EY Tax Alert CBDT notifies ITR forms for tax year 2017-18
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7 April 2018
EY Tax Alert
CBDT notifies ITR forms for
tax year 2017-18
Tax Alerts cover significant tax Executive summary
news, developments and changes
This Tax Alert summarizes key amendments made to the Income Tax Return (ITR) forms
in legislation that affect Indian for tax year 2017-18, vide Notification No. 16/2018 dated 3 April 2018 (Notification)
businesses. They act as technical issued by the Central Board of Direct Taxes (CBDT). The said Notification has also amended
summaries to keep you on top of Rule 12 of the Income Tax Rules, 1962 to restrict the scope of a simplified one-page ITR
form to specified individual taxpayers, being ordinarily resident in India.
the latest tax issues. For more
information, please contact your
Ernst & Young advisor.Page 2
modified to merge the closing balance
Background of written-down value under such old
block of assets to the block of asset
The CBDT, vide the Notification, has amended Rule 12 of
on which depreciation is charged at
the Income Tax Rules, 1962 (Rules), as also notified the
the rate of 40% (ITR 3, 5, 6).
ITR forms for all categories of taxpayers for tax year 2017-
2.02 The depreciation Schedule now
18 (Assessment Year 2018-19). However, instructions for
provides for separate disclosure of
filing the ITR forms are awaited. Refer Annexure 1 which
the quantum of depreciation
explains the applicability of the ITR forms to various
disallowable on the asset used for a
categories of taxpayers.
purpose other than business or
This Tax Alert summarizes the key changes in the ITR profession during the tax year (ITR 3,
forms as compared to the immediately preceding tax year 5, 6).
2016-17. 2.03 Separate disclosure of the quantum
of proportionate aggregate of
depreciation in the event of business
reorganization such as merger,
Key changes in the ITR forms demerger, succession etc., is required
(ITR 3, 5, 6).
2.04 Like in the case of erstwhile indirect
1.0 Key changes which commonly apply to most of taxes, the taxpayers are required to
the ITR forms: furnish the details of Goods and
1.01 While verifying the tax return, the Services Tax (GST) collected on sale
taxpayer is required to mention in or supply of goods and services,
whose capacity it is furnishing such tax component of GST paid on their
return and also declare that it is purchases, GST claimed as an
competent to furnish the said tax expense and GST outstanding as
return in that capacity (ITR 1, 2, 3, 4). payable, with break-up of Central
1.02 In reporting details of tax withheld on GST, State GST, Integrated GST and
income, the taxpayer is to provide Union Territory GST (ITR 3, 5, 6).
break-up of credit claimed in the hands
of the taxpayer, details of taxes 3.0 Key changes which apply to ITR-1 (Sahaj)
withheld and claimed in the name of Form
spouse governed by Portuguese Civil 3.01 Applicability restricted to resident
Code or any other person in respect of and ordinarily resident[1] individuals:
whom the declaration has been filed ITR-1, applicable to individual
(ITR 2, 3, 4, 5, 6, 7). taxpayers having aggregate total
1.03 Non-resident taxpayers need to submit income up to INR5m from salary or
details of any one foreign bank account one house property or other
for the purpose of remitting tax refund sources[2], is now restricted only to
due, if any (ITR 2, 3, 4, 5, 6, 7). resident and ordinarily resident
1.04 The requirement of reporting of cash individuals. Thus, individuals being
deposit into each bank account of the resident, but not ordinary resident,
taxpayer during the demonetization and non-residents, including
period (9 Nov 2016 to 30 Dec 2016) expatriates, will not have the benefit
has been omitted, as the same is not of furnishing the simplified one-page
relevant for the current tax year (ITR 1, ITR form.
2, 3, 4, 5, 6, 7). 3.02 Reporting of different components
1.05 In addition to details of capital gains of salary and house property
not chargeable to tax as per the Double income: Instead of reporting a final
Taxation Avoidance Agreement single amount of taxable salary and
(DTAA/tax treaty), the Schedule now house property income, the new form
also requires to report the capital gains requires a break-up of such incomes.
chargeable at special rates as per the For salary income, break-up
tax treaty. Consequently, the Schedule components include basic salary,
requires information of rate of tax as taxable allowances, value of
per the tax treaty, rate of tax as per perquisites, profits in-lieu of salary
the Indian Tax Laws (ITL) provisions and eligible deductions under the ITL,
etc. (ITR 2, 3, 5, 6).
2.0 Key changes which commonly apply to ITR
forms of taxpayers earning income from
[1] Resident and ordinarily resident means an individual who has been a
business or profession:
2.01 Consequent to the amendment in the resident in India in two out of ten tax years preceding the current tax
year and has been in India for a period of 730 days or more during the
ITL last year, curtailing the maximum seven tax years preceding the current tax year
rate of depreciation to 40% from the
earlier rates of 50%/60%/80%, the [2] Refer Annexure 1 for details
depreciation schedule has beenPage 3
along the lines of Form 16. Likewise, being inventory, cash in hand,
for house property income, details of debtors and creditors, the revised
gross rent received/receivable, taxes ITR-4 requires additional details of
paid to local authorities and interest capital balance, secured loans,
payable on borrowed capital need to be unsecured loans, advances, other
specifically disclosed. liabilities, fixed assets, bank balances,
loans and advances, and other assets.
4.0 Key changes in ITR-2 applicable to individuals
and Hindu Undivided Families (HUFs) not 7.0 Key changes in ITR-6 applicable to corporate
having income from business or profession: taxpayers
4.01 Revised ITR-2 is not applicable to 7.01 Indian Accounting Standards (Ind-
taxpayers earning income from AS): ITR-6 has been suitably amended
business and profession and, thus, for companies covered by Ind-AS to
consequential amendment to the ITR include balance sheet and statement
form has been made by deletion of of profit and loss as per Ind-AS,
information relating to business heads together with amendment to the
such as business income, business loss Schedule of Minimum Alternate Tax.
schedule. 7.02 Details of ultimate beneficiaries:
4.02 The ITL provides an option to resident Unlisted companies are obliged to
taxpayers which were non-resident in furnish particulars of natural persons
earlier years and having income from who are the ultimate beneficial
specified investment derived from owners holding, directly or indirectly,
foreign exchange assets, to continue not less than 10% of voting power at
with the benefit of concessional rate of any time during the tax year. These
taxation until such assets have been particulars include name, address,
transferred or converted into money. percentage holding and PAN[4] of
The taxpayer is required to opt for the such natural persons.
said option at the time of furnishing the 7.03 Break-up of details as per GST
tax return. Now, ITR-2 provides for returns: Corporate taxpayers whose
such option in the tax return itself[3]. turnover is up to INR10m are
4.03 In addition to information of house required to provide the break-up of
property which is let out and deemed to total expenditure with GST registered
be let out (vacant) property, the and non-registered entities. In
taxpayer will now also have to give relation to expenditure with GST
information of self-occupied property, registered entities, it further requires
which includes address of the property, the break-up of expenditure relating
details of co-owners, if any. to exempt supply covered under the
composition scheme, and other
5.0 Key changes in ITR-3 applicable to individuals registered entities for the period on
and HUFs having income from business or or after 1 July 2017, being the GST
profession applicability date.
5.01 Earlier, ITR-3 was applicable to 7.04 Transaction in foreign currency:
individuals and HUFs having income Corporate taxpayers whose turnover
from a proprietary business or is up to INR10m are required to
profession. Now, it applies to submit details in INR of aggregate
individuals and HUFs having income receipt and payment of foreign
from any business or profession currency made during the tax year on
revenue/capital account. Most of this
information may be available from
6.0 Key changes in ITR-4 (Sugam) applicable to financial statements prepared in
taxpayers covered by presumptive tax accordance with Indian Generally
provisions Accepted Accounting Principles
6.01 Taxpayers covered by presumptive (IGAAP).
taxation are required to submit GST
registration number and the amount of 8.0 Key changes in ITR-7 applicable to charitable
turnover/gross receipt as per returns trusts and other institutions, political parties,
furnished under the GST laws. business trusts[5]
6.02 Requirement to furnish compressed 8.01 In case of a charitable trust obtaining
balance sheet: The scope of reporting fresh registration on account of
details of assets held in business has changes in objects or activities during
been expanded substantially. As the year, information about fresh
against specific details of four items, registration is to be given.
[4] Permanent Account Number
[5] E.g., Alternative Investment Funds, Real Estate Investment Trusts
[3] Similar option is now provided in ITR-3 alsoPage 4
8.02 ITR-7 now provides for mandatory filing
of particulars of author, founders,
trustees or managers of the trust or
Comments
institution, as against the optional
requirement in past. The information to Consistent with its past practice, the CBDT
be provided includes name, address, has notified the new ITR forms just before
PAN and Aadhaar number of such the commencement of the tax filing season,
persons. which reflects its commitment to improve
service to taxpayers and to provide them
9.0 Changes to give effect to amendments in the sufficient time for filing tax returns.
ITL:
9.01 Additionally, all the ITR forms also Allowing non-resident taxpayers to submit
incorporate certain consequential details of any one foreign bank account for
modifications to give effect to the the purpose of crediting tax refund due,
amendments made by the Finance Act, appears to be an optional requirement and,
2017, which are effective from tax thus, such taxpayers may need to furnish
year 2017-18. Illustratively, this details of foreign bank account only when
includes: there is a tax refund claim. This may help
non-resident taxpayers to receive timely
• In respect of capital gains on tax refunds.
unquoted shares, the Schedule of
computing capital gains on sale of Small corporate taxpayers (having turnover
share and securities requires less than INR10m) are saddled with the
information of sale consideration additional compliance of providing detailed
and fair value as per the prescribed break-up of total expenditure with GST
rules (ITR 2, 3, 5, 6, 7). registered and non-registered entities.
• A separate Schedule has introduced However, most of the small taxpayers may
for reporting of receipt of specified be covered under the composite scheme of
property by way of gift or for taxation under GST, wherein break-up of
inadequate consideration (ITR 2, 3, GST registered and non-registered entities
5, 6, 7). has no significance, and such records are
unlikely to be maintained by the taxpayers.
One may have to observe whether such
taxpayers may still have to provide the
break-up in the prescribed form for ITR
filing.
Requirement of GST turnover details is
restricted to small corporate taxpayers. For
other corporates, one can expect that it
may be covered as part of the tax audit
report.Page 5 While GST return forms may provide the necessary break-up, readily or with some effort, the taxpayer may have to keep the reconciliation between turnover and other details as per financial statements and GST returns ready to cope up with future inquiry, if any, from the Tax Authority, since definition and scope of turnover for GST levy is materially different. In case of unlisted corporate taxpayers, there is an additional requirement of providing details of ultimate beneficial owners of shares, being natural persons, during the relevant year. This requirement appears to overcome challenges posed by the Tax Department in identifying the real owner of shares and funds through the presence of a web of intermediary companies. Thus, unlisted corporate taxpayers are now required to provide information under the look-though approach by ignoring individual identity/existence of intermediary corporates. An obligation to submit balance sheet details imposed on taxpayers covered under the presumptive taxation regime, is contrary to the legislative intent of simplifying the compliance requirement for such taxpayers, and is also contrary to the provisions under the ITL which exonerate such taxpayers from maintaining detailed books of account.
Page 6
Annexure 1
Applicability of ITR forms to various category of taxpayers
Form Category of taxpayers Sources of income covered
ITR-1 Individuals (resident and Who can file ITR-1
ordinarily resident)
(Sahaj) Has income from salaries or family pension, or
Income from one house property, or
Income from other sources
Who cannot file ITR-1
Who has an asset or signing authority in any account
outside India or earns income from any source outside
India, or
Who has claimed tax treaty relief and/or unilateral
double tax relief, or
Has agricultural income above INR5,000, or
Has total income above INR5m, or
Has dividend income exceeding INR1m attracting super
rich dividend tax levy, or
Has unexplained credits or investment taxable at 60%
under the provisions of the ITL, or
Has capital gains or business income, or
Income from more than one house property or has
brought forward loss or loss to be carried forward
under the house property head, or
Income from lotteries or horse races or loss under the
other sources head
ITR-2 Individuals and HUFs Has income from salaries, or
Income from house property, or
Capital gains, or
Income from other sources
ITR-3 Individuals and HUFs Has income from business or profession
ITR-4 Individuals, HUFs, firms (other Profits and gains from business and professions to
Sugam than limited liability partnerships which presumptive tax provisions apply
(LLPs))
ITR-5 For firms/LLPs/Association of Income from house property
Persons ( AOPs)
Capital gains
Profits and gains from business and profession
Income from other sources
ITR-6 Companies other than those filing Income from house property
ITR-7
Capital gains
Profits and gains from business and profession
Income from other sourcesPage 7
Form Category of taxpayers Sources of income covered
ITR-7 Persons requiring to furnish Income from house property
return of income in
circumstances specifically Capital gains
provided for under the ITL viz., Profits and gains from business and profession
charitable trusts and other
institutions, political parties, Income from other sources
business trusts etc.Page 8
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