Income Tax return for FY 2021-22 were announced, however till date only ITR 1, 2 and 4 were available for filing. Now ITR 3 is also available for filing on e filing website.
So, let’s have a look on what are some important amendments in ITR 3 and who are eligible to file the same.
First of all ITR 3 is the biggest and exhaustive return as far as Individual and HUF is concerned. Any type of income can be shown in ITR 3 and there are no restriction in ITR 3 as we see in ITR 1, 2 and 4.
Let’s first see who are eligible to file ITR 3 Form:
The heading of ITR 3 read as under: “For individuals and HUFs having income from profits and gains of business or profession”, but as mentioned above it is the most exhaustive return.
Also people are confused whether one can file presumptive taxation income under ITR 3 the answer is yes. We have discussed about the same in our post on Myths about Income Tax return busted. To read the same CLICK HERE: TOP Myths relating to Income Tax return….Busted – Taxontips. Also any person who is a partner in any firm has to file ITR 3.
Hence, this Return Form is to be used by an individual or a Hindu Undivided Family who is having income under the head “profits or gains of business or profession” and who is not eligible to file Form ITR‐1 (Sahaj), ITR‐2 or ITR‐4 (Sugam).
Below are the major amendments in ITR 3:
1. Change in Schedule FA:
Schedule FA deals with disclosure of foreign assets by a person who is a ordinary resident in India. Till now while declaring foreign assets in this schedule assessee was free to declare foreign assets held by him as on end of relevant accounting period of foreign jurisdiction.
Now no separate accounting periods shall be followed, CBDT had mandated all the taxpayers to report the foreign assets held by them as on 31st December. Thus, while filing Income Tax return for AY 2022-23, assessee has to disclose foreign assets held between 01.01.2021 to 31.12.2021.
2. Declaration of Significant Economic Presence (SEP) by non-resident:
Concept of SEP was introduced by Finance Act, 2020 and made applicable form AY 2022-23 and since this will be the first year of application of the provision, assessee need to file declaration of same while filing return of income.
To read more about concept of SEP CLICK HERE: Threshold limit prescribed by CBDT for determining “Significant Economic presence” of a business in India | Now many online portals will be taxed in India | Digital tax – Taxontips
3. Separate disclosure of Interest of contribution to EPF above Rs. 2.5 lakh:
Finance Act, 2021 had introduced a provision under section 10(11) and 10(12) wherein it was mentioned that if the contribution recognised and statutory provident fund by the employee is above Rs. 2.5 lakh in a year then the interest on that excess contribution will be taxable.
However, if the amount of employer does not make contribution then the threshold limit mentioned above will be increased to Rs. 5,00,000.
To read more on such taxability CLICK HERE: 2 Major amendments in Budget 2021 which would affect HNI – High net worth individuals – Taxontips
4. Change in ITR Form to adjust unabsorbed depreciation pertaining to additional depreciation to WDV of asset in relation to section 115BAC:
Provision of section 115BAC and 115BAD provides that if an assessee has any unabsorbed depreciation because of additional depreciation and if he opts for above provisions then the assessee can adjust the value of such unabsorbed depreciation to the WDV of the asset as on 01.04.2021.
Do remember that similar provision was introduced under section 115BAA for companies however, CBDT had sent notices to companies who had opted for the new regime and made above adjustment wherein such adjustment were not considered.
To read more on such intimation issued by CBDT CLICK HERE: Intimation issued u/s 143(1) of the Act for AY 2020-21 does not allow depreciation on adjustment of WDV due to additional depreciation to companies opting for section 115BAA – Taxontips
5. Disclosure for alternative tax regime opted under Section 115BAC:
The following disclosures are being required in ITR 3 and ITR 4 in respect of the new lower tax regime under Section 115BAC:
(a) Whether the assessee has opted for an alternative tax regime under Section 115BAC and filed Form 10-IE in AY 2021-22;
(b) For the AY 2022-23, the assessee has to choose from the following options:
- Opting in now
- Not opting
- Continue to opt
- Opt out
6. Additional information sought from the assessee not opting for the presumptive tax scheme:
The audit under Section 44AB is mandatory if the total sales, turnover or gross receipt from the business during the previous year exceeds Rs. 1 crore. However, if the cash receipt and cash payment do not exceed 5%, the audit shall be mandatory if the turnover of the business assessee exceeds Rs. 10 crores during the financial year.
For the purpose of computing the limit of 5%, payment or receipt by cheque drawn on a bank or by a bank draft, which is not an account payee, shall be deemed to be the payment or receipt in cash only.
The old ITR Forms required the assessee to furnish the response regarding cash receipts and payments only, and it did not consider the receipt or payment through non-account payee cheque or DD.
The following additional disclosures are required regarding Audit Information:
(a) Whether total sales, turnover or gross receipt is between Rs. 1 crore and Rs. 10 crores. If not, is it below Rs. 1 crore or exceeds Rs. 10 crores?
(b) The new ITR forms require aggregation of receipts and payment in cash and non-account payee cheque or DD while computing the limit of 5% as mentioned above.
7. Limiting the rate of surcharge on dividend income:
After Finance Act, 2020 dividend was made taxable in the hands of recipient at applicable tax rates. However, the rate of surcharge on such dividend was restricted to 15% if income exceeds as in case of capital gain.
Thus, in case of Individual, HUF, AOP, BOI, the surcharge on tax on dividend income shall be levied at the rate of 10% if it exceeds Rs. 50 lakh but does not exceed Rs. 1 crore and at the rate of 15% when it exceeds Rs. 1 crore.
The consequential changes have been made in Schedule Part B – TTI (Computation of tax liability on total income) to limit the rate of surcharge on dividend income taxable under Section 115AD and other dividend income.
Disclaimer: The views presented in the above article are personal views of our team and has no legal binding. For any legal opinion consult a tax professional.
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