As a prerequisite, the income tax returns for the tax year 2022-23 in order to file the annual income tax return for the fiscal year ended March 31, 2022 are in place.
It should be noted that for income tax purposes, all assessees are required to follow the aforementioned uniform financial year, regardless of the closing of their books of accounts, either the calendar or any other period of twelve months.
The good news is that there are no major changes this year to, say, the applicability of tax returns to different taxpayers. The Income Tax Service’s new e-filing portal, Form 26AS, Taxpayer Information Summary (TIS), and Annual Information Statement (AIS) have made filing the tax return easier.
On February 1, 2022, the Union Finance Minister, during the presentation of the 2022 budget, announced an FT on digital currency transactions. Adequate changes were expected in these new statements for reporting the same. However, there is ambiguity on how to declare them.
Apart from this, a considerable amount of additional information and disclosures are requested from taxpayers.
Let’s look at some details.
New tax returns
ITR-1: This declaration, also known as SAHAJ, applies to a resident taxpayer and an ordinary resident whose total income does not exceed 50,000 rupees and who fulfills other conditions.
The recently released ITR 1 seeks to break down wage income into salary, perquisites, and exemptions, among others. A taxpayer is also required to provide details of income from such “retirement benefit accounts” held in foreign countries such as Canada, UK, US and Northern Ireland. In addition, the quarterly breakdown of pension benefits to qualify for relief under Section 234C will need to be provided.
ITR-2: It applies to Hindu Undivided Individuals and Families (HUF) who have no income from the profits and earnings of a business or profession.
Now, he is required to disclose both “acquisition cost” and “indexed acquisition cost” when calculating capital gains. All of these changes are also reflected in RTIs 3, 5 and 6.
ITR-3: Applies to an individual or HUF with income from the “profits and gains of a business or profession”. All income covered by ITR 1 and 2 is also valid for this form. However, if an individual is a partner, then they must use ITR 3.
ITR-4: This statement is also known as SUGAM. It applies to individuals, HUFs and companies with total income up to Rs 50 lakhs and having business or professional income who have specifically opted for the flat tax scheme under Sections 44AD, 44ADA and 44AE.
The following information is required with respect to the alternative tax regime in BAC Section 115: whether the assessee has elected an alternative tax regime thereunder and whether the assessee has filed Form 10-IE at during the 2021-22 tax year or not. When filing this year’s return, the assessee must choose one or the other – register now or not register or continue to register or opt out, this also applies to ITR-3, as applicable.
ITR-U: to reduce disputes and provide an opportunity to correct bona fide errors that occurred when filing declarations, the 2022 Union budget introduced a new concept of “updated declaration” with effect April 1, 2022. It will allow an updated return to be filed within 24 months of the end of the relevant assessment year with applicable late fees, for example, a person can now file an updated return day for the 2020-21 / 2021-22 assessment year and correct its previously filed returns.
Therefore, a new ITR-U form was notified on April 29, 2022 and must be filed with the applicable ITR. The reasons for filing these updated returns are as follows: “income not reported correctly, new disclosure of evaded income, wrong choice of income, reduction in tax credit or depreciation not absorbed, incorrect tax rate”. However, filing a nil return, increasing the refund or reducing the tax payable is not allowed.
Through the new e-filing portal, nearly 5.89 million returns have been filed as of December 31, 2021, the extended due date for this assessment year. Over 45.5% of returns were filed using the new e-filing portal and the remainder using offline software utilities.
Although filing tax returns is becoming easier day by day, it is advisable to seek advice from a tax professional on critical aspects such as capital gains, stocks, shares, investment-related claims and disclosure of foreign assets to avoid future unintended consequences.
(The author is the founder and CEO of Shree Tax Chambers)