By Sandeep Jhunjhunwala
The CBDT recently notified ITR forms for Assessment Year (AY) 2022-23, corresponding to the financial year (FY) 2021-22. While applicability of the ITR forms to different categories of taxpayers does not change, certain changes merit attention.
Reporting of foreign assets
Schedule FA requires reporting of foreign assets by a resident taxpayer. Under the Income Tax Act, the period for which income is taxable is the “previous year”, which is the FY ending March 31. Schedule FA required disclosure of assets held during the “accounting period”, which is the period adopted for closing of accounts and tax filings by foreign jurisdictions in which assets are located.
To eliminate the confusion, Schedule FA of new ITR forms requires reporting of foreign assets held at any time during the calendar year ending on December 31, 2021. If for instance, an asset is purchased for the first time in January 2022, it does not have to be reported in Schedule FA of ITR for FY 2021-22 but in ITR for FY 2022-23.
Tax deferred on ESOP
To ease the burden of payment of taxes on exercise of ESOPs by employees of eligible startups or TDS by IMB recognised startup employers, Finance Act, 2020 had provided for deferral of TDS on perquisite value of ESOP. The new ITR forms provide for a schedule for reporting details of such taxes deferred. This reporting will require taxpayers to compute tax on the perquisite value of ESOPs in the AY in which shares have been allotted on exercise. This will allow I-T officials to monitor in which year taxes so deferred are actually required to be paid.
Tax credit on foreign retirement benefits
The Finance Act, 2021 had inserted Section 89A, to provide relief from tax on withdrawal from overseas retirement funds by residents who had opened such funds as non-residents. Withdrawal from such funds were taxed on receipt basis in the foreign country vis-à-vis accrual basis in India resulting in difficulties being faced by taxpayers in claiming foreign tax credit for taxes paid in foreign countries.
The new ITR forms have amended Schedule S (ie, details of Income from Salary) which will allow taxpayers to claim relief from taxation under Section 89A in the prescribed manner, rules for which are yet to be notified.
Additional disclosure for capital gains
The new ITR forms require additional disclosure in capital gains schedule with respect to land and building which include date of purchase or sale, year in which any improvements were made and separate disclosures for cost of acquisition and indexed cost.
Some stakeholders have expressed concerns over the absence of a specific schedule in new ITR forms for reporting crypto income. Authorities will make a provision in the ITR forms to report crypto income when ITR forms for FY 2022-23, being the first year of crypto tax regime, are notified.
— Schedule FA for reporting foreign assets held in CY21
— New ITR form asks for computing tax on perquisite value of ESOPs in the AY in which shares are allotted
— Schedule S amended to allow tax relief u/s 89A
— Additional disclosure in capital gains schedule with respect to land and building
The writer is partner, Nangia Andersen LLP. Inputs from Amita Jivrajani and Ankur Agarwal.