The Income Tax Department issues changes in the New ITR Forms for F.Y. 2019-20 (A.Y. 2020-21).

A taxpayer uses Income Tax Return forms to report their annual income to the Income Tax Department.

Earlier, the ITD had released ITR 1 and ITR 4 for FY 2019-20 in January, 2020. Changes introduced in the initial release are rolled back. Meaning, you no longer need to enter the following details like:

• Passport Details
• TAN of employer
• Tenant Details

Check out all the ITR changes, announced by the ITD in January 2020 that are no longer applicable.

What Changed in the New ITR Form for F.Y. 2019-20 (A.Y. 2020-21)?

Changes Applicable to all ITR Forms for FY 2019-20

ITR Form Changes for ITR 2 & ITR 3

Usually, when a taxpayer has income from capital gains they file ITR 2, and ITR 3 when they earn income from business and profession.

1. The details of investments should be reported under 2 sections Part A and Part B for ITR 2 and ITR 3. Part A for Chapter VIA deductions and Part B for Capital Gains and deductions u/s 10AA.
2. Aadhaar Card can be used in place of PAN Card in the following:
   • For House Property, when reporting
     • Co-owner
     • Tenant
   • For Capital Gains, when reporting Buyer of the Asset
   • When TDS is deducted as per Form 16 A (TDS deduction under for 26Q / 27Q for professionals) or Form 16B (Form 26QB for sale of property) / 16 C (Form 26QC for Payment on rent)

What are the types of ITR forms?

ITR 1 (Sahaj)

It is the simplest income tax return form. It can be filed by:

• Indian Resident (check your Residential status as per Income Tax)
• Salaried Individuals
• Individuals earning income from 1 house property (eg: Rent) 
• Individuals earning income from other sources like savings account interest, Fixed Deposit interest, etc. 
• Income is less than INR 50 lakh for the financial year

ITR 2

Individuals or HUFs who do not have any business and professional income can file ITR-2 .

4. In Details of Tax Deducted at Source (TDS) on Income [As per Form 16 A issued or Form 16B/16C furnished by Deductor(s)], the taxpayer can add Aadhar Card of Deductor instead of PAN/TAN.  

ITR-3

ITR 3 is filed by Individuals and HUFs having income from the business & profession and in case tax audit is applicable.

ITR 4 (Sugam)

Taxpayers who have opted for the presumptive taxation scheme can file for ITR 4, including:

• Indian Residents- Individuals, HUFs and firms (other than LLPs) (check your Residential status as per Income Tax)
• Businesses and Professionals under the presumptive taxation scheme
• Income is less than INR 50 lakh for the financial year

Check which ITR Form to file?

Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.

Explore

Check which ITR Form to file?

Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.

Explore

The PDFs for the New ITR Forms for F.Y. 2019-20 have been released, ITD usually release schemas/utilities few days/weeks after launching forms.
Stay tuned!

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Aadhaar is a 12 digit unique identity number issued by the Government of India. Unarguably, Aadhaar has been subject to several misconceptions and debates over the course of time. Regardless of which side you sway on the Aadhaar Validity Conundrum, Aadhaar Card has intertwined on so many levels for Tax purposes, that it has become the essential Document in India.

Linking PAN With Aadhaar Mandatory

Earlier the deadline for Linking Aadhaar with PAN card was March 31, 2020. But Due to the COVID-19 crisis, it has been pushed to June 30, 2020. The purpose behind Linking PAN and Aadhaar is for Verification and Registration purposes. Essentially, it will help the Income Tax Department(ITD) to keep a tab on Tax Evasion. Another reason for linking PAN with Aadhaar is to minimize the incidents of individuals/entities applying for multiple PAN cards. Not only that, Linking PAN with Aadhaar will help the ITD in tracking High-Value Transactions.

Reporting Aadhaar in ITR 

One of the major announcements made in Budget 2020 is the interchangeability of PAN and Aadhaar for Tax Filing Purposes. Meaning that Individuals who do not possess a PAN Card can use Aadhaar as a valid Document to file Income Tax Returns. This step was lauded as a major move towards simplifying India’s Tax Compliance System. As individuals who do not possess a PAN Card can file ITR through quoting Aadhaar in their Income Tax Returns. Specifically, Individual Residents either needs to mention the Aadhaar Number or Aadhaar Enrollment ID for filing their Income Tax Returns.

Aadhaar based e-verification of ITR

Everyone agrees that Aadhaar based e-Verification of ITR has not only simplified the Tax Compliance by streamlined it. Earlier, in order to verify an ITR, an individual had to download a 1-page ITR Verification Form (ITR-V) and then send the signed copy of ITR-V to Bengaluru for Verification. Instead, e-Verification can be done in just 4 easy steps and in less than 5 minutes. There are other ways like Net Banking, Bank Account, Demat Account, and DSC. So Aadhar bases e-verification just adds to the plethora of verification options available.

Aadhaar being part of new Form 26AS

Form 26AS is a consolidated Tax-Credit Statement that provides information related to details of TDS, TCS, Advance Tax, Self Assessment Tax, Income Tax Refunds, and any high-value transactions. To solidify Aadhar’s stature in Indian Tax Infrastructure, the Ministry of Finance announced on new avatar Form 26AS, effective from June 1, 2020. The Form will be divided into A and B. While Part A will have the Aadhaar information, D.O.B, and contact details, Part B will include details of Property & Share Transaction Details, Status of Proceeding with ITD, and Status of IT Refund/Demand. According to experts, the new Form 26AS will assist the taxpayers to identify and take corrective action, in case any incorrect information/ detail is reported in Form 26AS.

Aadhaar based e-KYC

e-KYC is an electronic version of KYC administered by the Unique Identification Authority of India (UIDAI). KYC i.e Know Your Customer is important documentation needed in India for doing many activities such as opening a Bank Account or buying a Sim Card. Aadhar based e-KYC has minimalized the time required for a KYC. Its data is downloadable by Aadhaar number holder is digitally signed by UIDAI to verify the authenticity and detect any tampering. Individuals can apply for e-PAN through Aadhaar based e-KYC.

Hey there,

I hope you and your family are doing okay. Though Lockdown has halted all Economic Activity, on the bright side, families are spending lots of time together. This lead many to realize that Maslow’s Hierarchy of needs is indeed outdated. To simplify, most people can do with basic amenities and still be happy. What if we add some ganache on the cake? How about we tell you 4 ways in which you can save on your Income Tax.

We figured that no one will mind some extra cash during times where businesses are struggling. So we dig our heels for you and are back with Tax Hack 106 for you. You’re Welcome!

Pay Rent to your Parents

If you live with your parents and happen to be a salaried individual, you can save on taxes by paying rent to your parents. With this measure, you will be able to reap the exemption benefits of the House Rent Allowance(HRA). If by chance you don’t receive any HRA, you can still claim a Deduction u/S 80GG. The USP here is that your parents can claim a flat 30% of the annual rent as a deduction for maintenance expenses. However, the property has to owned by your parents and you cannot be the co-owner of the property.

P.S. don’t worry if you are a novice with HRA Calculations, we got your back. We’ve built an HRA Calculator Tool to ease your burden.

Jointly Owned Property with Spouse

In case you are planning to buy some property, it is advisable to make your spouse a co-owner as it has multi-faced benefits. Not only you’ll enhance your loan eligibility but also enjoy tax benefits for interest on borrowed capital and the payment of the principal amount u/s 80C. Apart from that, you and your spouse could reap tax benefits on Capital Gains as well. If you and your spouse decide to buy a property from the capital gains within the mandated time, in that case, the taxable amount shall be reduced as per Section 54. Also if Rental Income accrues from the property, you and your spouse shall be taxed as per your respective stake in the property.

Invest Money in the name of your Parents.

If your parents happen to be in a lower Income Bracket than you, it could be a potential Tax Saving opportunity for you. In order to do so, one could gift a certain amount to your parents as this gifted amount will not attract any gift tax on their hand. One could then invest this money in the names of their parents in low-risk investment options like a Fixed Deposit. This measure makes a bit more sense if your parents are senior citizens. As generally Fixed Deposits tend to reap better interest rates for senior citizens as compared to younger people.

P.S. Did you know you can avail Tax Benefits while investing in FD? Learn more about it- Tax Saving FD(Fixed Deposit): Features and Eligibility

Set off Long Term Equity Losses

We have previously talked about Tax Loss Harvesting before. Tax Loss Harvesting is when an Individual set off his realized losses again realized profit, hence bringing the net taxable amount down. If you have a Long Term Equity Loss, and you still haven’t paid the Securities Transaction Tax(STT), don’t rush to pay it anytime soon. In such a scenario, you could still save some tax on it.

To do so, you must sell these shares at the market price and provide simultaneous delivery. Drumroll….Que in the family members. You could potentially sell the shares to a family member via a cheque at the incumbent market price. This will enable you to adjust the Long Term Equity Loss with Long Term Gains.

There we have it, another handful of tips to save on your Income Tax. If you found this blog informative and insightful, we have more Tax Hacks that might ignite interest. Do check them out.

• Trading Hacks 101: Tax Loss Harvesting

• Tax Hacks 102: Advance Tax

• Tax Hack 103: Tax Savings Investments

• Tax Hacks 104: A Financial Checklist for Year-End

• Tax Hacks 105: Lesser-Known Tax Deductions

Until Next time.

Did you know that the COVID-19 Pandemic is set to have economic impacts of USD 2 Trillion? Since Lockdown 4.0 has been implemented, several businesses have sighed relief. Economic activity is allowed in all zones with certain restrictions to accept containment zones. Reports suggest that 9 out of 10 startups have witnessed a decline in revenues. Not only that nearly half of the registered startups have reported a 40% decline in revenues and 30% have shut shop. Safe to say that businesses will have to tweak their business models to better adapt to the post-COVID-19 world.

Main culprit of this startup catastrophe is the global shut down of supply chains. Among the startups, travel and tourism based have seen the meanest phase in the last two months. Whereas on the other hand, startups with their business models in sync with Edtech, Fintech, Health and wellness have seen shots of green.

A columnist has placed COVID-19 Pandemic among the most influential events of modern society right beside the great depression of 1930, fall of the Berlin Wall, bombing of Hiroshima and Nagasaki, and the 9/11 terrorist attacks. All these events have changed the way we live forever. And it’s safe to say that, post COVID-19 world will be different nonetheless. There exists a mutual consensus that Business Models will have to change for good.

Impact on Business Models

Lets explain this by an Instagram Caption i saw few days back. It read “It’s crazy how we used to accept food deliveries with our bare hands before“. Such a thing would require, masks, physical distancing, e-payment, and contact-less delivery. In a nutshell, a major revamp to the business model will be the need of the hour.

And this is just the tip of the iceberg. Incidents of food delivery executives unknowingly spreading COVID-19 will just add fuel to the fire. Not only the food delivery startups, but also those in ride-sharing, e-commerce, and travel-tourism based startups will have to go back to the drawing board to figure out their value proposition and adjacent business models…Its like Deja vu all over again.

And Businesses have responded as well. Many have started advertising their safe and sensible way of doing business. While many startups are still scratching their heads over their ideal Business Models, some are seeing this as an influx of opportunities. For instance, several drone-based startups have inflated their core competencies from a mere Drone-based delivery startup to a full-blown aerial Sensitization startup.

Another trend that was often considered a far fetched idea has now emerged, i.e allowing employees to work from home. Many Startups especially Tech-based have recognized the work from home option as a valid and cost-saving instrument. Social Media giant, Twitter has also allowed it’s employees to work from home on a permanent basis. Work from home can also save a considerable sum on vile Fixed Costs and allow startups with much-needed liquidity.

Vinish Kathuria, Managing Partner at SenseAI voiced his opinion on the matter by saying “We are used to the high-touch, high-contact environment. We have to enable contact-less interactions as we live in the new environment” Unquestionably, Business Models will have to be modified if startups want to remain competitive and resilient in the post-COVID-19 world.

Impact on Businesses

The impact of COVID-19 on Business has been speculated and debated for a long time now. Several publications are convinced that we are headed towards a recession. Japan the world’s third-biggest economy has officially announced that it slipped into recession. And the world knows that it’s just a matter of time that waves of economic fallout reach the rest of the world from the Land of the Rising Sun.

Many startups have been forced to undertake several cost cutting measures like laying off, postponing expansion and growth projects and giving pay cuts. All this in a desperate attempt to save cash and remain buoyant.

According to a recent Nasscom survey, as much as 90% of the startups are experiencing steep falls in revenues. Many have also lobbied for Government support and bailouts. Strong voices recommending that the Startup India accelerate the fund disbursement with extra cash provided at the preliminary stages.

Startups were given a breather when FinMin Nirmala Sitharaman announced the revised criteria for MSME in the Atmanirbhar Bharat Economic Package. The criteria for registering as an MSME has been revised from Investment in Plant & Machinery to Investment and Annual Turnover.

Sure the Government announced several relaxations in terms of reduced TDS/TCS rates by 25% and allowed collateral-free loans worth INR 3 Lakh Crore. The impact of which will be seen in Q4 and Q1 of FY 2021-22.

Ending this blog by quoting the Illustrious Industrialist Mr. Ratan TATA, “In past difficult times, entrepreneurs have displayed farsightedness and creativity that could not have been believed to exist. These became the flagpoles of innovation and new technology today. I hope that the ability to find another way to build a product, run a company, run operations a better way, will emerge as an outcome of the current crisis“

The mammoth task of restarting the economy looms over India.

The Coronavirus has been rightly termed as a ‘simultaneous health and economic crisis’. While millions of Indians under lockdown are under the hopes of flattening the curve, the economy has come to a grinding halt.

India was initially quick to respond with the introduction of tax policy measures designed to ease the blow of the lockdown. In March, the Finance Minister rolled out tax compliance relaxations and other similar measures. These were primarily aimed at giving temporary respite to taxpayers and boosting liquidity.

These steps were regarded as appropriate. And so far it seems that the government has avoided the permanent distortion of our already complex tax framework.
Could taxes help rebuild India post Covid-19?

The Inherent Limitations of Tax Policies

First of all, it is necessary to understand the conundrum that our policymakers are facing. The government is facing a sharp decline in tax collection- which constitutes a major portion of its revenue. This is due to a combination of a few factors:

• Grant of collection waivers and deferrals as relaxation measures

• Reduction in the consumption of goods and services due to physical containment

• Decline in rate of profit generation due to suspension of economic activity

Along with this, the government expenditure has risen exponentially. The need to finance Coronavirus related expenses such as testing, treatment and cash hand-outs are of utmost importance. 

It is apparent that despite the efforts to resume economic activity, once the lockdown is lifted, international and domestic trade is likely to witness a slow recovery. It is thus crucial to temper our expectations and accept the limitations of tax policies in such situations:

• Tax revenue is dependent on the society’s consumption and income generation capabilities. The purchasing power of households affected by the crisis will be low and hence the Goods and Service Tax (GST) collections will suffer. Businesses will make a small profit and income tax earnings will be low. Local taxes such as house/property tax that are linked to the market value of property will witness a dry spell.  Therefore, tax revenue is not likely  to increase in the near future.

• Tax policies can only directly benefit those under the tax net. Thus the informal sector, which has arguably been hit the hardest by this pandemic, can reap only limited and indirect benefits from tax policies.

Planning Points

Despite all these limitations, tax policies pay a crucial role in influencing public behavior and financing public expenditure. Let’s look at how taxes can play an important role to rebuilt the economy post Covid-19.

• optimizing tax revenue

• support to the affected taxpayers

• increasing consumption

• incentivizing savings

• maintaining stability

Next Steps

• Prolonging the applicability of relaxation measures such as compliance relaxations and tax payment deferrals could be explored as good means to support businesses and help affected households regain stability and purchasing power. However, in the restoration phase the government should not be complacent with this.

• Many countries, including Australia and the U.K. are offering tailored solutions on a case-by-case basis to taxpayers that are especially affected by the ongoing crisis. Adopting a similar system for taxpayers operating in certain identified sectors may be explored in India as well.

• A special emphasis may also be laid on taxpayers that offer social returns and help build resilience against the impact of the pandemic. Tax authorities must also try hard to ensure that the terms and conditions of such relaxations are effectively communicated, so as to avoid legal problems in the future.

• In order to increase consumption, incentivize and optimize tax revenue, tweaks to tax rates also be considered. Optimizing tax revenue would ideally entail an increase in the levy of tax. It is of utmost importance that any alteration in tax rate is supported with observation and evidence, cost-benefit analysis and extensive public consultation. The impact on the sector is going to be huge hence it is necessary to determine the behavioral patterns.

Finally

In deciding whether to impose a new levy or any such complicated tax policy that would require restructuring, one must bear in mind the administrative capabilities due to the ongoing health crisis.

Any change that imposes a new levy or adds an additional tax burden must ensure a progressive tax framework.

To optimize tax collection, it is crucial that India invests in leveraging technology to digitize compliance, administration and enforcement processes. This would boost the taxpayer morale by making compliance less troublesome. It would also minimize corruption and ensure transparency and help to maximize tax collection. 

According to the United Nations Conference on Trade and Development, investment from developing countries during the Coronavirus crisis has been reportedly withdrawn at a faster rate than during the global financial crisis of 2008. Therefore, avoiding shocks and granting businesses a sense of stability and certainty in these confusing times should also be a priority for our tax policymakers. 

Gradually lifting the short-term relaxations in the mitigation phase and ensuring that no hasty decisions are taken to impose additional tax burdens would go a long way. 

In these uncertain and unprecedented times tax policymakers must try hard to strike a balance between incentivizing economic transactions through tax breaks, while maintaining a steady stream of revenue.