The government has released new tax forms (ITR Forms 2, 3, and 5) for the year 2024-25 through a notice called Notification No. 19/2024, dated January 31, 2024.
What you need to know about the new forms:
- The types of forms for different taxpayers are still the same.
- However, the new forms ask for more details from you.
- Some changes in the forms are because of updates made in the Finance Act of 2023.
We’ve carefully looked at the new forms and pointed out all the important changes and things you need to know, comparing them with last year’s forms.
Individuals/HUFs liable for audit can verify ITR using EVC (ITR-3)
- If you are an individual or part of a Hindu Undivided Family (HUF) and you need to get your taxes audited (according to Section 44AB), there’s a change in the rules for verifying your tax return.
- Rule 12, which is a set of guidelines, has been updated. Now, individuals and HUFs under tax audits can use an electronic verification code (EVC) to verify their tax returns. Before, the only option available for them was to use a digital signature.
Furnishing of due date for filing of return [ITR 3 and 5]
- When it comes to filing your tax return, there’s a new addition in the forms ITR 3 and 5.
- Now, there’s a special column asking for the due date, which is the deadline for submitting your income tax return.
- In this column, you need to pick the correct due date from the options given in a dropdown menu. Your choices are July 31st, October 31st, or November 30th.
Navigating the Default: Understanding the New Tax Regime and Opt-Out Options ([ITR 2, 3 and 5])
- Under the new tax rules (Finance Act 2023), there’s a default way of calculating taxes, called the new tax regime. This applies to individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOP), Bodies of Individuals (BOI), and Artificial Judicial Persons (AJP).
- If you don’t want to follow this new tax regime, you have to actively choose to stick to the old tax regime.
- For those with income (excluding business or professional income), you need to mention your choice in the income tax return for the relevant assessment year (Section 139(1)).
- If you earn income from a business or profession, and you want to opt out of the new regime, you have to fill out Form No. 10-IEA before the due date for filing your tax return (Section 139(1)).
- For those using ITR 2, you indicate your choice in the return. If you’re using ITR 3, you fill out Form 10-IEA to opt out of the new tax regime.
- The new ITR Forms have been updated to reflect these changes.
Unlocking Financial Identification: LEI Reporting in New ITR Forms
Within the updated Income-tax Return (ITR) Forms 2, 3, and 5, a significant addition pertains to the disclosure of details related to the Legal Entity Identifier (LEI). This 20-character alpha-numeric code serves as a distinctive marker in global financial transactions, contributing to the precision and reliability of financial data reporting systems, and ultimately enhancing risk management practices.
RBI Regulations and LEI Requirement:
- What is LEI?
- LEI stands for Legal Entity Identifier.
- It’s a 20-character code using letters and numbers.
- Used globally to uniquely identify parties in financial transactions.
- Why LEI is important in tax forms (ITR 2, 3, and 5):
- Improves the quality and accuracy of financial data reporting systems.
- Aids in better risk management.
- RBI Regulations:
- According to Reserve Bank of India (RBI) rules:
- Entities (non-individuals) making single payments of INR 50 crores or more must include LEI details for both the sender and receiver.
- According to Reserve Bank of India (RBI) rules:
- Applicability to Payment Systems:
- Rule applies to transactions using NEFT and RTGS payment systems.
- Incorporation into ITR Forms:
- New ITR Forms now include a specific space for LEI details.
- Taxpayers seeking a refund of INR 50 crores or more are required to provide their LEI information in this section.
The reintroduction of Legal Entity Identifier requirements within revised IRT forms shows commitment towards international best practices whilst also ensuring compliance with local regulations such as those stipulated by RBI which require accurate transparency over higher value transactions. When filling out these updated documents, taxpayers are reminded that failure or omission on their part could prevent them from achieving both regulatory adherence as well broader financial risk reduction objectives associated with this new addition.
Furnishing of the reason for tax audit under Section 44AB
- Who is Affected:
- Applies to taxpayers filing ITR 3 and 5.
- New Information Requirement:
- ITR-3 now asks for more details if the taxpayer is subject to an audit under Section 44AB.
- Details Needed:
- The additional information should explain why the company has to undergo this audit.
- Examples of reasons include:
- Sales, turnover, or gross receipts exceeding the limits set in Section 44AB.
- The taxpayer falls under Section 44AD/44ADA/44AE/44BB but doesn’t report income on a presumptive basis.
- Any other relevant circumstances.
To put it simply, if you are filling out ITR-3 and an audit is being carried out on your company under Section 44AB, then you need to state the reasons for such an audit in more detail than before. It could be due to high sales or turnover rates, non-reporting of income as per specific sections, or any other grounds applicable to your case.
Furnishing Audit Information:
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- Taxpayers filing ITR 3 and 5 need to provide the acknowledgment number of the audit report and Unique Document Identification Number (UDIN) for audits under Section 44AB, including Section 92E.
Enhanced Turnover Limit:
ITR3 and ITR5 forms have introduced a new column titled “Receipts in Cash” for claiming higher turnover limit under section 44AD. The Finance Act, 2023 has increased the turnover threshold and this new column includes cash receipts through cheques or bank drafts not marked as account payee.
Disclosure of Delayed Payments to MSME:
ITR 3 and 5 now require disclosure of sums payable to Micro or Small Enterprises beyond the specified time limit, aligning with amendments to Section 43B.
Capital Gains Accounts Scheme Details:
ITR 2, 3, and 5’s Schedule-CG is modified, requiring additional details like date of deposit, account number, and IFS code for sums deposited in the Capital Gains Accounts scheme.
Taxation of Online Game Winnings:
A new Section 115BBJ taxes online game winnings. ITR Forms 2, 3, and 5 are updated with Schedule OS to report income under Section 115BBJ.
Contributions to Political Parties:
New Schedule 80GGC in ITR 2, 3, and 5 demands details of contributions to political parties beyond just the eligible deduction amount under Section 80GGC.
Tax Deferral on ESOP:
ITR 2 and 3’s ‘Schedule – Tax Deferred on ESOP’ now requires additional details, including the PAN and DPIIT Registration Number of the eligible startup.
New Deduction – Section 80CCH:
ITR 2 and 3 introduce a new column for Section 80CCH, enabling individuals enrolled in the Agnipath Scheme to claim deductions for amounts deposited in the Agniveer Corpus Fund.
Deduction for Disabled Individuals:
ITR 3’s new ‘Schedule 80U’ gathers details of deductions claimed under Section 80U for individuals with a disability, including the nature of disability, filing date, and acknowledgment number.
Medical Treatment Deduction – Section 80DD:
ITR 2 and 3 introduce ‘Schedule 80DD’ for details regarding deductions under Section 80DD for medical treatment of a dependent with a disability.
Taxation of Dividend Income in IFSC:
ITR 2, 3, and 5’s Schedule OS is amended for reporting reduced tax rates (10%) on dividend income received from a unit in an International Financial Services Centre (IFSC).
Bonus Payments under Life Insurance Policies:
Schedule OS in ITR 2 and 3 includes an additional column to declare bonus payments received under life insurance policies, following amendments to Section 56(2).
Reporting Sums Received from Business Trust:
To avoid dual non-taxation, ITR 2, 3, and 5 now include a new column under Schedule OS for reporting sums received by a unitholder from a business trust.
Disclosure of All Bank Accounts:
All bank accounts ever held by the taxpayer, except dormant ones, need to be disclosed in ITR 2, 3, and 5.
Adjustment of Unabsorbed Depreciation:
ITR 3 and 5’s Schedule DPM is amended to adjust unabsorbed depreciation related to additional depreciation against the block’s written down value as of April 1, 2023.
Details of Eligible Startup:
New Schedule 80-IAC in ITR 5 seeks details of deductions claimed by companies under Section 80-IAC, including the date of incorporation, nature of business, and deduction amount.
Details of Offshore Banking Unit or IFSC:
ITR 5 introduces Schedule 80LA, requiring details from companies claiming deductions under Section 80LA for Offshore Banking Units or IFSC.
Reporting Tax Payable on Accreted Income:
A new ‘Schedule 115TD’ in ITR 5 is added to report tax payable on accreted income for funds or institutions approved under Section 10(23C) or registered under Section 12AB.
Recognition as MSME:
ITR 5 requires the applicant to disclose if they are a Micro, Small or Medium Enterprise (MSME).
Concessional Regime for Co-operative Societies:
A new ITR 5 field asks if a co-operative society being taxed under Section 115BAE, introduced by the Finance Act 2023, is a manufacturing one.