Four changes to note in new ITR 1 and ITR 4 forms

For assessment year 2024-25, the Income Tax department has already introduced two new I-T return forms — ITR 1 and ITR 4, aiming to prepare taxpayers for a seamless filing process and discourage any delays. Emphasising maximum disclosure for auto verification, pre-fill mechanisms, and timely processing of returns, the department has made subtle, yet noteworthy, changes in the newly introduced forms.

1. Section 80CCH - Agnipath Scheme Deductions

Effective from November 1, 2022, the newly incorporated Section 80CCH of the Income Tax Act, 1961 (ITA), brings forth deductions for taxpayers enrolled in the Agnipath Scheme contributing to the Agniveer Corpus Fund. A dedicated row has been inserted in the income tax forms to facilitate this specific deduction. It’s important to note that the impact of this change applies only to individuals enrolled under the Agnipath Scheme, underlining the department’s commitment to targeted deductions.

2. Type of Bank Account Disclosure

One notable change applicable across the board is the addition of a new column in the income tax forms for the type of bank account. While only ITR 1 and ITR 4 have been officially notified, this adjustment is expected to be implemented in all income tax returns. This information proves crucial for non-residents who have designated their NRE accounts for refund processing and failed to obtain refunds due to ineligibility. The introduction of this column enables the income tax department to verify the accuracy of the selected account for refunds, aiming to eliminate delays in its processing.

3. Disclosure of Cash Receipts in ITR 4

For taxpayers declaring income on a presumptive basis, a new row for the disclosure of cash receipts has been added to ITR 4. This modification, relevant under sections 44AD and 44ADA of the ITA, aids the income tax department in verifying the taxpayer’s eligibility under the chosen presumptive scheme and ensures the application of the correct presumptive rate. This addition also facilitates the auto-calculation of taxable income under the head, ”Income from business and profession.”

4. Default New Tax Regime for New Taxpayers in ITR 4

In a move aimed at simplifying the process for new taxpayers, ITR 4 now defaults to the new tax regime. This default setting is crucial for first-time filers, as the chosen tax regime during the initial filing becomes the applied regime for subsequent years and can be changed only once in the lifetime of the taxpayer. Taxpayers are advised to carefully consider not only their current income but also estimate their future income when selecting the tax regime to avoid unnecessary changes in subsequent filings. If the taxpayer chooses to opt out of the defaulted new tax regime, they will be required to file form 10-IEA.

Despite criticisms regarding the length and depth of information required in income tax forms, it’s essential to recognise that the information demanded is integral for the accurate computation of taxable income. The extensive details not only facilitate preliminary verification by the income tax department but also help identify errors or inconsistencies. The pre-fill option, drawing information from the previous year’s return and Form 26AS of the current year, further streamlines the filing process.

The early notification of these changes ensures that taxpayers have ample time to gather necessary documents, contributing to a more efficient and error-free income tax return filing process. As we navigate the intricacies of the updated forms, it becomes evident that these adjustments align with the broader objective of promoting transparency, accuracy, and timely compliance in the realm of income taxation.

  The writer is Partner, Nangia Andersen India. (With inputs from Neetu Brahma)

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