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New ITR forms require details of virtual digital assets, share trading

There are no changes in ITR-1 used by salaried individuals and only a few changes in other forms. The notified ITR forms come into effect on April 1.

February 16, 2023 / 11:36 AM IST
The CBDT notified the income-tax return forms for assessment year 2023-24 earlier this month.

The CBDT notified the income-tax return forms for assessment year 2023-24 earlier this month.

The Central Board of Direct Taxes notified the income-tax return forms for assessment year 2023-24 earlier this month. These forms are to be used to file returns for income earned during FY23, which ends on March 31.

“In order to facilitate the taxpayers and to improve ease of filing, no significant changes have been made to the ITR Forms in comparison to last year’s ITR Forms,” the CBDT said in a statement. “Only the bare minimum changes necessitated due to amendments in the Income-tax Act, 1961, have been made.”

There was no mention of “common ITR forms” that the CBDT had proposed in November to replace six of the seven ITR forms, for which inputs had been sought from stakeholders and the general public.

Tax practitioners and experts said the notification of the forms well before the end of FY23 will help in filing of returns right from the beginning of the AY.

Well in time

“It is indeed a healthy fiscal practice to notify ITRs in advance. This helps taxpayers in advance planning,” said Shailendra Kumar, chairman of TIOL Knowledge Foundation, a fiscal think tank. “With not many changes, it is a great relief for both the taxpayers and professionals.”

“This year, the government has notified the ITRs much earlier than March itself and hence taxpayers will get sufficient time to prepare for amendments,” said Vivek Jalan, a partner at Tax Connect Advisory, a tax consultancy.

A few changes have been made, taking into consideration provisions introduced in the Finance Act last year.

From April 1, 2022, gains made from transactions in virtual digital assets attract tax. Further, from July 1, transactions in assets such as cryptocurrency and non-fungible tokens exceeding Rs 10,000 attract tax deducted at source of 1 percent.

“These changes have been incorporated in ITRs, wherein in ITR2/ITR3/ITR5/ITR6 there is a separate VDA schedule to disclose income from virtual digital assets,” said Jalan.

Under the new schedule, information related to VDA transactions needs to be filled.

“For the purpose of determining tax implications, taxpayers are required to provide date of acquisition and transfer, head under which income to be taxed, cost of acquisition, consideration received and income from transfer of VDA,” said Suresh Surana, founder of RSM India. “In case of gift, one needs to enter the amount on which tax is paid u/s 56(2)(x), if any, and in any other case, cost to the previous owner.”

Those trading in the equity market may need to make additional disclosures.

“Now, where share trading business is done, the entire trading has to be bifurcated into intra-day trading and delivery-based trading also and reported accordingly in ITR3/ITR5/ITR6,” said Jalan.

Tax regime

Besides, forms have been amended to include additional questions related to the selection of the new tax regime.

“The form requires the taxpayer to report whether the filer opted for the new regime in the last assessment year and also select the assessment year in which it was opted. Additionally, another question has been inserted asking whether taxpayers have opted out of the new regime in any of the previous years and is also expecting the taxpayer to mention the 10IE details for both selections,” said Archit Gupta, founder of Clear, a finance platform.

Some experts said there is still scope for the introduction of the proposed common ITR form. According to Maneesh Bawa, executive director of Nangia Andersen LLP, the proposed common ITR form is likely to be introduced in time for AY24.

“The common ITR intends to create a smart design of schedules in a user-friendly manner with a better arrangement, logical flow, and increased scope of pre-filling. Taxpayers expect it to be released sooner than later so that there is sufficient time for troubleshooting and ironing out any technical glitches,” Bawa said.

Ashwini Kumar Sharma
first published: Feb 16, 2023 11:36 am