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The Center invited stakeholders to provide feedback by December 15 image. News18
Soon there may be only one form for tax returns.
This, according to the latest proposal from the Ministry of Finance on Tuesday.
The Central Board of Direct Taxes (CBDT) has invited stakeholders to submit their comments by December 15.
Let’s take a closer look at the proposal:
How many ITR forms are there?
Currently, there are 7 types of income tax return forms (ITRs) which are filed by different categories of taxpayers.
ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) are simpler forms that cater to a large number of small and medium taxpayers. Sahaj can be deposited by a person with an income of up to Rs 50 lakh who receives income from salary, house property/other sources (interest, etc.).
ITR-4 can be filed by individuals, Hindu Undivided Families (HUF) and companies whose total income does not exceed Rs 50 lakh and who have business and professional income.
ITR-2 is filed by individuals with income from residential property, ITR-3 by individuals with income from a business/profession, ITR-5 and 6 by LLPs and corporations respectively, while ITR-7 is filed by trusts.
“Current ITRs come in the form of designated forms in which the taxpayer is required to go through all the schedules, regardless of whether that particular schedule is applicable or not. This increases the time required to file ITRs and, in turn, can create avoidable hardship for taxpayers,” the CBDT project said, according to Economic times.
How will it benefit the public?
According to the Ministry of Finance, the proposed form will be user-friendly with income from digital assets under a separate heading.
All taxpayers, except trusts and not-for-profit organizations, will be permitted to file returns in the proposed form.
The CBDT, which falls under the Department of Finance, said ITR-1 and 4 would continue, but individuals would also have the option of filing tax returns in the common ITR form.
“He proposes to introduce a common ITR by merging all existing tax returns except the ITR-7. The RTI project aims to facilitate the filing of returns and significantly reduce the filing time of the ITR by individuals and non-commercial taxpayers,” the CBDT said.
Taxpayers will not be required to consult schedules that do not apply to them. It will have smart schedule design in a user-friendly way with better layout, logical flow and increased scope of pre-filling.
Representative image. Pixabay
“It will also facilitate the appropriate reconciliation of third-party data available with the Department of Income Tax against data to be reported in the ITR to reduce the compliance burden on taxpayers,” said the CBDT.
The proposed ITR would be customized for taxpayers with applicable schedules based on certain questions they answered.
Once the Common ITR Form is notified, after considering input received from stakeholders, the online utility will be released by the Department of Income Tax.
“In such a public service, a personalized IPR containing only the applicable questions and schedules will be made available to the taxpayer,” the CBDT said.
What are the experts saying?
Sujit Bangar, former IRS officer and founder of Taxbuddy.com said Economic period, “The CBDT wanted to unblock the single ITR form for all taxpayers regardless of the type of person or the sources of income. However, RIR 7 (applicable to charitable trusts) is maintained. In addition, the RTI-1 (Employee individuals) and the RTI-4 (Lump-sum tax regime) will be optional with the new RTI form. This is a very important step in promoting voluntary compliance. This implies that the registrant only has to fill in the relevant details requested by the analysis of his own answers. Irrelevant information and times should not be seen or displayed. It will be a big help to taxpayers if little-used schedules like transfer pricing, seldom-claimed deductions, and provisions like clubbing are kept separate and ended with a single question asked at the beginning.
Sandeep Jhunjhunwala, partner at Nangia Andersen LLP, said taxpayers filing tax returns in Forms ITR-2, ITR-3, ITR-5 and ITR-6 would not have the option of filing old forms, a once the new common form and related utility will be notified. .
“Contemporary reporting requirements such as transmission of income or loss under various headings, income from virtual digital assets, reporting and details of business connection, permanent establishment and significant economic presence in India for non-residents, and details of foreign equity and debt interest held remain the strengths of the new Common ITR Form,” Jhunjhunwala added.
Stakeholders can send their comments on the draft Common ITR Form to dirtpl4@nic.in and CC dirtpl1@nic.in by December 15.
With contributions from agencies
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