New ITR-1 form: Know the eligibility norms

The Central Board of Direct Taxes (CBDT) recently notified two Income Tax Return Forms, SAHAJ (ITR-1) and SUGAM (ITR-4), for certain individuals for assessment year 2020-21. The CBDT has notified these forms even before beginning of relevant assessment year, which will give sufficient time to taxpayers to gather necessary information.

These two types of ITR forms are supposedly most simple forms, requiring minimal details from individuals having limited total income or carrying out small business/ profession.

While ITR-1 is for Indian residents whose total income does not exceed Rs 50 lakh, ITR-4 is meant for taxpayers earning income from business and profession taxable under presumptive taxation scheme and where the total turnover/ gross receipts of business/ profession does not exceed prescribed limits. 

With an objective of effective tax implementation and to prevent tax leakages, the CBDT has introduced new disclosures and sought additional information from taxpayers in new forms.

Further, scope of these simple ITR forms has been pruned by omitting certain class of taxpayers, who could earlier file their Income Tax Return (ITR) through these simpler forms, but not henceforth.

Scope of ITR-1 and ITR-4

ITR-1 is generally the simplest form requiring minimum details from the taxpayers, with an objective that such ITR forms can be filled by any taxpayer without any assistance of tax professionals.

Initially it was proposed that taxpayers, who are required to file ITR due to certain high spend transactions, such as payment of more than Rs 1 lakh as electricity bills in one year, or deposit of an amount exceeding Rs 1 crore in current accounts maintained with a bank, or spending over Rs 2 lakh on a foreign travel, shall not be permitted to take benefit of filing ITR-1.

It was also proposed that ITR 1 and ITR-4 would not be applicable for individuals who are joint owners in house property. Such taxpayers will have to use more detailed ITR forms, which shall be notified in due course.

However, after concerns raised by taxpayers, the government issued a clarification on January 9, 2020 clarifying that above-mentioned high spenders would be eligible to use simple ITR-1, if they satisfy other conditions for using the same.

It has allowed taxpayers holding a single house property to use ITR-1 or ITR-4, even if they hold it jointly. However, such relaxation will not be applicable to taxpayers holding multiple house properties in joint names.

New disclosure requirements

Both the ITR forms necessitate disclosure of passport number where the taxpayer holds a valid Indian passport. Additionally, taxpayer shall be required to furnish details pertaining to TAN, name and address of employer along with allowances exempt under Section 10 of IT Act, while disclosing ‘salary income’.

Taxpayers can add multiple rows for gross salary in case they have had more than one employer in the previous year. For income from house property, besides providing details of unrealised rent, taxpayers shall now have to furnish name, Aadhaar or PAN details of tenant in both the ITR forms.

As a relaxation, taxpayers don’t need to furnish details of their debtors/ creditors in new ITR forms, though they would need to furnish particulars of cash and bank transactions relating to presumptive business in ITR-4. Further, the new ITR-4 form seeks details of partnership firm (i.e. name and PAN number) and details of partners, if the assessee is a partner in a firm. More comprehensive details pertaining to deductions under Chapter VI-A have been sought in the new ITR forms.

The government has provided abundant time to taxpayers to be aware of any new disclosures, ensuring timely compliance.

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