The income tax department on 1st November came out with a proposed common return filing form, which it has kept open for stakeholders and taxpayers to give their suggestions.

According to the tax department the idea to introduce a common income tax return (ITR) form, by merging all the existing returns of income, except ITR-7, is a step towards making lives easier and simple in terms of compliance.

Once notified after the inputs received, this will be one common form to file the income tax returns.

However, the current ITR-1 and ITR-4, which were already simplified and easy to file forms will also continue.

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So, if you a salaried individual with some interest and dividend income, having one house property where total income is less than Rs 50 lakhs per annum then you can continue to file ITR 1 and skip the common form.

Similarly, in cases of presumptive incomes, say if you are a professional with turnover less than Rs 50 lakh per annum or a small business with turnover less than Rs 2 crore per annum then you can continue to file ITR4 and skip the common form.

But, for the rest, this common form is what one needs to file, which means those who were filing ITR2,3,5 or 6, this is your next ITR form.

So how is this, different and simple?

Currently, ITRs are in the form of designated forms wherein the taxpayer is mandatorily required to go through all the schedules, irrespective of the fact whether that particular schedule is applicable or not, which increases the time taken to file the ITRs.

And the new proposed draft ITR takes a relook at the return filing system in tandem with international best practices, and will take you through only the relevant schedules and forms, based on your income category.

So what all does the new form have for the taxpayers?

The Basic information continues, where it comprises of parts A to E, such as Schedule for computation of total income, Schedule for computation of tax, Details of bank accounts, and a schedule for the tax payments is applicable for all taxpayers.

The new form guides a taxpayers to only those applicable forms or schedules, which are relevant to the taxpayer. These schedules get selected by the software based on basic FAQ form of set of questions, where the taxpayer gets an option to select the income category under which he/she is supposed to file the return.

These questions are designed in a manner and order that if the answer to any question is ‘no’, the other questions linked to this question will not be shown to the taxpayer.

The facility is ensuring that a taxpayer can file the form on his/her own, with instructions to assist the filing of the return containing the directions regarding the applicable schedules.

Tax department feels that the utility for the ITR will be rolled out in such a manner that only applicable fields of the schedule will be visible and wherever necessary, the set of fields will appear more than once.

Apart from this, all the other changes as proposed in the Union Budget for current fiscal, which was to include income reporting from crypto assets and others are also part of the proposed draft form and will continue to be there in the final form.

Government has kept the window open for inputs on the draft ITR form till 15th Dec, which can be sent via email.

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Commenting on the proposed new ITR form, Rakesh Nangia, Founder & Managing Partner at Nangia Andersen India Pvt. Ltd said, “The current ITRs are in the form of designated Forms wherein the taxpayer is mandatorily required to go through all the Schedules, irrespective of the fact whether that particular Schedule is applicable or not.”

“That increases the time taken to file the ITRs. Seamlessly integrating the technology with filing-utility, the Taxpayers under the proposed COMMON ITR will not be required to go through the Schedules that do not apply to them. The COMMON ITR gets automatically customized for taxpayers based on “wizard questions.” It intends the smart design of Schedules in a user-friendly manner with a better arrangement, logical flow, and increased scope of pre-filling,” Nangia continued.

“It will also facilitate the proper reconciliation of third-party data available with the Income-Tax department vis-à-vis the data to be reported under ITR to reduce the compliance burden on the taxpayers.

“Contemporary reporting requirements such as pass-through income or loss under various heads, income from virtual digital assets, declaration and details of business connection, permanent establishment and significant economic presence in India for non-residents, and details of foreign equity and debt interest held are the key highlights of the new COMMON ITR,” he added.

Srivatsan Chari, Co-founder ClearTax too feels that the income tax department is moving towards automation for ITR filing with each passing year. “Earlier the pre-fill option was introduced for taxpayers and in the recent past AIS has been introduced. Allowing taxpayers and the department detailed information related to every taxpayer’s income and financial activity. Frequent changes in the filing system make filing onerous for taxpayers, who have to re-learn the process to e-file.”

“It also means the flow introduced last year by the department will have to undergo more change. In the transition period right now, there are too many decisions that a taxpayer has to make: "Should I use the old tax regime or new tax regime?” Chari said.

“Should I use common ITR or continue with ITR-1 / ITR-4? Taxpayers may just continue to follow the status quo of previous choices (continue with the old regime, continue with ITR-1) since that is what they are most familiar with. We feel taxpayers will now need to be more careful while answering yes/no questions and be fully aware of the implications. We also believe that further simplification of questions will help taxpayers self e-file successfully.” he added.

Now to be seen that how soon the proposed draft form becomes the reality and how best does the online filing portal and the software gets aligned to it to avoid glitches and delays in return filing.

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First Published:Nov 2, 2022 8:51 PM IST