Changes in ITR forms – ITR-1, ITR-2 and ITR-V
Tax Exemption

CBDT notified the new ITR forms from ITR-1 to ITR-7 by incorporating the required changes for AY 2020-21.

For filing of income tax returns, the income tax department has prescribed seven different types of ITR forms, each depending based on the type of taxpayer and the nature of income earned by him.

Here we will discuss in detail the key changes in ITR-1, ITR-2 and ITR-V (acknowledgement).

Who needs to file ITR-1 and ITR-2?

ITR type Conditions for filing respective ITR
ITR-1 Can be filed by: 

  • Resident individuals can only file ITR-1 (not applicable to HUF and non-residents).
  • Total income should not be more than Rs 50 lakh under the heads:
    • Salaries (including pension and family pension).
    • House property (individual should not be an owner of more than one house property and should not have brought forward loss from previous years. The house property can be in single or joint ownership). 
    • Other sources (other than winning from lotteries and racehorses).
  • Agriculture income (if any) less than Rs.5,000.

Cannot be filed by:

  • Individuals who are a director of any company or have invested in unlisted equity shares.
  • Individual who is a resident and has assets (including financial interest in any entity) outside India or signing authority in any account located outside India.
  • Individual claiming relief of foreign tax paid or double taxation relief under section 90/90A/91.
  • Individual having income from business and profession.
  • The individual had capital gains income.
ITR-2 Can be filed by:

  • Individual & HUF (resident and non-resident both can file ITR-2) 
  • Individual and HUF having income from the below heads:
    • Salaries.
    • House property (including more than one house property).
    • Capital gains.
    • Income from other sources (including from lottery and horse races).
    • Foreign assets/foreign income.
  • Agriculture income (if any) more than Rs.5,000.

Cannot be filed by:

  • Any individual or HUF having income from business or profession.
  • Individuals who are eligible to file ITR-1 form.

Key changes in ITR-1, ITR-2 and ITR-V 

Disclosure if the assessee is filing return under the 7th proviso to section 139 (1)

  • Till last FY 2018-19, an individual (except a company) was required to file the income tax return only if his income was more than the basic exemption limit.
  • However, CBDT introduced the seventh proviso to section 139 (1), which requires mandatory filing of ITR by the individuals carrying out high-value transactions even though the total income is below the basic exemption limit (i.e. Rs 2.5 lakh for individuals for FY 19-20). High-value transactions include (i) cash deposits in current account more than Rs 1 crore, (ii) expenditure on foreign travel of more than Rs 2 lakh, and (iii) electric consumption expenditure of Rs 1 lakh and more. 
  • Updated ITRs 1 and 2 require the assessee to report if he is filing the return as required by the new proviso to section 139(1). 

Disclosure of investment in Schedule DI

CBDT had extended the due date of making tax-saving investments u/s 80 till 31st July 2020 from 31st March 2020. 

If the assessee has made any such tax-saving investments, the same is to be declared in Schedule DI, which is added to forms ITR-1 and ITR-2.

Resident individuals owning a single property in “Joint Ownership” can file ITR-1 if the total income is less than Rs 50 lakh

CBDT clarified that individuals who are eligible for filing ITR-1 can still file the same if they have joint ownership of single house property. 

Whereas, resident/non-resident individuals who own more than one house property should file their income tax return in ITR-2.

Also Read: New announcements by FM, income tax relief for property owners

Extension of time limit for investment in capital gains  u/s 54 to 54GB 

The government extended the time limit for claiming deduction from capital gains u/s 54 to 54GB  from July 31, 2020, to September 30, 2020.

Quoting PAN or Aadhaar interchangeably

Finance Act 2019 allowed for interchangeable usage of Aadhaar with PAN. Hence, a person who has not availed PAN but has Aadhaar can provide Aadhaar number. 

Separate reporting of surcharge u/s 111a, 112A and 115D

Additional surcharge rate introduced on the high income of more than Rs 2 crore and Rs 5 crore as introduced by the Finance Act 2019 was withdrawn due to concerns raised by domestic and foreign investors. The withdrawal of additional surcharge was made in the hands of specified taxpayers, i.e. individuals, HUF, AOP, BOI, AJP for the specified capital gains income earned by them u/s 111A (short-term capital gains on listed equity shares), 112A (long-term capital gain on listed equity) and 115AD  (capital gains on securities by FIIs-foreign institutional investors) subject to STT paid at the time of sale. 

Hence, to consider the non-applicability of the additional surcharge, CBDT has revised ITR-2 for separate reporting of income chargeable u/s 111A, 112A and proviso u/s 115AD(i) (ii) (iii).

A disclosure relating to “type of company” to be reported by directors or any person holding unlisted equity shares 

ITR-1 and 2 have been modified to report and provide the details of “type of company” if the assessee is a director in a company or holds unlisted equity shares.
This was done to gather information and monitor the existence of shell companies and ghost/fake directors. 

Addition in the list of “nature of employment” in ITR-1 and 2

The ITR forms have expanded the list of nature of employment. Three more categories have been added – The government category has been split, and government assessee will have to choose between the Central government and state government. An addition in the dropdown as “not applicable has been added in case assessee does not belong to any of other categories. 

Unique document identification is required if the return is filed in response to a notice

To maintain the audit trail, a unique identification number is contained on all the notices issued by the income tax authorities. Hence, ITR-1 and 2 has an option to provide the DIN if the return is filed in response to the notice. 

ITR update to provide additional interest deduction on housing loan

As per section 80EEA and 80EEB, first-time homeowners will be allowed additional housing loan interest deduction up to Rs 1.5 lakh u/s 80EEB over and above Rs 2 lakh allowed under section 24. 

Separate columns to claim the said deductions have been updated in the ITR-1 and ITR-2.

Multiple bank account for claiming refunds

In updated ITR-1 and 2, the assessee can choose to provide details of multiple bank accounts for payment of the refund. Refund will be credited in one of the accounts as decided by the CPC department of income tax level. 

Unverified ITR-V will not contain numeric details like gross total income, deductions, taxes, etc. 

The taxpayer, after filing the return, needs to verify the acknowledgement either through e verification or sending a signed physical copy of the acknowledgement to CPC department of income tax, Bengaluru. In FY 18-19, the government had modified the form V to incorporate the words “not verified” as watermark in case the ITR was filed but not verified by the taxpayer. 

Since FY 19-20, CBDT has added one more modification in case of unverified ITR-V. The unverified ITR-V will not reflect any income, deduction or taxes paid details and will be titled as “Indian income tax return verification form”. Unverified ITR will only print basic details like name, PAN, acknowledgement number, etc. Post verifications, ITR-V will contain the gross total income, deductions, taxes, etc. and will be titled as “Indian income tax return acknowledgement.

For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in

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