Important Changes and Additional Requirements for Filing ITR for Assessment Year 2020-21

E-Filing of the Income Tax Returns commenced from Assessment Year 2006-07 making it mandatory for Companies to file the same online. It was a biggest challenge for the Government and also for the Professionals to accept the revolutionary change of shifting to the Digitised filing. Gradually the scope of filing expanded to cover all types of assesses, step by step from Assessment Year 2007-08 and now almost we are in the fourteenth year of it’s successful implementation. Special thanks to the efforts of Technology and the services of software providers including the professionals who are working day in and out for it.

All Assessees are now required to file their Returns online except Super Senior Citizens are given option to submit Return in paper mode provided the Computation does not have any income chargeable under head of Profits and Gains from Business or Profession.

For filing the Return of Income, the Department releases the utility for filing each year. Based on the Nature of Income, Status and other criteria set for filing vide rules framed under the Income Tax Act, the assesse is required to select the correct applicable ITR utility, fill up the same with all the mandatory information required and upload the same within the time limit specified under Section 139(1) of the Income Tax Act, 1961 or such extended period, if any. The ITD Portal accepts any XML generated from any ITR utility specified for filing for Individual and HUF and there is no option on the Webportal to reject the XML on account of non-inclusion of any head of income. Proper care has to be taken that correct applicable ITR form is selected. This casts more responsibility on the part of the professionals to ensure that the information filled up and provided is correct and not to blindly rely on the work done by the Assistants and Articles, which may create problems at the time of assessments. Any incorrect or incomplete submission of information or incorrect selection of ITR may result in concealment of details and attract any of the penal provisions under Section 276C, Section 276CC, Section 277A etc. of the Income Tax Act, 1961.

Changes in the ITR Requirements

The New ITR Forms have been notified vide Notification No. G.S.R. 338(E) on May 29, 2020 in exercise of the powers conferred by section 139 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes and have made the rules further to amend the Income-tax Rules, 1962. These rules may be called the Income-tax (12th Amendment) Rules, 2020 and can be downloaded from the website of the Income Tax Department www.incometaxindia.gov.in under the head Notifications.

There are no changes in the number of forms and it’s applicability and it continues to be the same as earlier Assessment Year.

The Finance (No. 2) Act, 2019 inserted sub-section (5E) to Section 139A to allow the interchangeability of Aadhaar with PAN. The same has been implemented in the ITR’s notified. Now, the Individual person not having the PAN Number but having Aadhar Number will be able to file the Return of Income based on his Aadhar Number. The Department shall allot the PAN Number to such person in the manner prescribed. The person having Adhar Number can now apply for PAN online and the Real Time PAN Allotment by the Department has been implemented. The website of the ITD needs to update their software to enable the filing of ITR with Adhar Number. This revolutionary change in the filing is supposed to be for the Notices issued by the Income Tax Department to various non-filers who have entered into high value transactions in Demonitisation period and also in other cases wherein the non-filers have been identified and are not having PAN. As a result of this change, the Department will now be able to take actions against such Individual defaulters to file the Return in response to the Notices issued on account of un-accounted and un-reported transactions and may be able to take further action. Slowly and gradually, the country is moving towards Single Identification Number for each Individual person and the Government will be able to track all the earnings and spending to ensure that the income has been disclosed correctly.

Changes in the Procedure of generation of Acknowledgement

The Acknowledgement ITR-V was generated on uploading whether the Return was e-verified or not. The Assessee is required to complete the e-verifcation process either by sending the ITR-V generated signed and verification physically signed to CPC-Bengaluru or through other e-verification mode specified. On completion of the required e-verification procedure, the Digitised Acknowledgement was re-generated. From this Assessment Year, the provisional Acknowledgement will be generated in non-verified Returns filed in Form ITR-1 (SAHAJ), ITR-2, ITR3, ITR-4 (SUGAM), ITR-5, ITR-7. The provisional Acknowledgement so generated will not contain any data relating to income, deductions, taxes paid etc. and is termed as ITR V ‘Indian Income Tax Return Verification Form’. This Acknowledgement will state that Return is filed but NOT verified electronically. This Acknowledgement is required to be signed physically and sent to CPC-Bengaluru. Such Returns filed can also be e-verified through other specified modes but the e-verification process needs to be completed within the specified time limit.

Final Acknowledgement will be generated after completion of e-verification formalities and will be sent on the e-mail id of the assesse registered on the ITD Portal and also e-mail id specified in the ITR. The same is also available for downloading on the e-filing account of the assesse.

Mandatory filing of Return of Income for certain classes of Assessees

Finance Act, 2019 has introduced the mandatory filing of Return of Income by the following assesses and amended the filing of Return of Income under Seventh provisio to Section 139(1) and were otherwise not required to file Return of Income. The following additional details have to be furnished while filing ITR-1, ITR-2, ITR-3 or ITR-4.

The following categories of persons are now required to file the Return of Income

1. Cash Deposit in Current Account:

   It has been made compulsory, in all ITR forms to declare the amount of cash deposited in one or more current accounts with a bank, if such amount or aggregate of such amount exceeds ₹ 1 crore during the financial year 2019-20. The total amount deposited in cash is also required to be mentioned in the clause specified.

2. Expenditure on Foreign Travel:

   The person incurring expenditure of an amount or aggregate of amount or aggregate of amount exceeding ₹ 2 lakh for travel to foreign country for himself of for other person is required to be selected as “Yes” or “NO”. The total of such amount spent on foreign travel is required to be reported.

   Based on the wordings in the said clause, it is presumed that the information is to be submitted by the person who has actually spent the amount and not by the person who has actually travelled. Further, if the amount is spent for travel is actually reimbursed to the spender by the person who is actually traveling then it has to be reporting requirements will be of the traveller and not by the spender.

   There may be an instance where the amount has been spent by a person on behalf of other person in such cases may trigger scrutiny if the amount spent is significantly high on behalf of other person and accordingly proper care to be taken for reporting under such cases.

   The better option for reporting here could have been as under:

   1. Whether you have spent an amount or aggregate of amount or aggregate of amount exceeding ₹ 2 lakh for travel to foreign country for himself of for other person;

      1. Whether for self – Yes/No – If yes, amount of expenses

      2. For other person – Yes/No – If yes, provide the details like Name of the person, Relationship, PAN/Addhar and the actual amount spent, Purpose of travel;

   This could have given much clarity of the information sought by the Department and asking for only the required further information, in case any further clarification is required. In many cases, the travelling expenses are incurred by the main person of the family on all other person’s behalf.

   The information so submitted will be readily available and reflected in Form 26AS, as the provisions of TCS has been introduced by the Finance Act, 2020 on travel agents, though it’s implementation has been shifted to October 1, 2020, in lieu of COVID-19 the relaxations granted by The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

3. Expenditure on Consumption of Electricity:

   Lastly if the person has incurred expenditure of amount or aggregate of amount exceeding  ₹ 1 lakh on consumption of electricity during the year 2019-20 will have to disclose the actual amount so paid.

   If any of the above (3) conditions specified, are trigged, then the assessee needs to select the option ‘Yes” or “No”, stated in the ITR. If “Yes” option is selected, then other mandatory requirements field sought in the form get activated and if the required information is not filled, then the assesse will not be able to generate the validated XML for uploading Return.

   The foreign travel or electricity expenditure information sought in the Return, the clarification to report the amount whether it is required to be reported is only for personal purpose or not etc. is not given. If the absence of necessary clarification, the filings may end up creating genuine problems for the assessee at the time of assessment as there may be cases where the expenses may be for business purpose etc. or amount spent for assets like immovable property given on rent and the electricity expenses paid by the Tenant. Necessary representation needs to be made for getting the said clarification from CBDT as to what is the intention of such reporting or to modify the reporting only for the personal purposes etc.

Reporting of Income or Loss through Pass Through Entities (SCH-PTI)

Pass through Entities (PTI) like alia, Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (In VITs), Category I and Category II Alternative Investment Funds (AIFs) are allowed to pass its income to its investors without paying taxes and accordingly such investors are liable to pay tax on such income as if they have directly made the investments. Tax is payable by the investor and not by PTI as it is treated as income of the Investor. Further AIFs can pass any income which also includes losses (other than income from business or profession) to its investors, as per amended Section 115UB the Finance Act, 2020

The new ITR forms incorporated the above changes by introducing SCH-PTI, which needs to be filled up and the necessary income or loss, including the TDS Credit claimed is required to be reported in the said schedule. If the carried forward losses of earlier years of such PTI’s are adjusted against the current year’s income, then the provision for claiming such losses to be mentioned in the required SCH-CFL

Additional requirements of information sought for various classes of income.

Income from Salary

The details under Nature of Employment, Government employees have been bifurcated as Central Govt. and State Govt. employees. Also, a new option “NA” has been added to the list. This option will be beneficial for the individuals claiming Family Pension, etc. in ITR-1, and ITR-4, It is an welcome move as it was long pending requirement sought which has been addressed.

Income from House Property

Joint House Ownership:

Individual taxpayers who are joint owners of house property can now file their Annual Income tax Return using the simple ITR-1 (Sahaj) or ITR-4 (Sugam) forms. Earlier, they were not eligible to use these ITR to report their incomes if they are joint owners in a house property. ITR-1 and ITR-4 are the simple Returns which do not require any additional information as is required by ITR-2 and ITR-3. This seems to have been done to for giving effect by The Income Tax (First Amendment) Rules, 2020 w.e.f. 01.04.2020 to avoid unusual hardship to the individual taxpayers.

Further, in case of let-out property, instead of PAN and TAN details of the Tenant, Aadhaar Number of the Tenant can now be provided, if the tenant is an Individual.

Profits and Gains of Business or Profession

For Income from Profits and Gains of Business in ITR-3, ITR-5 or ITR-6, certain additional details have been sought under Audit Information. These are as follows:

1. Whether assessee is declaring income only under Section 44AE/44B/44BB/44AD/44ADA/ 44BBA/44BBB?

2. If No, whether during the year Total sales/turnover/gross receipts of business exceeds ₹ 1 crore but does not exceed ₹ 5 crores?

If the answer to point II above is Yes, then additionally need to inform whether aggregate of all amounts received in for sales, turnover or gross receipts or on capital account like capital contributions, loans etc. during the previous year, in cash, does not exceed five per cent of said amount?

Also, if the answer to point II above is Yes, then assesse further needs to inform whether aggregate of all payments made including amount incurred for expenditure or on capital account such as asset acquisition, repayment of loans etc., in cash, during the previous year does not exceed five per cent of the said payment?

In ITR-4, under “Schedule BP”, while calculating the Gross Turnover or Gross Receipts under Section 44AD, amounts received through prescribed electronic modes has been incorporated in addition to amounts received through account payee cheque, account payee bank draft and bank electronic clearing system. In ITR-4, while calculating presumptive income from goods carriages under Section 44AE, the celling of maximum 10 rows has been removed.

A new entry of 45% Depreciation is added in the block of Plant & Machinery to claim an additional depreciation of 15% on motor vehicles purchased between 23rd August, 2019 and 31st March, 2020. It is for giving effect to the announcements made as part of a stimulus package granted to vehicle industries on
 23-08-2019. The new depreciation rates have been notified by the CBDT vide Notification No. 69/2019, dated 20-09-2019 effective from date 23rd August, 2019.

Life Insurance Business

Person earning income from Life Insurance Business (ITR-5 and ITR-6), now requires following additional reporting in Schedule- BP

1. Net profit or loss from insurance business referred to in section 115B;

2. Additions in accordance with section 30 to section 43B;

3. Deductions in accordance with section 30 to section 43B; and

4. Income from life insurance business under section 115B.

The required changes have been made in other schedules and accordingly in the Schedule CFL (Details of losses to be carried forward to future years), a separate information is required for income from the life insurance business.

Capital Gains

1. Capital Gains Sale of Shares ITR

   The Assessee reporting income from capital gains on sale of shares are now required to give the full information and details as under

   1. ISIN Code (Scrip Code with Stock Exchange)

   2. Name of the Share/Unit

   3. No. of Shares/Unit

   4. Sale Price Per Share/Unit

   5. Full Value of Consideration (Total Sales Value)

   6. Cost of Acquisition without Indexation

   7. Cost of Acquisition

   8. If the Long Term Capital Asset was acquired prior to 1.2.2018, then FMV as on 31.1.2018;

   9. FMV per share/unit as at 31.1.2018;

   10. Total FMV of the Capital Asset as per Section 55(2)(ac)

   11. Expenditure incurred wholly and exclusively for the purpose of transfer

   12. Total Deduction

   13. Balance Long Term Capital Gains

   The information sought in the ITR will make it very difficult especially for the persons who are having multiple such transactions and are reporting income under this head. The Department needs to provide pre-filled utilities in time capturing all such information, other than cost of acquisition. Stock Exchanges have been providing details of the transactions done on the basis of PAN on regular basis through AIR. This will not only save the time and effort of the assesse but they will have an opportunity to verify the transactions captured are correct or not before uploading the Return of Income. Any mismatch in providing incorrect or incomplete information may call for harsh penal provisions under Section 276C, Section 276CC, Section 277A etc. of the Income Tax Act, 1961.

   It is recommended that the professionals advise such clients to maintain and update the records regularly so that the correct information is given in the Return of Income and they get the required information in time.

2. Short Term Capital Gains on Sale of Immovable Property

   In case of Sale of Property, the Seller now has the option of giving Aadhar Number of the Purchaser, if the PAN is not available. This will enable the Department to check on the high value transactions entered by non-tax complying assesses, which is one of the welcome move to increase the tax return filers.

Income from Other Sources

Deductions under Chapter VIA

Schedule DI- Details of Investment” has been amended to incorporate in all the ITR Forms, as per the COVID-19 Notification guidelines issued and accordingly the additional statement giving the information for any investment/ deposit/ payments made during the period 01.04.2020 to 30.06.2020 for the purpose of claiming any deduction under Chapter VIA. The details of the investments made during the specified extended period is required to be reported in the column specified. It has to be ensured that the amount claimed in the Assessment Year 2020-21 is not claimed again in the subsequent Assessment Year on the basis of deposit. Any incorrect claim may invite disallowance and penal provisions for submission of incorrect information.

Insertion of Schedule 80D for claiming mediclaim premium

A new schedule 80D has been inserted to calculate total eligible deduction under Section 80D for mediclaim premium with various sub heads. Earlier 80D deduction was part of the Schedule “Part C-Deduction & Taxable Income”. Under the new schedule assessees will now have to answer the questions like:

1. Whether you or any of your family members (excluding parents) is a senior citizen?

2. Whether any of your parents is a senior citizen? and then details of premium paid under sub heads like health insurance and preventive health check-up are separately asked and finally total eligible claim under Section 80D calculated.

This was required as at the time of processing of Return of Income, the actual eligible amount of deduction is not correctly granted by the system, resulting in additional tax liability.

Changes relating to uploading of specified ITR’s

ITR-6

1. Reporting of Income received from foreign company as per Section 115BD of the Income Tax Act, which is chargeable at a concessional rate, the necessary field for reporting has been incorporated in SCH-OS in ITR-6;

2. Schedule SH-1 not applicable in the case of Section 8 companies and companies limited by guarantee. Start-ups are exempted from levy of Angel Tax if the conditions mentioned in DPIIT’s Notification No. GSR 127 (E) [F.NO.5 (4)/2018-SI], Dated 19-02-2019 are satisfied.

ITR Form-6 uploaded on the e-filing web portal of ITD will now be required to be verified by using a digital signature only and not through other options. Further now, the Verifier of the Income Tax Return will now be additionally required to mention the Residential Address and the DIN Number, issued by MCA (in case of a Director).

ITR-7

In Part A- General, in the information relating to identity of assessee, the details of any project or institution run by the assessee during the year, section under which return is filed and section under which exemption has been claimed etc. is required to be given. Further certain schedules to this return form are mandatorily required to be filled up by assessees claiming exemption under specific provisions, as per the following list:-

Schedule required to be filled up	Exemption claimed under section
Schedule LA	Political party claiming exemption u/s 13A
Schedule ET	Electoral Trust claiming exemption u/s 13B
Schedule AI	Trust/institution claiming exemption u/s 11 and/or 10(23C)(iv) or 10(23C)(v) or 10(23C)(vi) or 10(23C) (via)
Schedule IE-1	Assessee claiming exemption under any of the clauses of section 10(21), 10(22B), 10(23AAA), 10(23B), 10(23FB), 10(23D), 10(23DA), 10(23EC), 10(23ED), 10(23EE), 10(29A), 10(46), 10(47) and persons whose income is unconditionally exempt under various clauses of section 10
Schedule IE-2	Assessee claiming exemption under sections 10(23A), 10(24)
Schedule IE-3	Assessee claiming exemption under sections 10(23C)(iiiab) or 10(23C)(iiiac)
Schedule IE-4	Assessee claiming exemption under sections 10(23C)(iiiad) or 10(23C)(iiiae)

Other Disclosures

1. Re-Registration of the Trust as per Finance Act, 2020, the details will be required to be given, if the Trust has done the same;

2. Donation from part of Corpus etc the disclosure requirements have been enhanced;

Other Changes

1. Income like interest chargeable at a concessional rate on account of DTAA, the reporting of such residuary income can be mentioned in the SCH-OS in the specified field to enable system to compute tax accordingly;

2. Foreign Companies reporting income from royalty or FTS are chargeable at a concessional rate. Accordingly a filed for reporting such income has been added in SCH-OS in ITR-6;

3. Secondary Adjustments on account of Section 92CE, to increase or decrease the Total Income of the Assesesee, the Schedule for such reporting has been modified accordingly in the ITR-3, ITR-5 and ITR-6;

4. If the Return is filed in response to the Notice issued by the Department, then UDIN Number is required to be quoted in the respective field. This is in line with DIN mechanism was developed to maintain a proper audit trail of all the communications of the department with the taxpayer;

5. Companies opting for alternate Tax Regimes i.e. concessional rate announced from time to time by inserting Section 115BAA and Section 115BAB. in Part-A of General Schedule, the company is required to choose whether it is opting for any of the alternative tax regimes of sections 115BA, 115BAA or 115BAB;

6. Section 115AB relating to taxing of units of mutual fund purchased in foreign currency by Offshore Fund at a concessional rate of 10%, the necessary filed for reporting such income has been incorporated in SCH-OS in ITR-6;

7. Option to select “SOP” added in ITR-5 and ITR-6 to report the property value as “NIL” if it consists of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let-out during the whole or any part of the previous year, provided 2 years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority;

8. Reporting of disallowance under Section 40(ba) for AOP filed has been incorporated [ITR-3 & ITR-6];

9. Assessse can now give more than one bank account number for crediting the Refund. This will now benefit the assesse to get the refund in the other bank account, if the first bank account is not operational or refund cannot be credited. It is recommended that the bank accounts maintained by the assesse to be pre-validated on the ITD Portal to ensure that the refund gets credited faster;

Different Due Dates for filing of Audit Reports and Returns

Further in case the Company is required to furnish a report of audit under Sections 10AA, 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115JC of the Income Tax Act, the Company shall file such report electronically at least one month before the due date of filing the return of income.

As per the recommendations in the Finance Act, 2020, the Department is gearing up to give prefilled utility capturing all the mandatory reported allowances/disallowances from the Audit Reports filed online. At present, most of the Notices for defaults are generated on account of mismatch of information in Audit Report and in ITR. Though this is a welcome move, but it is required to have a field either in the Return of Income or in the Audit Report to be filed to mention the contentions of the assesseee in such mismatch cases. If this window of informing the contentions are given, the same will ease the processing and also be helpful at the assessment stage. This matter requires proper representation by various forums.

Option to either give Aadhar instead or PAN interchangeably.

While furnishing audit information in ITR-3, ITR-5 and ITR-6, now there is an option to give either the PAN or the Aadhaar Number of the Auditor. Further also while providing information of Key Persons in ITR-6 PAN
 and Aadhaar Number can be used interchangeably.

Also in case the Return of Income is being filed by a representative assessee, now there is an option to give either the PAN or the Aadhaar Number of such person.

Hence, slowly and gradually the country is moving towards single Identity Number, to capture all the earnings and spending of a person to ensure that the tax filers are increased which is the main intention of the Government.

Penal Provisions

Section 271AAC of the Income-tax Act (inserted with effect from Assessment Year 2017-18 vide Taxation Laws (Second Amendment) Act, 2016) empowers AO to levy penalty at the rate of 10% of the tax payable under section 1 15BBE if any addition is made under section 68, section 69, section 69A, section 69B, section 69C, section 69D. However, no penalty shall be levied if such income is disclosed in the return of income and tax on such income is paid under Section 115BBE on or before the end of the relevant previous year. Tax is payable @ 60% on the additions made by the Assessing Officer on which is considered undisclosed income and added at the time of assessment.

Changes in Form 26AS

CBDT has notified new Annual Information Statement (AIS) vide Notification No. 30/2020 dated 28.05.2020 the new Annual Information Statement (AIS) under section 285BB by inserting a new Rule 114-I in the Income Tax Rules, 1962 to replace age-old Form 26AS notified under Rule 31AB as per the Finance Act, 2020.

The New Annual Information Statement (AIS) will be effective from 01.06.2020 and from that date the old Form 26AS will become obsolete. The Finance Act 2020 has inserted a new section 285BB regarding Annual Information Statement, in order to expand the scope of Form 26AS beyond the information related to taxpayers tax deducted and tax collected.

The new brought Form 26AS shall include-

1. All information relating to tax deducted and tax collected, payment of taxes and refund, as was available in the earlier Form 26AS;

2. Details about income tax demand, pending and completed tax proceedings including assessment and reassessment proceedings, revision and any appeal related information.

3. Information in respect of Specified Financial Transactions shall also be included. Section 285BA requires transactions of purchase/ sale of goods, property, services, works contract, investment, expenditure, taking or accepting any loan or deposits to be submitted in Form 61A/B by specified persons including prescribed reporting financial institution.

4. As per the newly inserted Rule 114-I(2) of the Income Tax Rules, CBDT shall authorise Director General (Systems) or any other officer, to upload in this form any information received from any other officer or authority under any law which shall include any adverse action initiated or taken or found or order passed under other laws such as GST, Benami Law, Custom, etc.

5. Details of information received by the Tax Department from any other country under the treaty covered u/s. 90/90A.

6. Personal information of the assesse including Mobile No., Email ID and Aadhar shall also be available in the new Form.

The Form shall be updated regularly within 3 months from the end of the month in which any information is received and hence the same shall provide all the latest information, making the form interactive. Now, the tax filer has to ensure that the required information displayed in the said statement is correct or not and if any incorrect information is found the same to be reported to respective authority for rectification and forward the copy of the same to the Assessing Officer to ensure that there is no action taken for under reporting or concealment of information at any stage.

Form 26AS in its new Avatar will provide all the information of the taxpayer which will benefit the tax authorities for having better and reliable source of information to assist in while doing E-Assessments wherein there is no/limited interaction with the assessee.

One of the source of information for selection of cases for scrutiny is mismatch of information available in Form 26AS with that furnished by the assessee in the ITR which is easily identified by their systems. The Tax Authorities have the access to information about the assesse under other laws like GST and customs as well thus including information of its import, export, turnover, etc. It shall provide information to the authorities about their income or assets located outside India.

The assessee will have to provide for correct and complete information at all times to the banks or financial institutions or any other authority about any demand or proceedings under any law as it will be asked by them. Form 26AS will be a due diligence report with background checks. The Government is slowly and gradually bringing in more transparency of the profile of taxpayer making it tough to conceal or provide any incorrect information.