Tax talk: Things you should know about new ITR forms

By: | Published: April 5, 2016 12:49 AM

The Central Board of Direct Taxes (CBDT) has issued a new set of income tax return forms where individuals or Hindu Undivided Family (HUF) with an income above R50 lakh will have to disclose their assets for the assessment year 2016-17 while filing returns.

The Central Board of Direct Taxes (CBDT) has issued a new set of income tax return forms where individuals or Hindu Undivided Family (HUF) with an income above R50 lakh will have to disclose their assets for the assessment year 2016-17 while filing returns.

The CBDT has also issued forms ITR 1 (SAHAJ) for individuals having income from salary and interest and ITR 4S (SUGAM) for individuals/HUF/partnership firm having income from presumptive business for early filing of returns.

The CBDT has introduced fresh reporting columns in the new forms — ITR 2 and ITR 2A — applicable in cases where the total income exceeds R50 lakh. Individuals and entities in this income bracket will have to mention the total cost of such assets. Immovable assets like land and buildings have to be declared as also movable assets like cash in hand, jewellery, bullion, vehicles, etc. The entity reporting these will also have to describe the liability in relation to them.

To prevent tax evasion, the income tax department last year sought information on foreign travel undertaken by taxpayers and the expenditure incurred, as well as details of all bank accounts along with account balances at the end of a year in the tax return forms. However, after protest from taxpayers, the department issued revised forms seeking only the passport numbers without details of travel and expenditure.

From assessment year 2016-17, wealth tax will no longer be applicable. Information which was furnished for wealth tax returns earlier will now reflect in forms ITR 2 and ITR 2A for those with income over R50 lakh. In fact, while abolishing wealth tax, finance minister Arun Jaitley had announced in the Budget that information which was required to be furnished in the return of wealth will now form a part of the I-T return.

Tapati Ghose, partner at Deloitte Haskins & Sells, says a threshold limit for each category of asset for disclosure purposes would provide an administrative relief in case assets below a prescribed threshold are exempted from disclosure requirement. “For instance, it may be recalled that only cash value in excess of R50,000 was required to be considered for wealth tax purposes in the past. Whether any threshold for disclosure is intended will be known only when the instructions are made available,” she says and adds that individuals are likely to face a challenge in determining cost for gifted assets (such as jewellery), inherited assets and for assets purchased several years earlier where records have not been retained.

At present, foreign asset disclosure is required for Resident and Ordinarily Residents in Schedule Foreign Assets. However, clarification should be issued to ensure that double disclosure is not required for such foreign assets in Schedule Assets and Liabilities as well.

Wealth tax was levied on an individual, HUF or a company, if the net wealth of such an entity exceeds R30 lakh on March 31.Taxpayers were required to value assets as per wealth tax rules for computation of net wealth. For assets such as jewellery, individuals or HUFs had to obtain a report from a registered valuer.

Analysts say with the abolition of wealth tax, people may take a relook at their wealth portfolio. They may now invest more in land in urban areas and other assets that were earlier subject to wealth tax. Holding more than one plot of land in an urban area will be free from wealth tax and would attract capital gains tax upon sale only. At the time of the sale, the taxpayer will be able to reduce his I-T liability by investing in a residential house or specified securities and bonds provided the property was held for 36 months.

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