Key Takeaways in new ITR Forms (A.y 2014-15)

I. Matching Concept: Unclaimed TDS/TCS of earlier year can be claimed in current year

[ITR 1, 2, 3, 4, 5, 6, 7]

Certain provisions of TDS (including TCS) require deduction of tax at source at the time of payment or at the time of credit, whichever occurs earlier. Resulting advance payments are also subjected to TDS. Old ITR form did not have any mechanism to carry forward the excess TDS, thus, taxpayers were required to show the entire TDS as a deduction and claim refund of excess TDS. To fix the issues, the Schedule TDS/TCS introduces two new columns:

(a)			Unclaimed TDS/TCS brought forward
			Financial Year in which deducted/collected
			Amount brought forward
(b)		TDS/TCS being claimed this year from amount brought forward or from TDS/TCS of current financial year.

II. Transactions with Cyprus, being a non-co-operative tax jurisdiction, to be reported in ITR Forms

[ITR 3, 4, 5, 6, 7]

Every transaction entered into with a person located in jurisdiction notified in section 94A shall be reported in new ITR forms. Central Government has notified 'Cyprus' for the purposes of section 94A for not providing the information requested for by Indian tax authorities under 'Exchange of Information' provisions of treaty between India and Cyprus. With notification of Cyprus as non-co-operative tax jurisdiction, the following ramifications shall follow:

		An assessee entering into a transaction with a person in Cyprus shall be treated as associated enterprises and the transaction shall be treated as an 'International Transaction'. Consequently, transfer pricing regulations and maintenance of documentations shall be made applicable.
		No deduction in respect of any payment made to any financial institution in Cyprus shall be allowed, unless the assessee furnishes an authorization allowing for seeking relevant information from the said financial institution.
		No deduction in respect of any other expenditure or allowance arising from the transaction with a person located in Cyprus shall be allowed unless the assessee maintains and furnishes the prescribed information.
		If any sum is received from a person located in Cyprus, the onus would be on the assessee to explain the source of such money in the hands of such person or in the hands of the beneficial owner. In case of his failure to do so, the amount shall be deemed to be the income of the assessee.
		Any payment made to a person located in Cyprus shall be liable for withholding tax at the rate of 30% or a rate prescribed in the Act, whichever is higher.

III. Initiative for Speedy refund of taxes: Refund to be credited to bank account only

[ITR 1, 2, 3, 4, 5, 7]

Earlier taxpayers had an option to claim refund of tax through cheque or credit into its bank account.

As per new forms, facility of getting refund via cheque has been dispensed with and assessee shall get credit of refund of taxes directly into his bank account.

IV. Unique Identification Numbers issued by MCA to be reported in ITR Forms:

[ITR 5, 6]

		Domestic Company or LLP shall mention a unique Corporate Identity Number (CIN)/LLP identification number ('LLPIN') issued by the MCA in the tax return filed in new ITR form.
		CIN/LLPIN is allotted on and from the date mentioned in the certificate of incorporation of a company/LLP, which shall be a distinct identity for the company/LLP.
		CIN/LLPIN is allotted to create unique identity of each and every company/LLP incorporated in India.
		DIN issued by MCA to each Director shall be reported in return filed by a corporate assessee. DIN is a unique identity number allotted to an individual who intends to be appointed as director of a company or is an existing director of a company. There is a prohibition on obtaining more than one DIN.
		Designated partner identification number (DPIN) is issued by MCA to each designated partner and has to be reported in return filed by a LLP. DPIN is a unique identity number allotted to an individual who intends to be appointed as designated partner of LLP or is an existing partner of LLP. There is a prohibition on obtaining more than one DPIN.

V. Buy-back of shares to be reported by closely held company

[ITR 6]

Unlisted companies, as part of tax avoidance scheme, were resorting to buy-back of shares instead of payment of dividends. Consequently, such companies were avoiding payment of Dividend Distribution Tax and capital gains tax, as shareholders were either not chargeable to tax on such buy-back of shares or were taxable at a lower rate.

In order to curb such practice a new Chapter XII-DA was inserted by the Finance Act, 2013, to provide that the consideration paid by the company for purchase of its own unlisted shares which is in excess of the sum received by the company at the time of issue of such shares (distributed income) will be charged to tax. The company would be liable to pay additional income-tax at 20% of the distributed income paid to the shareholders. In this case, the income arising to the shareholders from such buy-back would be exempt.

Thus, a new Schedule BBS is inserted wherein a domestic company shall report all shares which were bought back from its shareholders during the year.

VI. Liability for MAT of Insurance, Electricity and Banking Co. being governed by special Acts

[ITR 6]

The Finance Act, 2012 substituted section 115JB(2) to provide that Insurance, Banking or Electricity company shall prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company. Such amendment put an end to litigations which provided that MAT provisions would not be applicable in case of companies which were not required to prepare financial statements as per Schedule VI of the Companies Act, 1956.

Accordingly, a new row is added in Schedule MAT which seeks response from the taxpayer (being a banking, insurance or electricity co.) whether profit and loss account is prepared in accordance with the provisions of the Act governing such company.

VII. Furnish PAN of debtor responsible for bad-debts

[ITR 4]

Every person claiming deduction of bad debts is required to specify PAN of the debtor, if available, responsible for bad debts. This requirement is specified if quantum of bad debts is Rs. 1 lakh or more.

Such requirement was already available in old Forms of ITR 5 and ITR 6. It is now introduced in ITR 4.

VIII. Information on Advance Pricing Agreements ('APA'):

A. Modified return filed under section 92CD to give effect to APA

[ITR 2, 3, 4]

Section 92CD was inserted by the Finance Act, 2012 with effect from July 1, 2012 to provide a framework for APA. Section 92CD(1) provides that a person who has entered into the APA shall furnish a modified return in accordance with and limited to the APA, if prior to the date of entering into the APA, any return of income has been furnished under section 139.

In new ITR Form an option is given to choose return filed under section 92CD. This option was already available in old ITR forms 5, 6 and 7, but now introduced in ITR Forms 2, 3 and 4.

B. Date of APA

[ITR 2, 3, 4, 5, 6, 7]

An assessee is required to report date of APA if return was filed under section 92CD after entering into the APA.

IX. Upgraded computation sheet for Capital Gains:

[ITR 2, 3, 4, 5, 6]

New Schedule on Capital Gains provides for a detailed mechanism for computation of capital gains. Major takeaways from Schedule CG are as under:

		New form provides additionally for computation of short-term capital gains in following cases:
(a)		Sale of land or building or both as per provisions of section 50C, i.e., full value of consideration viz-a-viz stamp valuation
(b)		Sale of securities by FIIs which is taxable as per provisions of section 115AD
		New form provides additionally for computation of long-term capital gains in following cases:
(a)		Sale of land or building or both as per provisions of section 50C, i.e., full value of consideration viz-a-viz stamp valuation
(b)		Sale of bonds or debentures (other than capital indexed bonds issued by Government)
(c)		Sale of bonds or GDRs by a non-resident which is taxable as per provisions of section 115AC
(d)		Sale of securities by FIIs which is taxable as per provisions of section 115AD
		The Schedule CG in ITR forms of earlier years could not allow computations of capital gains from individual assets, especially land and building, thereby making it difficult for the taxpayers to correlate the exemptions with rollover of investments. With more categorization, the claim for exemptions would be easier to compute and claim.
		Capital gains, short-term and long-term, are taxable at different rates so the ITR forms add more rows for taxability of such capital gains at different rates.
		Details for intra-head adjustments under section 70 shall be provided along with computation of capital gains under the Schedule CG.

X. New cells inserted to obtain more specific information:

A. Expenditure disallowable under sections 36 and 37

[ITR 4, 5, 6]

The New ITR forms require taxpayers to provide specific information to the extent possible. Accordingly, it inserts new cells to disclose expenditures which are disallowable under specific provisions of the Income-tax Act as under:

(a)		Amount of contribution to a pension scheme referred to in section 80CCD [section 36(1)(iva)]
(b)		Amount of securities transaction paid in respect of transaction in securities, if such income is not included in business income [36(1)(xv)]
(c)		Expenditure of capital nature [section 37(1)]
(d)		Expenditure laid out or expended wholly and exclusively not for the purpose of business or profession [section 37(1)]

B. Privilege or license fee or royalty paid by State Undertaking to State Government

[ITR 4, 5, 6]

Disputes have arisen during assessment of some State Government undertakings as to whether any sum paid by way of privilege fee, license fee, royalty, etc., levied or charged by the State Government exclusively on its undertakings are deductible or not for the purposes of computation of income of such undertakings?

Therefore, a new sub-clause (iib) has been inserted in section 40(a) to provide that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction for the purposes of computation of income of such undertakings under the head 'Profits and gains of business or profession'.

C. Deemed Income under section 43CA

[ITR 4, 5, 6]

The Finance Act, 2013 has introduced a new section 43CA which provides that stamp duty value shall be considered for the purpose of computation of income under the head 'Profits and Gains of Business or Profession' in respect of transactions relating to land or building or both. Any deemed income, i.e., excess of stamp duty value over actual sales consideration, if any, shall be reported in new ITR Form.

D. Intra-head adjustments:

[ITR 4, 5, 6]

Details for intra-head adjustments under section 70 shall be provided along with computation of business profits under the Schedule BP.

E. Income chargeable at different rates to be reported specifically

[ITR 2, 3, 4, 5, 6]

Some incomes are taxable at a concessional rate or at a flat rate. New cells have been inserted to disclose these incomes and tax thereon separately. Taxability of certain incomes at special rates under sections 115AD, 115AB, 115AC, 115AD, etc., shall be reported in Schedule SI. Example: Short-term capital gains taxable at 15%, 30% or at normal rate, long-term capital gains taxable at 10% or 20%, etc.

F. sections 10A and 10AA deductions

[ITR 4, 5, 6]

Entities claiming exemptions under sections 10A and 10AA shall provide the relevant Assessment Years in which eligible units began manufacturing or production.

XI. Date of furnishing audit reports under sections 92E and 115JC

[ITR 4]

Person who is liable to furnish following audit reports is required to mention the date of furnishing of such reports.

1.		Report under section 92E - Every taxpayer who has entered into an international transaction or specified domestic transaction is required to obtain a report from an accountant and furnish such report on or before the specified date. The audit report under section 92E is required to be furnished electronically.
2.		Report under section 115JC - Every person who is liable to pay Alternative Minimum Tax('AMT') shall obtain a report from an accountant, certifying that the adjusted total income and the AMT have been computed in accordance with the provisions of this Chapter and furnish such report on or before the due date of furnishing of return of income under section 139(1).

Old ITR Forms 5 and 6 already had a column to fill in the date of furnishing of report under sections 92E and 115JC/115JB.The column is now introduced in ITR 4.

XII. Separate disclosure of sums paid to non-residents

[ITR 4]

Following payments to non-residents need separate disclosure:

(1)		Compensation in case of non-resident employees,
(2)		Commission,
(3)		Royalty,
(4)		Professional/consultancy fees/Fee for technical services, and
(5)		Interest.

Old Forms of ITR 5 and ITR 6 already had this option. However, ITR 4 now seeks this information.

XIII. Rebate under section 87A

[ITR 1, 2, 3, 4]

The Finance Act, 2013 inserted section 87A which provides rebate to resident individuals whose total income does not exceed Rs. 5,00,000. The amount of rebate will be 100% of income-tax or Rs. 2,000, whichever is less.

An option is provided under new Form for availing of rebate under section 87A.

XIV. Private discretionary trust

[ITR 5]

A 'Discretionary Trust' is a trust where trustees have discretion over the use of its income and capital. It gives trustee the power to decide which beneficiary would receive the funds and up to what extent.

In new ITR 5, a new category of 'Private discretionary trust' is included. Such trust can now file return of income in new ITR 5.

XV. Filing of Return by a Trust

[ITR 7]

A. Mention Registering Authority and relevant provision

In addition to name of the project/Institution and nature of activity, New ITR 7 requires trust to mention its registration no., registering authority and section number under which it is claiming exemption in respect of project or Institution being run by it.

B. Accumulation of income for charitable or religious purpose

Where 85% of the income is not applied for charitable purposes by a trust then it has an option to accumulate or set apart such income for future application. However, trust has to file an application electronically to the AO before the due date of filing of return to avail of such option.

Such accumulation of income shall be reported by the trust in new Form ITR 7.

C. Voluntary Contributions

A new 'Schedule VC' has been inserted in new Form ITR 7 for reporting of various voluntary donations received by the trust. Every trust shall report nature of donation along with its quantum as under:

(1)		Local voluntary donations (Corpus and non-corpus)
(2)		Foreign Contributions (Corpus and non-corpus)
(3)		Anonymous donation

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CA SANJAY DEWAN

B.COM (H),FCA

FCMA,LCS,MIMA