Recently CBDT notified the latest ITR Forms AY 2022-23 / FY 2021-22. What are the changes in the new ITR Forms for AY 2022-23? Which form to use for filing ITR? Let us try to answer these questions in detail.
Let me first share with you the Income Tax Slab rates applicable for AY 2022-23 / FY 2021-22.
As per the Income Tax Act 1961, if the person’s income exceeds the basic limit prescribed by the income tax department in a financial year (currently it is Rs.2,50,000), needs to file an income tax return. Usually, the due dates to file ITR are 31st July for salaried individuals and non-auditable firms. For companies and auditable firms, it is 30th September. However, the IT Department may extend these deadlines.
Changes in the ITR Forms for AY 2022-23
Let us now discuss the major changes in the ITR Forms for AY 2022-23.
# Category of Pensioners
In the old ITR forms, for Nature of Employment, an individual receiving pension had to choose the option of ‘Pensioners’. In new ITR forms, the following options have been incorporated for pensioners:
- Pensioners – CG,
- Pensioners – SC,
- Pensioners – PSU and
- Pensioners – Others.
# Reporting of Interest Income from EPF
You may be aware that if an employee contribution crosses more than Rs.2,50,000 a year (financial year), then interest accrued on such additional contribution is taxed as an “Income from Other Sources”. Now onwards, you have to declare such interest income on yearly basis and pay the tax.
However, if such a person has contributed to a fund in which there is no contribution by the employer, the limit of Rs. 2,50,000 shall be increased to Rs. 5,00,000.
In the new ITR forms, the Schedule OS (Other Sources) has been amended to incorporate the reporting requirement of such interest income from EPF contributions.
# Reporting of foreign assets
The ITR Forms (except ITR 1 and ITR 4) require a resident taxpayer to disclose his foreign assets such as shares(ESOPs, RSUs), and property in Schedule FA.
Here there was confusion as in India FY will start from 1st April to 31st March. However, in few countries, it is usually from 1st January to 31st December. Hence, to avoid the confusion, the CBDT has clarified that a taxpayer shall be required to report foreign assets only if such assets have been held at any time during the “previous year” (of India) as also during the ‘relevant accounting period’ (on the foreign tax jurisdiction).
The reporting requirement is mandatory only for a taxpayer who is a resident in India. Schedule FA is not required to be filed up by a taxpayer who is ‘not ordinarily resident or is a ‘non-resident’. Under this schedule disclosure of various foreign assets such as Foreign Depository Account, Immovable Property, trusts created outside India, etc., is required.
For example, if you have acquired shares of your employer in January 2021 and sold it in February 2021. For the previous year 2021-22, the relevant accounting period will be 01-01-2021 to 31-12-2021. The transaction of purchase of Share falls in the relevant Accounting Period. Then, you have to report such Foreign Asset in ITR though the same is not held in the previous year 2021-22.
# Additional disclosure in case of Capital Gains
New ITR Forms require the following additional disclosures in the Schedule CG (Capital Gains) both Long and Short
- Date of purchase and sale of land/building
- Country and Zip Code if the property is situated in a foreign country
- Disclosure of FMV of capital assets and consideration received in a slump sale transaction
- Year-wise details of the cost of improvement to land/building
- Separate disclosure of cost of acquisition and indexed cost of acquisition
# Residential status in India ITR
The income tax rules and perks of NRI are different from those applicable to resident Indians. For example, From the financial year 2017-18, ITR 1 is not available for non-residents. NRIs are supposed to file returns in ITR2 in all cases, except for business income. NRIs with business income are supposed to file returns in ITR 3.
If you lived outside India in the last Financial year, Whether your income will be taxed in India or not depends upon your residential status.
Determining the residential status of an individual in India is quite a tedious exercise. The new ITR forms give a suitable description of different clauses due to which the residential status is determined. These options are self-explanatory. The assessee has to choose the relevant option in support of his selection of residential status.
For a resident, their Global income is taxable in India.
For NRIs, income earned within India is taxable income. If you earned interest on an NRE account and an FCNR account is non-taxable in India. But interest earned on an NRO account is taxable in India for an NRI. Income that is earned outside India is not taxable income in India
Examples of Income earned and are taxable income in India:
- Salary received in India
- Salary for service provided in India
- Income from Indian house property(Rental)
- Capital gains on transfer of Indian assets(sale of property etc)
- Income from Fixed Deposits
- Interest on the savings bank account
# New tax regime opted under Section 115BAC
Do remember that those with an income from business or profession cannot opt in and opt-out of the new tax regime every year. Once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future. Form 10IE is a declaration made by the return filers for choosing the ‘New Tax Regime’
For AY 2021-22 only information required was if one has opted for the new tax regime or not. However, for the AY 2022-23, you have to choose from the following options: Whether you have opted for the new tax regime under Section 115BAC and filed Form 10-IE in AY 2021-22For the AY 2022-23, you have to choose from the following options as shown in the image below.
- Opting in now
- Not opting
- Continue to opt
- Opt-out
# Additional information not opting for the presumptive tax scheme
The audit under Section 44AB is mandatory if the total sales, turnover, or gross receipt from the business during the previous year exceeds Rs. 1 crore. However, if the cash receipt and cash payment do not exceed 5%, the audit shall be mandatory if the turnover of the business assessee exceeds Rs. 10 crores during the financial year. For the purpose of computing the limit of 5%, payment or receipt by cheque drawn on a bank or by a bank draft, which is not an account payee, shall be deemed to be the payment or receipt in cash only. The old ITR Forms required the assessee to furnish the response regarding cash receipts and payments only, and it did not consider the receipt or payment through a non-account payee cheque or DD.
The following additional disclosures are required regarding Audit Information:
- Whether total sales, turnover or gross receipt is between Rs. 1 crore and Rs. 10 crores. If not, is it below Rs. 1 crore or exceeds Rs. 10 crores?
- The new ITR forms require aggregation of receipts and payment in cash and non-account payee cheque or DD while computing the limit of 5% as mentioned above.
# Reporting of tax-deferred on ESOP
An employee can defer the payment or deduction of tax in respect of shares allotted under ESOP (specified securities) by an eligible start-up referred under Section 80-IAC. The tax is paid or deducted in respect of such ESOPs within 14 days from the earliest of the following period:
- After the expiry of 48 months from the end of the assessment year relevant to the financial year in which ESOPs are allotted;
- From the date the assessee ceases to be an employee of the organization; or
- From the date of sale of shares allotted under ESOP.
The Part B of Schedule TTI (Computation of tax liability on total income) in ITR Forms of AY 2021-22 shows the disclosure of the tax amount deferred in this respect.
The New ITR Forms have inserted a “Schedule: Tax-Deferred on ESOP”. The Schedule seeks the following disclosures:
- Amount of tax-deferred in ITR filed for AY 2021-22;
- Date of sale of specified securities and amount of tax attributable to such sale;
- Date on which he ceased to be an employee of the organization;
- Amount of tax payable in current assessment year;
- Balance amount of tax deferred to be carried forward to next assessment years.
As the outer limitation period of 48 months from the end of the assessment year relevant to the financial year in which ESOPs are allotted is not yet over, the employee shall be liable to pay tax deferred in the assessment year 2021-22 in the previous year 2025-26.
The new Schedule has been inserted to keep track of the amount of tax deferred by the employee and the year it should be taxed. The tax payable in the current assessment year is exported in a new row introduced in Schedule Part B – TTI (Computation of tax liability on total income).
# Relief under Sec.89A from taxation of income from retirement benefits account maintained in notified countries
Where a non-resident becomes a resident in India, the amount of income in his foreign retirement benefits account is chargeable to tax in India on an accrual basis. However, some countries tax such an amount at the time of receipt. Due to a mismatch in the year of taxability of such income in retirement funds, the taxpayers (generally non-residents who have permanently returned to India) face difficulties in availing of the foreign tax credit in respect of tax paid outside India on such income.
Section 89A, inserted with effect from the assessment year 2022-23, removed the aforesaid difficulty by providing that the income of a specified person from the specified account shall be taxed in such manner and for such year as may be prescribed by rules. The Board has not notified any rules yet. However, the new ITR Forms have amended Schedule S (Details of Income from Salary) to disclose:
- Income from retirement benefits account maintained in a notified country under Section 89A.
- Income from retirement benefit account maintained in a country other than notified country under Section 89A.
The eligible taxpayer is allowed to claim a deduction of ‘Income claimed for relief from taxation on the application of Section 89A’. It is not clear yet how such a deduction shall be computed?
A similar disclosure has to be made in the Schedule OS (Income from Other Sources) in respect of the family pension.
ITR Forms AY 2022-23 / FY 2021-22 – Which form to use?
# Sahaj ITR 1
You can use this form if you are –
- Salary or pension income.
- Income / Loss from one house property (excluding cases where loss is brought forward from previous years).
- Agricultural income less than Rs 5,000.
- Income from other sources like FD interest, interest on small saving schemes, Post Office interest etc., (excluding Winning from Lottery and Income from Race Horses).
- Resident Indians, who are not ordinarily resident with income up to Rs 50 Lakhs.
Who can’t use Sahaj ITR1?
- Total income exceeding Rs 50 lakh
- Agricultural income exceeding Rs 5000
- If you have taxable capital gains
- If you have income from business or profession
- Having income from more than one house property
- If you are a Director in a company
- If you have had investments in unlisted equity shares at any time during the financial year
- Owning assets (including financial interest in any entity) outside India) if you are a resident, including signing authority in any account located outside India
- If you are a resident not ordinarily resident (RNOR) and non-resident
- Having foreign assets or foreign income
- If you are assessable in respect of income of another person in respect of which tax is deducted in the hands of the other person.
# ITR 2
You can use this form –
- Income from Salary/Pension; or
- Income from House Property; or
- Income from Other Sources (including Winnings from Lottery and Income from Race Horses).
- (Total income from the above should be more than Rs 50 Lakhs). If you are an Individual Director in a company
- If you have had investments in unlisted equity shares at any time during the financial year
- Being a resident not ordinarily resident (RNOR) and non-resident
- Income from Capital Gains; or
- Foreign Assets/Foreign income
- Agricultural income more than Rs 5,000
You can’t use this form if –
This Form should not be used by an individual whose total income for the AY 2020-21 includes Income from Business or Profession.
# ITR 3
You can use this form if –
- Carrying on a business or profession
- If you are an Individual Director in a company
- If you have had investments in unlisted equity shares at any time during the financial year
- Return may include income from House property, Salary/Pension and Income from other sources
- Income of a person as a partner in the firm.
# ITR 4
The current ITR 4 is applicable to individuals and HUFs, Partnership firms (other than LLPs) which are residents having income from a business or profession. It also include those who have opted for the presumptive income scheme as per Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act. However, if the turnover of the business exceeds Rs 2 crore, the taxpayer will have to file ITR-3.
You can’t use this form if –
- If your total income exceeds Rs 50 lakh
- Having income from more than one house property
- If you have any brought forward loss or loss to be carried forward under any head of income
- Owning any foreign asset
- If you have signing authority in any account located outside India
- Having income from any source outside India
- If you are a Director in a company
- If you have had investments in unlisted equity shares at any time during the financial year
- Being a resident not ordinarily resident (RNOR) and non-resident
- Having foreign assets or foreign income
- If you are assessable in respect of income of another person in respect of which tax is deducted in the hands of the other person.
I have covered the major aspects of the changes and also the major rules of which form to use.
