The Central Board of Direct Taxes has brought about several amendments recently that impact the taxability and reporting requirements for resident as well as non-resident individuals.
Accordingly, it is imperative for the taxpayers not only to comply with the tax filings in specified timelines but also to fill the tax return forms appropriately. The last date to file tax returns in case of individuals (not subjected to tax audit) is July 31, 2022. However, effective from the financial year 2021-22, an exception has been carved out in the case of specified senior citizens earning only pension and interest income. Such senior citizens, in this case, are not required to file their tax returns.
The income tax return forms for FY22 (Asessment Year 2022-23) have been released by CBDT vide notification no. 21/2022 and 23/2022, dated March 30, 2022, and April 1, 2022, respectively.
While many taxpayers must have started filing their tax returns, here are some of the important aspects that individual taxpayers should keep in mind while filing their tax returns this year.
Income That Needs to Be Offered
Effective FY22, taxpayers will have to offer to tax the interest earned on an employee’s contribution to the Employee Provident Fund in excess of Rs 2.5 lakh.
The government has amended provisions of slump sale wherein the fair market value of undertaking/division transferred shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
Disclosures Required
First and foremost, the classification of residential status in return becomes very important as a number of inquiries also emanate therefrom.
Determining the residential status of an individual in India is quite a tedious exercise. ITR forms for FY22 provide a suitable self-explanatory description of different clauses to determine the residential status.
The taxpayers are required to disclose their foreign assets in Schedule FA. The reporting requirement is mandatory only for a taxpayer .who is a resident in India and shall not apply in the case of ‘not ordinary resident’ or ‘non-resident’ taxpayer.
Up to last year, resident taxpayers were required to report their foreign assets during the relevant accounting period. Since the accounting period was not defined, taxpayers were facing difficulty in the reporting aspect. This has now been clarified, and the ITR form for FY22 requires the taxpayers to report foreign assets held from Jan. 1, 2021, to Dec. 31, 2021. Accordingly, any foreign assets held during the calendar year 2021 are mandatorily required to be reported in the ITR.
It is mandatory for taxpayers to report scrip-wise details in case of transfer of shares/units bought on or before Jan. 31, 2018.
Taxpayers are required to report their dividend income quarter-wise
In case tax is paid in a foreign country credit for the same can be claimed by submitting Form 67 electronically. Further, the details of tax relief claimed for taxes paid outside India are required to be reported in 'Schedule TR' of the ITR form.
The government has allowed deferment of payment/deduction of tax with respect to shares allotted under the employee stock option plan by eligible startups. In order to track such cases, the form now has a new schedule in the ITR form - ‘Tax Deferred on ESOP’ wherein the taxpayers are required to furnish relevant details of tax-deferred on ESOPs.
In order to enable tax authorities to verify the eligibility and allowability of exemptions in respect of income under the head ‘Capital Gains’, it is now mandatory for taxpayers to furnish the date of purchase as well as the date of sale of land/building.
Not only that, the new ITR forms require the taxpayers to furnish year-wise details of the cost of improvements incurred on land/building transferred during the relevant year. The forms also require the taxpayers to mention both ‘cost of acquisition’ as well as the ‘indexed cost of acquisition’ separately.
In respect of FMV being deemed to be the full value of consideration in respect of slump sale, the same has been captured in the ITR forms. The forms now require the taxpayers to report the FMVs calculated as per relevant Income-tax rules.
In the case of a non-resident who does not have a bank account in India, the refund can be received in a foreign bank account by filling the following details in the ITR form:
SWIFT code of foreign bank account;
Name of the bank; and
International bank account number.
Belated Returns
Though the last date to file the tax return is July 31, 2022, taxpayers can file a belated return before Dec. 31, 2022, failing which, apart from penal interest, a penalty of Rs 5,000 would also apply (restricted to Rs 1,000 if total income is below Rs 5 lakh).
Updated Returns
Taxpayers now have an option to file the updated return, which can be filed within 24 months from the end of the relevant assessment year (i.e., up to March 31, 2025, in the case of AY23) subject to specified conditions. However, the said return is subject to payment of additional tax.
The government is doing its part toward creating a transparent system of taxation. The government is not only requiring the taxpayers to report their income appropriately, but it is also creating measures to plug the loopholes if any.
It is our turn now to fill their tax returns carefully and file proper tax returns.
Anita Basrur is Partner - Direct Tax, at Sudit K Parekh & Co. LLP.
The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.