9 key changes in ITR-1, ITR-2 for FY 2019-20 | Economic Times

By CA Naveen Wadhwa and CA Rahul SinghThe Income Tax Department has notified income tax return (ITR) forms 1 to 7 for the financial year (FY) 2019-20. These forms are applicable for filing of ITR in respect of income earned during the previous year, FY 2019-20 (between April 1, 2019 and March 31, 2020).The applicability of the ITR forms depend on the type of taxpayer and the nature of income earned by him. Individuals and HUFs, who are not earning income from profits and gains of business or profession (PGBP), can file return of income using ITR-1 or ITR-2.ITR-1 is a simpler form which is filed by those resident individuals having only salaried income, income from one house property and other sources such as interest income from fixed deposits, savings account etc. On the other hand, ITR-2 is a bulkier form which can be filed by both a resident as well as a non-resident individual having all types of income except income from PGBP.The Income-tax Department has made several changes in the ITR forms applicable for tax filing for FY 2019-20. In this article, we have highlighted the key changes introduced in ITR-1 and ITR-2 which should be kept in mind while filing return for assessment year 2020-21.1) New 'Schedule DI' to furnish details of investments made during the extended periodThe Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, promulgated by the President of India on March 31, 2020, has extended the time limit till July 31, 2020 to make investments, deposits, payments, etc. for FY 2019-20 for claiming deduction under Chapter VI-A, section 10AA and sections 54 to 54GB.For example, a person is eligible to claim deduction under section 80G if he made donation during the FY (between April 01 to March 31). However, for the FY 2019-20, the CBDT has allowed additional 4 months so as to claim deduction of donations/investments. Thus any sum donated by July 31, 2020 can be claimed as deduction under section 80G while filing ITR for FY 2019-20.Note: Time limit for claiming deduction from capital gains under sections 54 to 54GB has been further extended by the board from July 31, 2020 to September 30, 2020.As exceptional circumstances due to the COVID-19 pandemic has arisen for the first time, the existing ITR forms had no option to allow the deduction if investments are made by the taxpayer after the end of the financial year. Thus, a new Schedule DI has been inserted in ITR forms 1 and 2 to allow taxpayers to avail the deduction for investments/deposits made during the extended period.'Schedule DI' is bifurcated into the following three parts:a) Part A seeks details of the investment, deposit, or payments made to claim deduction under Chapter VI-A;b) Part B seeks detail of eligible amount of deduction available under section 10AA; andc) Part C seeks details of payment, acquisition, purchase or construction made to claim deduction under Sections 54 to 54GB.It must be noted that though the time limit for making tax-saving investments has been extended by four months, there is no increase in the threshold limit available under respective sections. For example, if a taxpayer is claiming deduction under section 80C, the aggregate amount of deduction for investment/payment made during the period of April 1, 2019 to March 31, 2020 and April 1, 2020 to July 31, 2020 shall not exceed Rs 1.5 lakh.2) Filing ITR by person falling under the Seventh proviso to section 139(1)To ensure that individuals, entering into certain high-value transactions, furnish the ITR, the seventh proviso to section 139 was inserted by the Finance (No. 2) Act, 2019. The provision requires every person, who is otherwise not required to file ITR due to the reason that his income does not exceed the maximum exemption limit, to file tax return if during FY 2019-20 he has:a) Deposited more than Rs 1 crore in one or more current accounts maintained with a bank or a co-operative bank;b) Incurred more than Rs 2 lakh for himself or any other person for travel to a foreign country; orc) Incurred more than Rs 1 lakh towards payment of electricity bill.If an assessee is required to file the return of income in the circumstances covered under the seventh proviso to Section 139(1), he is required to furnish the relevant details in ITR-1 and ITR-2 forms, that is, amount deposited in the current account, the amount incurred on the foreign travel or amount paid toward electricity bill.3) Option to quote PAN or Aadhaar in various schedulesThe Finance (No. 2) Act, 2019 inserted sub-section (5E) to Section 139A to allow the interchangeability of Aadhaar with PAN. Thus, where a person has not been allotted PAN, but he possesses Aadhaar, he may furnish his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner.Further, every person who has been allotted a PAN, and who has linked his Aadhaar number with PAN as per section 139AA, may furnish his Aadhaar number in lieu of PAN for all the transactions where quoting of PAN is mandatory as per the Income-tax Act.Various schedules of ITR-1 and ITR-2 require the assessee to furnish PAN of the second party, inter-alia, tenant, buyer, etc. To allow quoting of Aadhaar in place of PAN, these schedules now substitute the term 'PAN' with 'PAN/Aadhaar'. Accordingly, the assessee can furnish Aadhaar or PAN in respect to the following person:a) A person filing the Income-tax return as a representative assessee;b) Co-owner of the house property;c) Tenant(s) of the house property;d) Buyer of the immovable property transferred during the year;e) A person whose tax credit is being claimed by the assessee;f) Tenants/buyer who has deducted tax at source;g) Person holding 10% or more of the voting power in case of unlisted company;h) Shareholders of unlisted companies including start-ups;i) Person whose income is clubbed with the income of assessee; andj) Spouse governed by Portuguese Civil Code.4) Separate reporting of surcharge on income chargeable to tax under sections 112A, 111A, 115ADThe rate of surcharge was enhanced by the Finance (No. 2) Act, 2019. Two new additional rates of surcharge have been introduced, that is, 25 per cent and 37 per cent where the income exceeds Rs 2 crore and Rs 5 crore, respectively. However, due to the concerns raised by domestic and foreign investors, the enhanced rates of surcharge of 25 per cent or 37 per cent were withdrawn on the individual, HUF, AOP, BOI and Artificial Juridical Person in respect of tax payable on income arising from the transfer of long-term or short-term capital assets taxable under sections 111A, 112A and income taxable under proviso to section 115AD(1)(ii)(iii).Section 111A provides for the taxability of short-term capital gains arising from the sale of listed securities. Section 112A is applicable if the resultant capital gains is arising from long-term capital assets. In both the provisions, payment of securities transaction tax (STT) is at the time of sale of such securities is a necessary condition. Section 115AD(i)(ii)(iii) deals with taxability in the hand of Foreign Institutional Investors from capital gains arising from sale of securities.Considering the non-applicability of the enhanced surcharge on these specified incomes, ITR-2 has been revised to appropriately show the computation of surcharge on various incomes in the hands of the assessee. Columns have been inserted for separate reporting of surcharge on income chargeable under sections 111A, 112A and proviso to section 115AD(1)(ii)/(iii).5) Type of company to be reported if the assessee is a director in a company or holding unlisted equity sharesITR-2 applicable for FY2018-19 required the directors of companies to furnish the following details:Name of the companyPANWhether the shares are listed or notDINThe initiative was taken to check shell companies and ghost directors. The new ITR-2 form for FY 2019-20 require the directors to provide information regarding the 'type of the company'. The utility will provide a drop-down list of the type of companies and the assessee director is required to choose any one from them.6) List of nature of employment has been expandedThe ITR forms require the individual assessee to furnish the nature of employment. Until last year, only the following categories were available for selection:GovernmentPublic sector undertakingPensionersOthersThe new ITR-1 form expands the category of employers. Government employer is bifurcated into Central and State governments. Now, in the new ITR forms, following six categories are available for selection in the nature of employment:Central GovernmentState GovernmentPublic sector undertakingPensionersOthersNot Applicable7) Unique Document Identification is required if return is filed in response to a noticeThe CBDT has made it mandatory for the authorities to quote Document Identification Number (DIN) in all correspondence issued by them. DIN mechanism was developed to maintain a proper audit trail of all the communications of the department with the taxpayer. After the introduction of the DIN system from October 1, 2019, every notice issued by the department contains a unique identification number. The new ITR-1 and ITR-2 forms require the assessee to provide the DIN of the notice in response to which he is filing the return of income.8) Consequential changes in the Schedule of Deductions under Chapter VI-ASection 80EEA and Section 80EEB were introduced by the Finance (No. 2) Act, 2019 to provide deduction in respect of interest on housing loan and interest on loan taken for electric vehicles respectively. The necessary changes have been made to ITR-1 and ITR-2 forms to claim these deductions in ITRs.9) Assessee can choose multiple bank accounts for payment of refundAt the time of filing ITR, assessee is required to furnish the details of all bank accounts held in India during the previous year (excluding dormant accounts). Out of the mentioned accounts, the assessee is required to indicate minimum one account in which he prefers to get the tax refund. In the new ITR-1 and ITR-2 forms, the assessee has been given an option to choose multiple bank accounts for the payment of refund. However, the refund will be credited to one of the accounts decided by CPC after processing of ITR.(CA Naveen Wadhwa, DGM, R&D, Taxmann.com and CA Rahul Singh, Manager, R&D, Taxmann.com)