Key Changes in Income Tax Return Forms for FY 2023-24

Introduction

The Income Tax Return (ITR) forms for the fiscal year 2023-24 have experienced significant revisions that affect various categories of taxpayers. These updates include changes to filing deadlines and taxation rules, necessitating careful attention and understanding. This article provides an in-depth analysis of the modifications in ITR Forms 2, 3, 5, and 6.

Changes in ITR Forms 2, 3, 5, and 6

1. Filing Deadlines

ITR Forms 3, 5, and 6 now feature a new column requesting information about the deadline for submitting income tax returns. Taxpayers must select their applicable filing due date from options including July 31st, October 31st, or November 30th.

2. EVC for Tax Audits

Form ITR 3 has undergone revisions in Rule 12, allowing individuals and Hindu Undivided Families (HUF) subject to tax audits under Section 44AB to verify their returns using an electronic verification code (EVC). Previously, digital signatures were the sole method of verification.

3. Reasons for Tax Audit under Section 44AB

Additional details regarding the circumstances necessitating tax audits are now required from audited companies in Forms ITR 3, 5, and 6. This change aims to improve transparency and accountability in tax reporting practices.

4. Cash Receipts Reporting

The Finance Act, 2023, raises the turnover threshold for the presumptive taxation scheme under Section 44AD from INR 2 crores to INR 3 crores, provided cash receipts do not exceed 5% of total turnover or gross receipts from the previous year. Similarly, Section 44ADA has been amended to increase the gross receipts threshold from INR 50 lakhs to INR 75 lakhs under the same cash condition. New columns for reporting cash receipts have been added to Schedule BP ("Profits and Gains from Business and Profession") in Forms ITR 3, 4, and 5.

5. Capital Gains Accounts Scheme (CGAS) Reporting

The Schedule-CG ("Capital Gain") of ITR forms now requires more comprehensive details regarding capital gains earned. The newly amended Schedule-CG in ITR-2 will now include the date of deposit, account number, and IFS code related to deposits in the Capital Gains Accounts Scheme (CGAS).

6. Details of Legal Entity Identifier (LEI)

The Legal Entity Identifier (LEI) is a 20-character alphanumeric code used to uniquely identify parties in global financial transactions. In line with RBI regulations, all single payment transactions of INR 50 crores or more undertaken by non-individual entities must include the LEI information of both the remitter and beneficiary. Legal Entity Identifier disclosure is now mandatory for refunds exceeding INR 50 crores in Forms ITR 5 and 6, requiring updates on the Income Tax Portal.

7. Political Party Contributions

Section 80GGC allows deductions for contributions to political parties or electoral trusts. The new ITR forms introduce Schedule 80GGC to document political party contributions, which include the date of contribution, contribution amount (detailed by cash and other modes), eligible contribution amount, and transaction reference number for electronic transfers.

8. Adjustment of Unabsorbed Depreciation

Taxpayers opting for Sections 115BAA or 115BAC are prohibited from setting off unabsorbed depreciation from additional depreciation. Such depreciation must now be adjusted to the written down value (WDV) of the asset block as of April 1, 2023. Revised ITR Forms 3, 5, and 6 have modified Schedule DPM to reflect this change.

9. Online Gaming Winnings Taxation

The Finance Act, 2023, introduced Section 115BBJ to tax online gaming winnings at 30% from Assessment Year 2024-25. Tax deductions on such winnings will be made under Section 194BA. Revised ITR Forms 2, 3, 5, and 6 now include amendments to Schedule OS ("Income from Other Sources") to allow reporting of online gaming income.

10. Schedule 80DD

The new ITR forms (ITR 2 and 3) feature Schedule 80DD, requiring details related to deductions claimed for the maintenance and medical treatment of dependents with disabilities. Previous forms only required the amount claimed under Section 80DD.

11. Reporting of Sums Received by Unitholders from Business Trust

To prevent dual non-taxation of distributions made by business trusts to unitholders, the Finance Act, 2023, has added clause (xii) to Section 56(2). ITR forms now include a new column in Schedule OS to report these earnings.

12. Dividend Income Reporting

Amendments to Section 115A of the Finance Act, 2023, now stipulate that dividends from units in an International Financial Service Centre (IFSC) will be taxed at 10% instead of 20%. Consequently, Schedule OS in the revised ITR Forms (2, 3, 5, and 6) has been updated to reflect this adjusted tax rate.

13. ESOP Tax Benefits

Schedule "Tax Deferred on ESOP" is designed to gather information about the assessment year, deferred tax amounts, tax payable for the current assessment year, and carry-forward amounts. The updated ITR forms (ITR 2 and 3) now require additional details, such as the employer's PAN and the DPIIT Registration number.

14. Start-up Deduction Details (Schedule 80IAC)

ITR-5 now features a new Schedule 80IAC which captures essential information regarding deductions claimed by companies under Section 80-IAC, including the date of incorporation, nature of business, certificate number, first assessment year for the claimed deduction, and current AY deduction amount.

15. Offshore Banking Unit or IFSC (Schedule 80LA)

A newly added Schedule 80LA in ITR-5 requires companies to provide details such as type of entity, income type of the unit, registration authority, registration date and number, and the first AY for claimed deductions.

Conclusion

The revisions to ITR forms for FY 2023-24 reflect a commitment to enhancing transparency, compliance, and accuracy in tax reporting. Taxpayers should familiarize themselves with these changes to meet their obligations effectively and mitigate the risk of penalties. Staying informed about the updated requirements in the revised ITR forms is essential for successful compliance.