After a lot of criticism in the past two months for the complicated Income Tax mechanism, the Government has rolled out new Income Tax Return forms and Tax filing procedures, this week. The Income Tax Department (ITD) has introduced these changes very wisely as it will definitely provide some ease in e-filing the Income Tax Return. At the same time, it will have more financial information about payers by including their multiple Bank Account details, Aadhar Card number, and Passport number in Income Tax Return.
This year, following are the 7 changes in Tax filing process:
Introducing The New Form ITR 2A
It is a smart move by the Government by introducing ITR-2A form for the Individuals and HUF tax payers who do not require filing ITR-1. In previous years, the Tax Payers were supposed to file 14 paged ITR-2, if they enjoyed exempted income above Rs. 5000, Capital Gains, Lottery Winnings, Horse racing, or had any asset located outside India.
The ITR-2 form is a complicated form as it has a lot of information related to Capital Gains, Set-off losses, or Foreign Assets. The Government analyzed that 80% of ITR-2 filers do not have income in such sources. Consequently, this year, the IT Department rolled out ITR-2A to ease the ITR filing for majority of tax Payers. This will be a great relaxation for Payers who do not require filling the fields which are not applicable to them.
Thus, ITR 2A is essentially for Individuals or HUF whose sources of income is from the following:
- Income from Salary
- Income from House Property (any number of Properties)
- Income from Other Sources including Lottery winnings or Horse racing
- Clubbed income of a Minor child or Spouse
But, at the same time, ITR 2A form cannot be used if the individual has the following:
- Income from Capital Gains
- Income from Business or Profession
- Any claim of relief/deduction under the Sections 90, 90A or 91
- Any Resident having an Asset (including financial interest in any entity) located outside India or signing authority in any account located outside India
- Any Resident having income from any Source outside India
File ITR-1 even if the exempt income is more than Rs.5000
From the past two years, the Tax Payers were using ITR 2 or ITR 4 if the exempt income was more than Rs. 5000. This created a lot of debate and dilemma among Tax payers, whether to file ITR 2, even they receive exempt HRA allowance, which is normally more than Rs.5000.
This year, it brought a great sigh of relief. From now onwards, any Tax Payer enjoying any amount of exempt income such as PPF Interest , House Rent Allowance etc. can file ITR-2 or ITR 4S. However, Payers who are enjoying the Agricultural income above Rs.5000 are still required to file ITR 2 / ITR 4.
Mentioning of Multiple Bank Account Numbers
New Income Tax Return forms require Tax Payers to report the number of Bank Accounts they are operating along with related details such as name of Bank, Account number, & IFSC code. Irrespective of a Payer operates a Savings or a Current Account, reporting the details is mandatory.
Please note that dormant accounts are not required to report. By this move, Government plans to keep an eye on all the financial transactions of the Tax payers.
Mandatory e-Filing for Income Tax Refunds
To speed up and prompt issue of Tax Refunds, e-filing of Income Tax Return has been made mandatory for those who desire any Income Tax Refund. This step will definitely ensure quick refunds to tax Payers. Secondly, it is proposed that from now onwards all the refunds will be done electronically and cheques will not be issued.
ITR-V Form Not required for Aadhar Card Holders
A new system of verification has been rolled out which is called as Electronic verification. In this system, the Tax Payer will receive a verification code (similar to One Time Password (OTP)) on Payer’s Mobile number which is associated with Payer’s Aadhar card.
The Aadhar Card number is also required to be mentioned in the ITR. Once the Payer enters the verification code), the e-filing will be verified. Therefore posting ITR-V to CPC, Bangalore is not required if the Tax Payer opted to file his tax return either through Electronic Verification System or with Digital Signature. In all other cases i.e. Aadhar Card Holders or who don’t file through Electronic Verification system are still required to follow the old mechanism of sending ITR-V to CPC, Bangalore
Passport & Aadhar Card Number
The new Tax Return also seeks optional information about Aadhar Card number and Passport. Aadhar Card number is mandatory for electronic verification process which is discussed above. Using the Passport number, the Government is trying to monitor on foreign travelling expenses and source of income for funding the travelling expenses.
Automated Validations during E-Filings
This year, the Income Tax Department has updated its Technology significantly by introducing a lot of validations while efiling the Income Tax Returns. For instance, if the Tax Payer wishes to claim Tax benefits under the Section 80G (for Donations) but fails to report PAN of the Donor; the Income Tax Return will not be accepted.
Similarly, if the name of the Tax Payer in Income Tax Return does not match with the name as per PAN database, the Income Tax Return will be declined. Likewise, many more logical validations have been implemented.
Earlier, such types of Income Tax Returns were allowed to be filed and the Tax Payers ended up with huge Tax Demands while receiving the Intimation receipts u/s 143(1). From now onwards, the Tax Payers will receive an alert before submitting, if the form contains any significant errors.
These changes will drastically improve the Tax Compliance system in India which will definitely be appreciated by majority of Tax Payers.