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2021-04-06 - New income tax return forms for AY2021-22 notified; here are a few changes that matter

The Central Board of Direct Taxes (CBDT) has notified income tax return (ITR) forms for the assessment year 2021-22 with minimum changes to reduce the compliance burden on taxpayers, especially individuals whose main source of income is salary. The bare minimum changes in the ITRs relate primarily to the announcements made in the Finance Act 2020. To be sure, utilities for only ITR-1 and ITR-4 have been made available so far. How will that affect the common taxpayer? Read on.

Can I pick up any ITR form right away and start filling it?

Not quite. Although the government has notified all ITR forms, you still need to download them and fill in the details. This facility is called ‘Utilities’. At present, the CBDT has allowed the ‘Utilities’ facilities only for ITR-1 and ITR-4.

Here, you download the applicable editable income tax form (utility), save it on your computer, fill it and then upload it on the income tax website. While earlier the utility forms were either in excel or java format, this year the CBDT has enabled ITR 1 and ITR 4 utilities based on new technology JSON (JavaScript Object Notation).

Utilities for other ITRs will be added in the subsequent releases. Besides that a step-by-step guide has been issued, giving instructions about how to install and use it. These forms that you download come pre-filled to a large degree as the taxman already captures a lot of your investment and spending related information. But the form also allows you to fill in a lot of your income details, yourself.

Changes in line with new tax regime

Though the new ITR forms notified aren’t much different to last year’s forms, this year marks the first time that individual taxpayers will have to choose between existing and new income tax regimes while filing their taxes, under Section 115BAC of the Income Tax Act, 1961. The new income tax regime- that carried lower income tax rates provided the taxpayer would let go of a host of income tax deductions and rebates- was introduced in Budget 2020.

Taxpayers not opting for the new tax regime will be entitled to various exemptions but they will have to pay tax at comparatively higher rates.

Sahaj (ITR-1) and Sugam (ITR-4) explained

Consequent to the Finance Act, 2020, the CBDT has imposed some restrictions on filing of the ITR-1 (Sahaj) and ITR-4 (Sugam), which are simpler forms and filed by the bulk of small and medium taxpayers.

The ITR-1, which is Sahaj, is required to be filed by an individual having income up to Rs 50 lakh and who receives income from salary, one house property or other source mainly interest. Sugam (ITR-4) is filed by individuals, Hindu Undivided Families (HUFs) and firms having total income up to Rs 50 lakh and income from business and profession computed under the provisions relating to presumptive taxation.

Who cannot use ITR-1 and ITR-4?

Explaining the restrictive provisions, Naveen Wadhwa, DGM, Taxmann, says that “ITR-1 shall not be available to a taxpayer in whose case the tax has been deducted on cash withdrawal under Section 194N. Further, return filing is also not allowed in ITR-1 or ITR-4 if the tax has been deferred in respect of ESOPs allotted by an eligible start-up."

Under section 194N of the IT Act, tax is required to be deducted if the amount of cash withdrawn during the year exceeds Rs 20 lakh in case of certain non-filers of return and Rs 1 crore in other cases from any bank, banking institution, cooperative bank or post office.

Further, if payment or deduction of tax in respect of such ESOPs has been deferred, under Rule 12, then you cannot use either ITR-1 or ITR-4. For this, you will have to either ITR-2 or ITR-3; the utilities for these forms are yet to be made available.

"The most significant change in the ITR forms is the enabling of the option to choose the alternative tax regime that was made applicable vide Finance Act 2020. The alternative tax regime offers 6 slabs with low tax rates, if taxpayers forego a set of exemptions and deductions available under income tax laws," she said.

Part A (General) of the new ITR Forms 1 and 2 require the assesses to disclose whether the alternative tax regime is being opted for or not.

We also informed that ITR 1 cannot be filed by an individual in whose case tax has been deducted at source under section 194N of the Income Tax Act, which necessitates every bank/post office/ cooperative bank to withhold tax in case cash withdrawal by an individual, from one or more of his accounts, during the financial year exceeds Rs 1 crore (Rs 20 lakh in case of non-filers of return for three previous years).

So far, utilities for only ITR-1 and ITR-4, the most sought-after tax return forms, have been notified. Utilities for other ITR forms are expected to be notified soon.

To make it further simpler for the return filers, the income tax department has notified that the subsequent releases will have a questionnaire-based functionality that will help taxpayers identify which ITR is applicable to them. Further, it shall enable the taxpayers to pay taxes, verify and upload the ITR through the utility itself.

“The new utility is a user-friendly functionality for filing of returns and will afford greater ease to the taxpayers. The utility itself provides help in the form of FAQs, guidance notes, circulars and provisions of the law so as to enable hassle-free return filing,”

2021-03-25 - Income tax planning: Last-minute tips to save tax from loans

Home loan

Principal Amount

If you have availed a loan for the purposes of purchase or construction of a residential house, the principal portion of the installment paid can be deducted under section 80C upto Rs 1.5 lakh. However, the deduction is conditional and can be availed if the house is not sold within five years from the date of the end of the financial year in which possession of such property is received. In case the house is sold within five years, then the deduction claimed will be added back as income in the year of sale.

Interest Amount

The Income Tax Act covers not only the principal amount as a deduction but also the interest on the loan. Section 24 allows a deduction upto Rs 2 lakhs provided the construction or purchase of the house should be completed within five years from the end of the financial year when the loan was taken. It is important to note that the deduction is allowed to be claimed after the house is purchased or constructed.

Usually, home loan is taken prior to the construction of the house or the purchase but the loan repayment begins immediately after the loan is taken. To address this issue, the Act provides for a deduction for the interest paid during this time. Section 24B allows a deduction to be claimed on interest payable for five years in equal instalments from the year in which the house is bought or the construction is completed.

An unrestricted amount of deduction can be claimed for the interest payable if the same house is rented out.

Affordable Housing

If you are a homeowner who acquired a residential property through a loan from a financial institution in financial year 2016-17 or 2019-20 and are still paying interest on that loan, then that interest can reduce your taxable income.

The interest payable on the loan up to Rs 50,000 can be claimed under section 80EE of the Income Tax Act. Do not worry if you skipped paying the interest in the last year due to any reason whatsoever including the distress of the ongoing pandemic, you can still claim this deduction.

The actual disbursement of the loan is irrelevant if the loan is sanctioned within due time (FY 2016-17).However, the following are caveats should be noted that would make you eligible for claiming this deduction:

The amount of loan sanctioned for acquiring the residential house should not exceed Rs 35 lakhs.
The value of the residential house does not exceed Rs 50 lakhs.
An individual should not own any other residential house on the date of sanction of loan.

This deduction can be claimed even if the house is under construction or if the registry has not taken place in your name or you still have not received the possession.

Not eligible to claim the deduction in the above mentioned section? Do not worry! There's another one.

Under section 80EEA of the act, you are eligible for a deduction of upto Rs 1.5 lakhs for low cost housing loans sanctioned from a financial institution in the financial year 2019-20. In order to extend the benefit of 'Housing for all,' the government introduced this deduction in Budget 2019.

The three caveats will apply here as well but with a few modifications:

The loan should be sanctioned between April 1, 2019 to March 31, 2020.
The stamp duty value of the residential house does not exceed Rs 45 lakhs.
An individual should not own any other residential house on the date of sanction of loan.

For all of you who did not manage to pay back the loan installments in the last year due to reasons including pandemic woes, there is a piece of good news.

The interest amount 'payable' is of the essence here and not the actual interest 'paid,' meaning that the deduction can be claimed irrespective of the amount actually paid on the loan in the financial year. It is important that the liability to pay the amount should exist at the time of claiming the deduction. Stamp Duty

The Stamp Duty, registration fee and other expenses for the purpose of transfer of such house property are also deductible under section 80C further reducing the tax liability. The maximum amount that can be claimed under this section is Rs 1.5 lakhs, including all other deductions in this section.

Own an electric vehicle?

If you are one of the few electric vehicle owners in the country, the government has provided you with an extra deduction on the interest payable on that vehicle loan.

Under section 80EEB of the act, you are eligible for a deduction of Rs 1.5 lakhs for the interest payable on a loan taken from a financial institution for the purpose of buying an electric vehicle. The deduction is conditional on the date of sanctioning of the loan which should be from April 1, 2019, to March 31, 2023.

2021-03-17 - E-invoice mandatory for businesses with over Rs 50 crore turnover from April 1

The government has made it mandatory for businesses with over Rs 50 crore turnover to generate e-invoices for B2B transactions from April 1.

Under Goods and Services Tax (GST) law, e-invoicing for business-to-business (B2B) transactions has been made mandatory for companies with turnover of over Rs 500 crore and Rs 100 crore from October 1, 2020, and January 1, 2021, respectively.

E-invoicing will be extended to companies with turnover over Rs 50 crore from April 1, the Central Board of Indirect Taxes and Customs (CBIC) said in a notification.

Under e-invoicing, taxpayers have to generate invoices on their internal systems (ERP/accounting/billing software) and then report them online to the Invoice Registration Portal (IRP).

The IRP will validate the information provided in the invoices and return the digitally signed e-invoices with a unique ‘Invoice Reference Number (IRN)’ along with a QR Code to the taxpayer.

e-invoicing has been made mandatory for businesses for Rs 50 crore plus turnover from April 1, which showcases the pro activeness and the intent of the government to wider the net of digitization.

“As limited time is left, industry players in this segment will need to proactively map out the IT and process changes and start implementing the same,”.

2021-03-10 - Declaration of HSN Code for Goods & Services wef 01.04.2021

DECLARATION OF HSN CODE FOR GOODS AND SERVICES

Effective from 1st April, 2021

For Taxpayers (with aggregate Annual Turnover more than Rs. 5 Crore during the FY 2020-21)

6 Digits of HSN Code for Goods and Services to be mentioned mandatory in all Tax Invoices

For Taxpayers (with aggregate Annual Turnover up to Rs. 5 Crore during the FY 2020-21)

4 Digits of HSN Code for Goods and Services to be mentioned mandatory in B2B Tax Invoices
4 Digits of HSN Code for Goods and Services to be mentioned on optional bases in B2C Tax Invoices

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