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How will Tax Filing be Different this year?

Updated on: 09 Aug, 2023 12:08 PM

Like every year, income tax return filing is going to be a little different this year as well. So, before you begin filing your income tax return, let’s see what has changed in income tax return filing this year.

Disclosure and linking of Aadhaar Number

From 1st July on-wards, the quoting of your Aadhaar number in your ITR is mandatory. If you don’t have one, but have filed an application for the same, then the 28 digit Aadhaar Enrolment number is required to be quoted in the ITR.

In addition to this, you are required to link your Aadhaar number with the PAN number as a precondition for filing your Income Tax Return. This follows from a recent CBDT press release clarifying the impact of the Supreme Court judgment on Aadhaar PAN linkage.

The release stated, among other things: Everyone who has been allotted permanent account number as on the 1st day of July 2017, and who has Aadhaar number or is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to income tax authorities for the purpose of linking PAN with Aadhaar.

Additionally, it has been practically observed that income tax servers are not accepting ITRs unless your PAN is linked with your Aadhaar.

The impact of demonetization

If you have deposited cash equal to or more than Rs 2,00,000 in aggregate – old as well as new currency notes – in any of your Bank Account, be it Savings, Current or even a Loan Account between 9th November 2016 to 30th December 2016, the same has to be reported by you at the time of filing your income tax return. This applies to all the ITR forms including the ITR 1 (Sahaj).

Change in ITR form numbers

For simplification, the Income Tax Department has changed Income Tax Return form numbers. Following Forms are to be filled for the assessment year 2017-2018, relevant for Financial Year 2016-17 return filing:

  • a) ITR 1 (Sahaj): For Individuals having Income from Salaries, one house property, other sources (Interest etc.) and having total income of up to Rs 50 lakh;
  • b) ITR 2: For Individuals and Hindu Undivided Families (HUFs) not carrying out a business or profession. This ITR has merged Form ITR 2/2A and 3 which were applicable for F.Y. 2015-16;
  • c) ITR 3: For individuals and HUFs having income from a proprietary business or profession. This form is renumbered and replaced ITR 4 applicable for F.Y. 2015-16;
  • d) ITR 4 (Sugam): For presumptive income from Business & Profession. It has replaced ITR 4S (Sugam) used for F.Y. 2015-16;

Other forms remain the same.

Filing of your ITR is mandatory even if you have only exempt long term capital gains (LTCG):

In case your aggregate income including tax-exempt Long Term Capital Gains (LTCG) exceeds Rs 2,50,000, i.e. the basic exemption limit, you will have to file your income tax return as per the amendment made in the last provision of section 139(1) of the Income Tax Act.

This means that even if your taxable income is less than the basic exemption limit of Rs 2,50,000 but because of exempt LTCG income, the total amount exceeds Rs 2,50,000, then the filing of return of income is mandatory.

For example, your taxable income from all the sources is Rs 2, 00,000 before deduction of chapter VIA deductions, and then normally you are not required to file your return. But, if you have an exempt LTCG income of say Rs 1, 50,000, then, since your taxable income plus income from exempt LTCG exceeds the basic exemption limit of Rs 2,50,000, it will be mandatory to file your return of income.

As per section 10(38), long-term capital gain arising on transfer of equity share or units of equity oriented mutual fund (*) or units of business trust is not chargeable to tax in the hands of any person, if following conditions are satisfied: The transaction i.e. the transaction of sale of equity shares or units of an equity oriented mutual fund or units of business trust should be liable to securities transaction tax.

Such shares/units should be long-term capital asset as defined in the Income Tax Act. The transfer should have taken place on or after 01.10.2004.

Increased Rebate u/s 87A:

Section 87A of the Income Tax Act allows a rebate of up to Rs 5,000 for individuals whose taxable income (total income minus deductions under section 80) is Rs 5,00,000 or less. However, if your tax liability is lower than Rs 5,000 then the amount of rebate will be restricted to your tax liability. The amount of rebate earlier was Rs. 2000/-.

Additional Benefit for 1st Time home Owners (Sec 80EE):

For taxpayers who do not own any house, the Finance Act 2016 had introduced a new Section 80EE. Under this section, you can claim deduction for the interest paid up to Rs 50,000 for loan taken for a residential house. This would be in addition to the deduction of Rs. 2 Lacs under section 24(b). For availing this benefit, you need to satisfy certain conditions.

The first condition is that the loan should have been sanctioned between 1st April 2016 to 31st March 2017 and the amount of the loan should not exceed Rs. 35 Lakhs for a residential house and the cost of this house does not exceed Rs. 50 lakh. Moreover, you should not be the owner of any residential house at the time of sanction of the house.

However, there are no restrictions on your owning any commercial property or even a residential house later on as the condition of not owning house needs to be satisfied at the point of sanction of the loan and not continuously. This benefit unlike Section 24(b) and 80 C can be claimed during construction of the house and not necessarily after completion of the construction of the house.

Exemption from LTCG for Investment in Startups

This tax filing season, you can reap the benefits of investing in a startup under section 54GB. As per this section, if you have earned Long Term Capital Gains by selling your house or land, and have invested such income in equity shares of a startup business then such gain will not be taxed.

However, such investment in shares should be made before filing your Income Tax Return and the return should be filed before the due date. Further, as a condition, the start-up company has to invest this amount to purchase new plant and machinery within 1 year from the date of subscription of equity shares by you, otherwise, such exempt LTCG would be made taxable.

Taxpayers need to obtain the proofs from the Company to show that it has bought new plant and machinery. Proof may consist of the Invoice copy, bank payment and agreements etc.

Published in The Economic Times

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.