Revised tax forms will be simple; stress on foreign travel and assets has been reduced
Putting to rest days of speculation, revised (ITR) forms are likely to be issued by the end of June. While tax payers will have to disclose some additional details, they will have more time till August 31, instead of July 31.
Besides, the new forms will be simpler than what was earlier proposed by the finance Ministry. The number of pages has been reduced to three.
The notification for the new forms was announced on May 31. The biggest relief for tax payers is the reduction on the rigour on foreign travel and details of disclosing the bank account balances, says Amarpal Chadha, tax partner, EY.
As per the earlier proposed forms, tax payers had to declared details of foreign travels including all expenses, big and small. This had caused a lot of confusion as it would have been physically impossible for all those travelling abroad to keep proof of all their expenses. This has been simplified and now tax payers need to only disclose their passport number.
"The tax authorities can use the passport data to pull out more details. The assumption is that if you can afford a foreign travel you are earning enough income to pay tax, which is a fair assumption to make. The government wants to widen the return filing base,'' says Chadha.
Another big relief for tax payers is that the disclosing of the bank account details. The earlier forms had proposed that the balances in all bank accounts were to be declared. Details like date of opening of bank accounts too were to be included.
But the new notification says that tax payers need to only disclose the IFSC codes of account numbers of all active bank accounts held in the past one year. Accounts that are dormant for more than three years need not be shown. This is different because until last year tax payers were not asked to disclose bank account details. Now they will have to provide the IFSC code.
Kuldip Kumar, executive director - Tax & regulatory Practice, PWC says that earlier most tax payers were not able to use ITR-I, Sahaj, because the exemption income limit was only Rs 5,000. But now unless you have some agriculture income to show, you can use ITR-I.
Similarly, now those who have only a second property and no capital gains, can use ITR-2, which too has been simplified from the earlier 10 page form. "There is no need for ITR-2A, if you have only second property, but no capital gains,'' Kumar says.
The rules have been simplified even for expatriates who have the status of ordinary residents in India. They need to declare income from asset/property only if they are earning an income out of it. This means that only if they have a second house abroad will they have to pay tax. But if they have land or assets like jewellery, painting, artifacts, etc, they need not declare this.
These measures are welcome as it is easier for tax payers to file returns. However, clarity is still required on how wealth tax will be declared, points out Kumar.
"In the 2015 Budget, Finance Minister Arun Jaitley had said that wealth tax will be done away with and adjustments would be made in the ITR to declare the assets. Those details have yet to be included, though that will be applicable from assessing year 2016-17," Kumar says.
