended from May 31, 2019, to June 30, 2019, and because of this, the deadline for employers to issue Form 16 was extended by 25 days, i.e. from June 15 to July 10. This means you have just 21 days to file your ITR after receiving Form 16. So, why is there a delay? The reason is that the Form 16 format has been changed.
Form 16: Deductions And Exemptions
The Income Tax (IT) department has asked employers to give a detailed break-up of tax-exempt allowances and tax breaks in Form 16. So, all your deductions including those under 80C, 80CCD, 80E and 80G will have to be disclosed separately. Earlier, just a consolidated amount for all deductions was needed. Now, it will include details with respect to Leave Travel Allowance, Gratuity, Commuted Pension, Leave Encashment and House Rent Allowance.
Another change is that in the new Form 16 format there is a specific column for providing the total amount of salary that you received from other employers.
Additional Reading: Tax Tips For Those In The Highest Tax Bracket
Since the IT department wants detailed disclosures regarding exemptions, ITR form will have a separate tab for section 80GGA. As you might know, this section is for those who wish to claim a deduction for donations to specific institutions. Complete details like the name and address of the organisation to which you donated, PAN of that organisation, donation amount and the deduction amount will have to be provided. Why? This will help the IT department to check the genuineness of the claim.
Sold A Property?
Earlier when you sold a house property, you just gave the capital gains in your ITR. From this year, you will have to furnish additional details for all capital gains arising from the transfer of immovable property. This will be details like address of the property sold, and name and PAN of the buyer. If there are many buyers, their proportionate share in the property has to be mentioned.
You need to use ITR-2 or 3 depending on whether your income comes from a business or not. In these forms, you will have to establish your residential status. How? Provide the number of days for which you were physically present in India. Under the Income Tax Act, taxability of an individual depends on his residential status. This is as per section 6(1) of the Income Tax Act, 1961.
You will have to mention the country of your residence and also the identification number for that country. Even if you are a citizen of India or Person of Indian Origin (PIO), you will have to mention the total time you stayed in India during the previous Financial Year (FY), which will be FY 2018-19.
Have Unlisted Equity Shares Or Foreign Assets?
Unlike earlier where you may not have declared unlisted shares held by you, now you will have to disclose the details of all unlisted equity shares that you held in the previous year. This will include details such as name and PAN of the company in which you held the shares, opening balance of the number of shares, shares purchased/sold, date of purchase and costs, along with the consideration and closing balance number of shares.
Held foreign assets? Then, you will need to declare them in your ITR. Information on the assets including foreign depository and custodian accounts will have to be given. If you have held any equity and debt investments in any company during the previous year, you must disclose the details like name of the country in which the asset was held, company’s name and the nature of business and date of acquisition of the asset.
Additional Reading: Capital Gains Tax Guide For NRI
In the previous years, you gave all the interest income that you earned under ‘Income from other sources’. Now, you will have to specify what kind of interest income you earned. You need to put them into different categories like interest received from a government instrument or interest you received from foreign deposits.
Tax On Cashback?
If you didn’t know, you may have to pay taxes on the cashback that you received in the previous year. However, this will depend on the type of cashback received by you. Only cashback received as cash in your account will be subject to tax if it exceeds Rs. 50,000 in a financial year. How?
These cashbacks are classified as ‘gifts’. A gift is any sum of money that is received without any consideration. Since you receive cashback without the need to pay anything for it, it is taxable. This will include any credit in your bank account, e-wallets or Credit Card. As per Indian law, gifts received as cash in your account are taxed only if they exceed Rs. 50,000 a year. This is not applicable to gifts received in kind. So, if you get cashback in the form of goodies, like free earphones or watches, it is not taxable.
Since this is part of the gift tax if the total cashback is less than Rs. 50,000 but when you include monetary gifts from non-relatives/friends if the total comes to Rs. 50,000, then you will have to pay tax.
No paper forms! From this year onward, all individuals, other than super senior citizens above the age of 80 years, will need to compulsorily file their ITR electronically.
Additional Reading: Income Below Taxable Limit? Why You Should Still File ITR
To make the tax filing process easy, the IT department will provide pre-filled ITR-1 forms when you file your ITR online. What are the details that will be pre-filled? Almost all details provided by you to your employer and that is part of Form 16. This will include your salary, FD interest income and TDS details. How? Your PAN details, the TDS filed by your employer in 24Q and Form 26AS will be used for pre-filling these details.
Deductions claimed by you under various IT sections such as 80C to 80U will also be pre-filled in ITR-1. Even details regarding house property will be pre-filled for you. In case you haven’t provided these details to your employer but want to make use of the deductions, you can fill the form by yourself. In case of any mismatch, you can change the amounts as the fields will be editable.
However, note that this facility will be available only for those taxpayers who file ITR-1 online via the IT department’s e-filing website (incometaxindiaefiling.gov.in).
Thought you will get a cheque or Demand Draft for your tax refund? That’s not the case! From this year, the IT department will issue only e-refunds. This came into effect since March 1, 2019. Not only that, e-refunds will be issued to only those bank accounts that have been verified on the IT department’s e-filing website. The bank account needs to be linked to your PAN as well. Haven’t linked your PAN to your bank account? Do it now. You can use any bank account such as Savings, Current or Overdraft.
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