Key changes in ITR for the financial year 2023-24

Introduction

As we all know, the ITR season is ongoing, and the last date for individuals to file their income tax return is 31st July. Filing your Income Tax Return incorrectly just to claim a TDS refund can lead to significant fines and penalties. Therefore, it’s crucial to follow the guidelines and be aware of the key changes for the Financial Year 2023-24.

Why is it crucial for taxpayers to be aware?

Staying informed about the latest changes and requirements is essential to avoid heavy penalties and ensure accurate return filing. The Central Board of Direct Taxes (CBDT) has introduced several changes to the ITR forms, making it necessary for taxpayers to select the correct form based on their income sources and financial investments.

The deadline for making investments and planning your taxes was 31st March 2024. Since there is no longer an option to reduce taxes, it’s recommended not to evade them. If you forgot to plan your taxes, it’s better to opt for the default tax regime, i.e., the new tax scheme.

Importance of Filing the Correct ITR Form

Filing the wrong ITR form can lead to complications, including the need to file a revised return. While the Income Tax Department allows taxpayers to file revised returns multiple times within a fiscal year, intentional misreporting or tax evasion can attract penalties ranging from 100% to 300% of the tax amount due but not paid. Hence, selecting the appropriate form and adhering to the new requirements is critical.

What is a fiscal year?

A fiscal year is a 12-month period from 1st April to 31st March chosen by the government for assessing tax or revenue. Tax filings and assessments are conducted based on the fiscal year, also called the financial year.

How to Choose the Right ITR Form

The tax department provides seven distinct ITR forms, each catering to different taxpayer categories:

1. ITR-1 (SAHAJ): Applicable for individuals with income up to Rs 50 lakh from salary, one house property, and other sources (interest, etc.).
2. ITR-2: For individuals and HUFs not having income from profits and gains of business or profession, but having capital gains.
3. ITR-3: For individuals and HUFs having income from profits and gains of business or profession, applicable if a person has income in every head.
4. ITR-4 (SUGAM): For individuals, HUFs, and firms (other than LLP) with total income up to Rs 50 lakh and income from business and profession computed under Sections 44AD, 44ADA, or 44AE.
5. ITR-5: For persons other than individuals, HUFs, and companies required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D), including trusts, political parties, and certain institutions.
6. ITR-6: For companies other than those claiming exemption under Section 11 (trusts or charitable institutions).
7. ITR-7: For persons including companies required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D), such as trusts, political parties, and certain institutions.

Key Changes in ITR Forms for FY2023-24

Several significant changes have been introduced in the tax return forms for this assessment year, reflecting amendments made under the Finance Act 2023 and including additional reporting requirements:

1. Legal Entity Identifier (LEI): Applicable to ITR forms 2, 3, 5, and 6, taxpayers eligible for a refund of Rs 50 crore or more must provide their LEI, a unique 20-character alphanumeric code used globally in financial transactions.
2. Disclosure Requirements for Capital Gains Accounts Scheme: Applicable to ITR forms 2, 3, 5, and 6, requiring detailed information on the capital gains account scheme, including the date of deposit, account number, and IFSC code.
3. Contributions Made to Political Parties: A new Schedule 80GGC for ITR forms 2, 3, 5, and 6, requiring detailed information on contributions made to political parties.
4. Deduction Details for Medical Treatment: Detailed requirements for claiming deductions under Schedule 80DD for maintenance and medical treatment expenses for a dependent with a disability.
5. Contribution to Agniveer Corpus Fund: A new provision under Section 80CCH introduced by the Finance Act 2023, applicable to ITR forms 1, 2, 3, and 4, allowing individuals to claim deductions for amounts deposited in the Agniveer Corpus Fund.

Conclusion

With the ITR filing deadline fast approaching, taxpayers are advised not to wait until the last moment to file their income tax returns. Filing ITR through a professional at the earliest is recommended to avoid errors, ensure compliance with the latest requirements, and reduce the chances of receiving notices or encountering further issues. Staying informed about the changes and selecting the correct ITR form based on individual circumstances is crucial to avoid penalties and ensure accurate reporting of financial details.