The union finance ministry on Tuesday suggested creating a simple common-income tax return form for all taxpayers that would require revenue from virtual digital assets to be disclosed under a separate heading.

The proposed new common ITR form, for which the Central Board of Direct Taxes (CBDT) has sought stakeholder feedback by December 15, is available to all taxpayers, with the exception of trusts and non-profit organisations.

There are now 7 distinct types of income tax return (ITR) forms available for different categories of taxpayers to file. The simplified ITR Forms 1 (Sahaj) and 4 (Sugam) are commonly used by numerous small- and medium-sized taxpayers. Individuals with income up to Rs 50 lakh who are employed, own a home, or have other sources of income may submit a Sahaj.

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ITR-4 can be filed by individuals, Hindu Undivided Families (HUFs) and firms with total income up to Rs 50 lakh and having income from business and profession.

ITR-2 is submitted by individuals with income from residential real estate, ITR-3 by those with income from a business or profession, ITR-5 and ITR-6 by companies and LLPs, respectively, and ITR-7 by trusts.

ITR-1 and ITR-4 would still be continued, according to the CBDT, under the finance ministry, but people would also have the choice to submit their income tax returns in the common ITR form.

"It proposes to introduce a common ITR by merging all the existing returns of income except ITR-7. The draft ITR aims to bring ease of filing returns and reduce the time for filing the ITR by individuals and non-business-type taxpayers considerably," the CBDT said.

The taxpayers will not be required to see the schedules that do not apply to them. It will include user-friendly schedules that are smartly designed with a better arrangement, a logical flow, and increased scope of pre-filling.

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"It will also facilitate the proper reconciliation of third-party data available with the Income-tax Department vis a vis the data to be reported in the ITR to reduce the compliance burden on the taxpayers," the CBDT said.

Based on the taxpayers' responses to a series of questions, the proposed ITR would be tailored for them and comprise the pertinent schedules.

The Income Tax Department will release the online utility once the common ITR form is announced, after taking into consideration the feedback from stakeholders.

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"In such a utility, a customized ITR containing only the applicable questions and schedules will be available to the taxpayer," the CBDT said.

Sandeep Jhunjhunwala, a partner at Nangia Andersen LLP, stated that once the new common form and associated functionality are made known, taxpayers submitting income tax returns in ITR-2, ITR-3, ITR-5, and ITR-6 won't have the option to do so.

"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 remain key highlights of the new common ITR form," Jhunjhunwala added.

First Published:Nov 1, 2022 10:35 PM IST