Why does taxman want to know so much about your private lives?
The tale of Privacy and Income Tax Department in India.
Is taxman using the new ITR forms to know too much about your private lives? Check out the changes in ITR 1 and ITR 4.
Wow! This is very unlike taxman. Income Tax Department is always late to the party, announcing ITR forms way into tax filing season, causing chaos & confusion and invariably extending the due date. Surprisingly ITD has released ITR forms ITR-1 (Mostly used by Salaried) & ITR-4 (Mostly used by Professionals) way ahead of the tax filing season which starts in April. Looks like the ITD has taken up as their New Year Resolution to consider taxpayers’ complaints, and pulling up their socks for AY 2020–21.
Does this mean there won’t be any extension in the Income Tax due date (which is 31st July) this Assessment Year (AY 2020–21)?
By now, you all may know that ITR forms are followed by ITR Utilities that one must use to file income tax returns (Or you can also use Quicko. A simpler way to file ITR online for free). However, these utilities are more likely to be released at the beginning of the tax season (which starts in April).
Now that we can sigh a relief, let’s talk about what changed in ITR forms. Looks like taxman can not get their hands off of your private lives. Like Yogi Bera said, “It’s Dejavu all over again”. Late Finance Minister Arun Jaitely simplified ITR for salaried by introducing ITR-1 (Sahaj) back in 2016. However, the taxman is determined that fewer & fewer people can file ITR-1.
Let’s take a closer look at the changes.
What is ITR-1 Sahaj?
ITR-1 (SAHAJ) is the most widely used ITR form with over 3.2 Crore filing it this Assessment Year in 2019–20. Individuals earning income from Salary, Pension, One House Property, and Interest use this one-page ITR form (hence the name Sahaj) to file their Return.
Changes in ITR-1 for AY 2020–21
Passport Details:
Make ITD your travel buddy… It is mandatory to share your Passport number with the ITD through your Income Tax Return.
You cannot file ITR 1 if you spent more than INR 2 Lakh on your foreign travel. After Budget 2019, it was compulsory to file ITR if you incurred an expense of INR 2 Lakh or more on foreign travel for yourself or any other person.
It is possible, with this information the ITD can understand the relation between the Income earned and your ability to incur lifestyle expenses like foreign travel for self or any other person.
Is it possible that the government is trying to build a database, where a citizen’s PAN and Passport number are linked?
TAN of employer:
This AY onwards you will have to give details of your employer like TAN, Name, Nature, and Address. You can find all these details from your Form 16. The due date to issue Form 16 is 15th June of the Assessment Year.
You can simply add the TAN of your employer and all the other employer details will be prefilled from the Income Tax Database.
Until last year, you only had to select the nature of your employment from PSU, Pensioner, Government, etc.
Details of Tenant:
If you are renting a property, you will now have to disclose PAN and Aadhaar details of your tenant. It is, however, uncertain if a taxpayer can file the ITR without providing these details.
Complete House/Property Address:
The new ITR form will require your complete House/Property address. Earlier, the complete house/property address was required only in ITR 2 and ITR 3. This AY onwards, irrespective of whether it is a self-occupied, let-out or deemed let-out, you are required to share your complete House/Property address.
Provide details of Unrealized Rent:
Property Owners would now be required to provide details of rent due but not paid by tenant.
Hence giving the ITD an opportunity to double-check the details with the tenant and vice versa.
Previously, these details were asked only in ITR 2 and ITR 3.
Eligibility for ITR-1 reduced:
Lesser people will get away by filing ITR-1 and will need to fill more detailed ITR forms that require more detailed information and disclosures. Looks like the 4.99% of growth rate in ITR 1 filed this year in AY 2019–20, might not continue.
Following people can file ITR-1
- Anyone who’s total income doesn’t exceed Rs 50 Lakh and includes
- Salary / Pension Income
- Income from Other Sources (excluding winnings from Lottery and Income from racehorses)
- Income from one House Property
- Agricultural income up to Rs 5000.
Following people cannot file ITR-1:
- Total income exceeds INR 50 Lakh
- Director of a company incorporated under the Companies Act
- Individual who has invested in unlisted equity shares
- Individuals who have any brought forward / carry forward loss under the head ‘Income from House Property’
- Traveled abroad spending INR 2 Lakh or more
- Anyone who has paid INR 1 Lakh in electricity bills
- Anyone who has deposited more than INR. 1 Crore in a bank account during the year
If any of the above conditions are applicable, you can file ITR 4.
What is ITR-4 Sugam?
ITR-4 (SUGAM) form is for those taxpayers — both Individuals and HUFs who have opted for the presumptive taxation scheme under Section 44AD, 44ADA or Section 44AE of the Income Tax Act.
Changes in ITR 4 for AY 2020–21
You can file ITR 4 if you earn up to INR 50 lakhs annually,
- Have one house property
- Deposited more than INR 1 crore in a bank account
- Incurred INR 2 Lakh on foreign travel
- Incurred INR 1 Lakh on electricity
Information required to be disclosed in ITR 4:
- Holders of Indian Passports would be required to provide their passport number
- People who have deposited INR 1 crore or more in their current accounts need to notify
- Individuals who have travelled abroad themselves or paid for someone else’s vacation need to notify the ITD
- Individuals who have paid INR 1 lakh or excess for electricity during the previous year will need to disclose the amount
Following people can file ITR 4
- Individuals with income up to INR 50 Lakh
- HUFs (Hindu Undivided Family) with income up to INR 50 Lakh
- Firms that are not an LLP and with income up to INR 50 Lakh
- Individuals with One house property income
- People from income with Family pension
- Agricultural income up to INR 5000.
Following people cannot file ITR-4
- Income from more than one House Property
- Winning from Lottery and Race Horses
- Income from Capital Gains
- Agricultural income exceeding INR 5000
- Income from speculative business
- Income from Foreign Sources and/or having any Foreign Asset
What could be some possible implications?
Evidently, it is apparent that the ITD is trying to lower the eligibility criteria for ITR-1, hence nudging taxpayers to disclose more information on ITR forms. Subsequently, Individuals with jointly owned house property cannot file ITR-1 — which only requires you to share ownership and PAN (This change was rolled back by ITD on 9th Jan 2019). But smartly enough due to ITD’s changes, Individuals would need to also disclose the PAN of the Co-owner of the property.
Wow! Seems like ITD got two birds with one stone.
With all the disclosures needs now the ITD is clearly trying to capitalize on individuals who have a better lifestyle and pay lavishly for travel and luxury. Now they need to pay the government their fair share of information/details too! Usually, Indians are secretive of their finances but making it mandatory to disclose their deposits would maybe help the ITD better understand Indian Tax Economics.
Moreover, the logic here seems to identify people who dodge paying correct taxes by masking their wealth. So to sum up, though these changes are supposed to be for the greater good of the country, ITD should rather try to build frameworks that do the job and not make taxpayers get privacy jitters. Surely we can learn from nations like Switzerland and Germany which have simplified taxes once and for all.
Let’s just hope this tax filing season, no due dates are extended and tax returns are filed at the right time. Fingers crossed!
