Be Ready to Comply With These New Changes in ITR 1 and ITR 4 Forms
Jan 10, 2020

Author: Divya Grover

Be Ready to Comply With These New Changes in ITR-1 and ITR-4 Forms
photo created by katemangostar - )

Revamping the direct tax regime has been one of the top agendas of the Modi government in its second term. The government is in the process of replacing the age old Income Tax Act with a new Direct Tax code that seeks to consolidate and amend the law relating to all direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax, and wealth-tax, so as to establish an economically efficient, effective, and equitable direct tax system.

The government aims to widen the tax payers' base and introduce measures to make tax compliance simple and convenient for individuals and firms. The most prominent among these measures is the introduction of pre-filled Income Tax returns (ITR) form.

The pre-filled form will contain details of salary income, bank interest, TDS details, deductions claimed, and dividends, etc. Earlier these details had to be manually entered.

[Read: Here's How The Tax Department Has Made Filing ITR Easy For Salaried Individuals]

At the same time, it wants to ensure that tax evaders and money launderers do not escape the taxman's radar. One such move includes starting a new technological platform to notify users/taxpayers via SMS when they undertake any of the 18 types of high-value financial transaction where quoting of PAN/Aadhar is mandatory.

The rationale behind this development is to urge assessees to mention such transaction while filing ITR and pay taxes if applicable.

[Read: I-T Department To Follow-up High-Value Transactions With SMS]

Now the tax department has notified new changes that will allow it to keep a closer tab on your income and expenses.

The income tax department notifies ITR forms to be filled every year by taxpayers, usually in the month of March or April. This year the department has already notified ITR-1 and ITR-4 form with some significant changes for assessment year (AY) 2020-2021.

ITR-1 form, also known as Sahaj form, is to be filled by resident individuals with a total income of not more than Rs 50 lakhs from the following sources:

  • - Income from salary,

  • - One house property,

  • - Other sources (interest etc.),

  • - Agricultural income up to Rs 5,000

ITR-4 form (Sugam form) is to be filled by resident individuals, Hindu Undivided Families (HUFs) and firms (other than Limited Liability Partnership) with total income of up to Rs 50 lakh and having presumptive income from business and profession.

[Read:  How To e-File Your Income Tax Returns In Few Easy Steps...]

Taxpayers using ITR-1 and ITR-4 forms will now have to furnish their passport number (if they have one). According to Mr Naveen Wadhwa, DGM, Taxmann, "It is a possibility that passport details are asked to check if you have travelled to a foreign country in FY 2019-20 or the income declared by you matches with your ability to incur the expenses of foreign travel on yourself or any other person."

Earlier, the IT department had notified that a taxpayer who owns a property in joint ownership with two or more persons will not be eligible to be file returns through a simple ITR-1 or ITR-4 form and will instead have to file returns through a detailed ITR form. Following this, taxpayers raised concern that the changes are likely to cause hardship. The department has now rolled back the notification.

Similarly, the tax department had in the last year notified seventh proviso to Section 139(1) of the Income Tax Act, 1961. Under the provision, it became mandatory for certain individuals to file IT returns carrying the following transaction even if their total income is below taxable limit:

  1. Payments towards electricity consumption bill of more than Rs 1 lakh per annum

  2. Making deposits of an amount or an aggregate of the amounts exceeding Rs 1 crore in one or more current account

  3. Expenditure on travel to a foreign country for self or others for an amount exceeding Rs 2 lakh

These individuals were earlier not eligible for filing ITR-1; the changes have now been rolled-back.

Other changes in ITR-1 form are as follows:

  • Details of employer such as Tax Deduction Account Number (TAN), name, nature and address of the employer have to be provided. TAN is mandatory if tax is deducted.

  • You will have to provide name and Aadhar/PAN details of tenant if you have rented out a property

  • Complete address of your property whether self-occupied, let out or deemed let out needs to be provided

  • Details of rent due but not received during the financial year is also required to be filled

Other changes in ITR-4 form are as follows:

  • ​Name and Aadhar/PAN details of tenant has to be provided if you have rented out a property

  • New ITR-4 form seeks details if the cash deposit in current account exceeds Rs 1 crore

  • Firms have to submit details such as name, address, and Aadhar/PAN of partners, percentage of share, rate of interest on capital, and remuneration paid to them

  • In case of presumptive tax assessment, the assessee has to give details of opening balance of cash and bank accounts, cash receipts, withdrawals and deposits during the year, and the closing balance of cash and bank accounts

The early notification of changes this year will give tax payers enough time to be well-versed with new changes and file returns on time. If you pay taxes diligently, declare all your income and required details, don't have any illegitimate source of income and file your income tax returns honestly and on time, you need not worry about facing taxman's axe.

[Read:  10 Benefits Of Filing Your I-T Return On-Time]

Besides, being conscientious and filing returns on time will help you plan your taxes and investments better and empower you to make smarter decisions towards your financial independence.

If you are looking for efficient tax-planning instrument, download PersonalFN's Definitive Guide to Select ELSS

In this you will learn:

  • Why ELSS is a worthy option for tax planning

  • Mistakes to avoid while investing in ELSS

  • How to select the best ELSS for tax planning

  • How have ELSS performed as a category

  • Some of the best ELSS to invest in

  • Who should consider investing in ELSS

  • How should one go about investing in ELSS


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