Authored by Homi Mistry, Niji Arora, Vivek Mistry and Zalak Shah

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The return filing deadline for an individual is usually July 31 of the relevant assessment year. However, for FY 2019-2020, due to the COVID-19 pandemic, the government has extended the deadline till November 30 to file a tax return for the financial year 2019-20.

The tax return process starts with identifying the correct tax return form (‘form’) to be filled. This is determined based on an individual’s residency, nature and level of income during the FY.

Revised income forms were notified by the Central Board of Direct Taxes (CBDT) on May 29, 2020. Hence, it is pertinent to understand the changes introduced in these forms, to enable correct preparation and correct filing of the tax return.

Some of the changes introduced in the forms (ITR 1 and ITR 2) applicable to salaried individuals having non-business / non-profession incomes have been summarised below:

Return filing requirement for high spenders

Until FY 2018-19, an individual below 60 years and having taxable income up to Rs 2,50,000 (income up to Rs 3,00,000 for taxpayers between the age of 60 to 79 years and INR 500,000 for taxpayers 80 years and above) was not required to file a tax return.

However, from FY 2019-20, an individual having income below the basic exemption limit is required to mandatorily file a tax return if he/she meets any of the below conditions during FY 2019-20:

Incurs expenditure on foreign travel for self or another person exceeding Rs 2,00,000, in aggregate;

Incurs electricity expenditure exceeding Rs 100,000, in aggregate; or

Has deposited more than Rs 10 million, in aggregate, in one or more current accounts.

Additional deductions under section 80EEA and 80EEB

In the Finance Act 2019, two additional deductions under sections 80EEA and 80EEB were introduced, which is now part of the new forms.

Section 80EEA has been introduced with the intent to provide the tax benefits on interest paid on loan taken for the purchase of houses under the affordable housing scheme. It is applicable only to first time home buyers. Accordingly, an additional deduction up to Rs 1,50,000 is available on such interest paid under this section on the fulfillment of certain conditions.

Section 80EEB: To promote the usage of electric vehicle (EV), a deduction up to Rs 1,50,000 on interest payable on loan taken for the purchase of EV, is available on fulfillment of certain conditions.

Interchangeability of Permanent Account Number (PAN) and Aadhaar number

As announced in the Finance Act, 2019, the tax return forms have introduced interchangeability in the use of PAN and Aadhaar. Some of the places where Aadhaar can be quoted are mentioned below:

Tax deducted at source (TDS) by a tenant under section 194-IB of the Act

Return filed by a representative assessee;

Details of co-owners or tenants;

Details of the buyer on the transfer of immovable property;

Details of the income of specified persons (e.g., spouse, minor child etc.) under clubbing provisions;

TDS credit claim relating to another person.

Income from pass-through entities (pass-through income, PTI)

Capital gains and other PTI earned by taxpayers must be disclosed under the respective income schedule as well as in schedule PTI, as follows:

Long term capital gains under section 112A of the ITA and others;

Short term capital gains under section 111A of the ITA and others; and

Income from other sources as dividends referred to in section 115-O of the Act and others

Introduction of new Schedule DI

Due to the COVID-19 pandemic, as a taxpayer-friendly measure, the government extended the timeline for making investments eligible for Chapter VIA deductions up to July 31, 2020, and for claiming capital gain exemption under section 54 to 54GB, up to September 30, 2020.

In view of the above changes, an additional schedule DI has been inserted in the tax return forms to facilitate tracking of deductions claimed in FY 2019-20 for investments made during the extended period mentioned above.

Other changes

Schedule 80D of the Act

A detailed schedule for reporting and claiming deduction towards payment of medical-related expenses and health / medical insurance premium has been introduced.

The schedule has two sections :

(i) for the taxpayer and family, and

(ii) for the taxpayer’s parents.

Each section is further split into two categories namely “Senior citizen” and “Not a senior citizen”

The following details are required to be reported under each section:

(i) Health insurance premiums;

(ii) Preventive health check-up expenses; and

(iii) Medical expenses (not covered by a health insurance policy in respect of which a deduction for the premiums is claimed under (i) above)

The categorization and drop-down in the schedule will align the return with the provisions of section 80D

Based on the above it is evident that there is an enhanced reporting requirement introduced in the revised forms. Individuals should ensure that their returns are correctly and accurately filed with the above additional reporting.

Homi Mistry is Partner with Deloitte India. Niji Arora is Senior Manager, Vivek Mistry is Manager, Zalak Shah is Deputy Manager.