Five must-know changes with Tax FormsJul 21 2016,
Here are five must-know changes in tax reforms you need to know before you file your income tax returns:
1. Detailed declarations for those earning over Rs.50 lakh
If your total income is more than Rs.50 lakh, you will have to provide information on the cost of your assets—movable and immovable—in the new schedule introduced in forms ITR 1, 2, 2A, 3, 4 and 4S. “For example, you will have to disclose the cost of your land and building. Similarly, cost of assets like jewellery, bullion, vehicles, yacht, aircraft, cash in hand, too, needs to be disclosed in the schedule,” says Vaibhav Sankla, director of tax consulting firm H&R Block. You will have to put out details of all liabilities in relation to such assets. “Individuals and HUFs with income exceeding Rs.25 lakh, filing returns under ITR-3 and ITR-4 were already required to furnish information of their assets and liabilities. Now, the threshold of Rs.25 lakh has been increased to Rs.50 lakh in new ITR-3 and ITR-4 for disclosure of details of assets and liabilities,” explains Amit Maheshwari, partner, Ashok Maheshwary & Associates.
2. Accommodation of new deductions
This year, you will find a new row in ITR Forms ITR 1, 2, 2A, 3, 4 and 4S for deduction on investment in National Pension System (NPS). This is particularly relevant given the amount of interest NPS has managed to attract of late. “A new sub-section (1B) was introduced in Section 80CCD by the Finance Act, 2015 to provide for an additional deduction of up to Rs.50,000 for investment in NPS. Accordingly, a new row has now been introduced in the ITR Forms to claim benefits of such additional deduction,” says Maheshwari.
3. TCS credit for individual taxpayers
This is more a case of change introduced by the Finance Act 2012—insertion of a sub-section (1D)—taking effect this year. As per section 206 (1D), the seller of bullion and jewellery has to collect TCS at 1 per cent of the sale consideration from buyer if the amount, exceeding Rs.2 lakh and Rs.5 lakh in case of bullion and jewellery respectively, is received in cash. “The aim is to reduce the practice of cash payments and curb the flow of unaccounted money in the trading system. However, in the absence of any row in the ITR Forms (ITR 1, 2 and 2A), individual taxpayers were unable to claim credit of such TCS,” says Maheshwari. The new ITR forms have done away with this discrepancy.
4. New schedule for pass-through income
In keeping with the trend of seeking additional disclosures from tax-payers, the ITR forms this year require individuals to provide details of pass-through income earned. “They will have to report details of pass-through income received from business trusts and investment funds in a separate schedule,” says Amarpal Chadha, tax partner, People Advisory Services, EY. The new schedule ‘PTI’ seeks name of business trust or investment fund, PAN, head of income, amount of income and TDS on such income, if any. “Under section 115UA and Section 115UB, passthrough status is provided for income [other than income from business or profession] of business trust/investment fund. Income distributed by the business trust/investment fund is to be taxed in the hands of the unit holders,” adds Sankla
5. A longer list of eligible 80G deductions
If you have been taken in by the central government’s Swachch Bharat campaign and have done your bit by contributing to the specially-carved-out fund, you can use it to reduce your tax outgo. Swachch Bharat Kosh is among the three such funds added to the list of charities that entitle you to tax benefits under section 80G for donations made, the other two being National Fund for Control of Drug Abuse and Clean Ganga Fund. You can claim deductions of up to 100 per cent of the donations made to these funds.
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