First issue a taxpayer faces while filing his/her Income Tax Return (ITR) is selecting the correct ITR Form. For example, a salaried taxpayer is supposed to file ITR-1, but possessing more than one house property, having any capital gain and many other conditions disqualify such an assessee from filing ITR-1.
With the Income Tax Department is moving towards automation for ITR filing with each passing year, instead of making taxpayers study the conditions that qualify or disqualify a taxpayer from selecting an ITR Form out of ITR-1 to ITR-6, the Department has now proposed a common ITR form, a draft of which has been released for consultation purposes.
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The common ITR would replace all ITR Forms, except ITR-7, and the taxpayers will be able to download the appropriate utility to file ITR based on questions answered by them related to their income and filing status.
For the taxpayers eligible to file ITR-1 (Sahaj) and ITR-4 (Sugam), there will be an option to select any of the two ITR Forms directly, or to use the common ITR Form.
However, for the taxpayers eligible to file ITR-2 (ITR for capital gains) and ITR-3 (ITR for Business Returns), there will be no other option, but to use the common ITR, when implemented.
The launch of the new Income Tax Portal in 2021, paved the way for the introduction of the pre-fill option for taxpayers. The introduction of the Annual Information Statement (AIS) has allowed the taxpayers and the Department to avail detailed information related to every taxpayer’s income and financial activity.
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However, every change in the filing process makes the taxpayers a confused lot.
“Frequent changes in the filing system make filing difficult for taxpayers, who have to re-learn the process to e-file. It also means the flow introduced last year by the department will have to undergo more change,” said Archit Gupta, Founder & CEO, Clear, adding, “In the transition period right now, there are too many decisions that a taxpayer has to make: ‘Should I use the old tax regime or new tax regime?’ ‘Should I use common ITR or continue with ITR-1 / ITR-4?’”
“As they are most familiar with the old regime, it’s better for the taxpayers to continue the status quo of previous choices,” said Gupta.
As selection of the appropriate ITR Form and applicability of the Tax Regime will be based on the answers given by the taxpayers, they should be more alert while filing their return of income.
“We feel taxpayers will now need to be more careful while answering yes/no questions and be fully aware of the implications,” said Gupta.
“We also believe that further simplification of questions will help taxpayers self e-file successfully,” he added.
Talking on the role of Cleartax, Gupta said, “Cleartax had introduced auto ITR form selection 10 years back. Our customers already see only the applicable schedules based on the income reported by them. Certains schedules are auto populated and taxpayers don’t need to be concerned about them when filing on Cleartax.”
“We will work to educate taxpayers about the new process,” he added.
