Tax Talk: Taxman returns, with a simpler filing process

By: | Published: June 9, 2015 12:05 AM

WHEN the government notified tax-return forms — ITR 1, ITR 2 and ITR 4S — for FY15 a few weeks ago, it stirred quite a controversy.

WHEN the government notified tax-return forms —  ITR 1, ITR 2 and ITR 4S — for FY15 a few weeks ago, it stirred quite a controversy. These forms entailed a number of additional disclosures by taxpayers, including exhaustive details of foreign trips and bank accounts. Consequent to the representations made before the finance ministry by stakeholders, the forms were put on hold.

On May 31, the government announced a number of changes in the forms aimed at simplifying them, abandoning its attempt to seek detailed disclosures of foreign trips and bank accounts and delivering on its promise of simpler tax filing. ITR 2 is now expected to be reduced from a 14-page comprehensive document to a three-page concise form (with annexures to be filled up only if applicable).

The requirement to report extensive details of foreign trips made during the financial year, including countries visited, number of trips and expenses incurred from own sources, will be done away with, instead only requiring the disclosure of the passport number. This is a welcome change.

Earlier, the forms sought detailed particulars of all bank accounts held in India. Now, while taxpayers will be required to furnish the account number and IFSC code for all current and savings accounts held by them at any time during the previous year, they won’t have to give details of dormant accounts. Taxpayers will also be spared from disclosing the balance in each bank account.

To identify undisclosed income stashed abroad, the government had introduced mandatory reporting of foreign assets held outside India for all ordinary resident taxpayers. This provision, along with Indian citizens, also covered foreign citizens who stayed in India long enough to qualify as ordinary residents. This anomaly will now be set right with the relaxation in the reporting requirement of foreign assets for individuals who are not Indian citizens and are present in India on business, employment or student visa (expatriate). Such relaxation will, however, be restricted to foreign assets acquired by the foreign citizen when he qualified to be non-resident in India and from which no income is derived during the fiscal.

There will also be the much required rationalisation in respect of return forms to be used by individuals. Hitherto, individuals with income from more than one house or capital gains were required to file their returns in form ITR 2.

However, a majority of individuals using form ITR 2 did not have capital gains and, hence, to save such taxpayers the hassle of filling up the detailed form ITR 2, they can now file their return via a new form, ITR 2A, if they do not have any income from capital gains, business or profession and foreign income/assets.

Moreover, individual taxpayers with exempt income exceeding R5,000 were not allowed to use the simpler ITR 1 form. Instead, they were mandatorily required to use form ITR 2. Taxpayers with exempt income (other than agricultural income exceeding R5,000), without any ceiling, will now be allowed to use ITR 1, making the return filing process much easier and faster for them.

The software for these return forms is being prepared and the forms are expected to go public only in the third week of June. Hence, the government has extended the deadline for filing returns by a month.

The writer is senior manager Deloitte. With inputs from Bhavin Rajput, manager and Monish Satra, assistant manager, Deloitte in India

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