Income Tax return for FY 2020-21 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 shall discuss on same in our Future post on Myths about Income Tax return busted. 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. Option to avail benefit of section 115BAC:
If new tax regime is opted, loss under the head House Property is not allowed to be set off and the following deductions/allowances cannot be claimed
1) Certain allowances u/s section 10 (LTA, HRA, allowances granted to meet expenses in performance of duties of office, Allowances granted to meet personal expenses in performance of duties of office, Allowance received by MP/MLA/MLC, Standard deduction in case of Minor child).
2)Deductions u/s16 (Standard Deduction, Entertainment allowance and Professional tax)
3)Interest payable on borrowed capital for self‐occupied property
4)Standard Deduction in case of family pension
5)Chapter VIA Deduction (life insurance, health insurance premium, pension funds, provident fund, donation etc. except Contribution made by employer to notified pension scheme u/s 80CCD (2)).
6) Deduction u/s 10AA in respect of newly established Units in Special Economic Zones.
7) Additional depreciation u/s 32(1)(iia)
8)Deduction u/s 32AD, 33AB,3ABA, 35AD,35CCC
9) Deduction under sub‐clause (ii) or sub‐clause (iia) or sub‐clause (iii) of sub‐ section (1) or sub‐section (2AA) of section 35
In Schedule DPM, the column “3a. Amount as adjusted on account of opting for taxation section 115BAC” and “3b. Adjusted Written down value on the first day of previous year (3) + (3a)” has been added . Hence corresponding mapping changes are made in schedule DPM
2. New Audit Threshold Limit applicable for FY 2020-21:
In AY 2020‐21 , the threshold limit for a person carrying on business was increased from one crore rupees to five crore rupees in cases where the cash receipts or payments by a business don’t exceed 5% of the such receipts or such payments, however in AY 2021‐22 , the limit of five crore rupees is increased to ten crore rupees for the requirement of conducting Tax audit.
Loss (negative value) under “No books of account” at sl.no. 65 in Sch P&L is restricted.
In schedule BP, Income/ receipts credited to profit and loss account considered under head “other sources” has been bifurcated into 2 parts as:
o “Dividend income” and
o “Other than dividend income”
CBDT vide notification dated 20th September 2019 increased depreciation to 45% on motor cars, motor buses etc wrt assets purchased on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020. Therefore, no additions will be allowed in 45% block from the AY 2021‐22 w.r.t to such assets.
In Schedule CG, the allowable difference between full value of consideration u/s. 50 C and value of property as per stamp authority has been increased from 1.05 times to 1.10 times.
3. Changes in schedule Income from other sources:
The existing drop related to “Dividend income” is bifurcated into 2 parts i.e “Dividend income [other than (ii)]” and “Dividend income u/s 2(22)(e)” and respective changes are done in sl.no.2e DTAA field and in sl.no. 10(i) Quarterly breakup of Dividend income.
Dividend will now be taxable from Rs.1/‐ as the section 115BBDA is omitted. Accordingly, Interest expenditure u/s 57(1) to earn Dividend can be claimed at sl.no. 3.
The existing drop down at Sl. No. 2d “115AD(1)(i)‐ Income received by an FII in respect of securities (other than units referred to in section115AB)” bifurcated into 2 drop downs as under:‐
115AD(1)(i)‐Income being Dividend received by an FII in respect of securities (other than units referred to in section115AB) @20%
115AD(1)(i)‐Income being other than dividend income received by an FII in respect of securities (other than units referred to in section115AB) @20%
Further new drop downs are inserted in sl. No. 2d and Sl. No. 2e wrt “Interest referred to in section 194LC(1)” and Distributed income being Dividend referred to in section 194LBA.
Section 115BBDA is removed from AY 2021‐22 onwards hence corresponding drop downs are removed from sl. No. 2c, 2d and 2e of schedule OS and respective changes are done in sl.no.10(i)_Quarterly breakup of Dividend
In existing Sl. No. 10 “Information about accrual/receipt of income from Other Sources”
Field “Dividend Income u/s 115BBDA” is changed to “Dividend income” due to finance Act changes.
New line item is inserted to capture the quarter wise break up of “Dividend income which is taxable at DTAA Rates”. This information will be used to calculate interest u/s 234C.
4. Changes with regard to Start-Up:
Sl.No. 8 “Gross tax payable (higher of 1d and 7)” of Schedule Part B TTI has been bifurcated in below two fields
Sl.No. 8a – “Tax on income without including income on perquisites referred in section 17(2)(vi) received from employer, being an eligible start‐up referred to in section 80‐IAC ( Schedule Salary)”
Sl.No. 8b – “Tax deferred ‐ relatable to income on perquisites referred in section 17(2)(vi) received from employer, being an eligible start‐up referred to in section 80‐IAC”
Tax on ESOP received from eligible start‐up will be deferred and is payable by the assessee within fourteen days—
(i) after the expiry of forty‐eight months from the end of the relevant assessment year; or
(ii) from the date of the sale of such specified security or sweat equity share by the assessee; or
(iii) from the date of the assessee ceasing to be the employee of the employer who allotted or transferred him such specified security or sweat equity share, whichever is the earliest.
5. Various other changes:
Now, assessee needs to disclose surcharge before “Marginal Relief” and after “Marginal relief” in Schedule Part BTTI.
In Schedule TDS, earlier TDS credit is allowed only if corresponding income is being offered for tax this year , however exception is being added for TDS u/s 194N. Also the label is amended to include form 16D for the claim of TDS
Annexure 2 is inserted in instructions w.r.t. ITR fields which should be tallied with corresponding amount mentioned in Tax Audit report i.e Form 3CA‐3CD/3CB‐3CD, if applicable.
Upload level validations table is modified w.r.t. mapping changes and new rules.
Option of Filing ITR in response to notice u/s 153A and 153C is removed from ITR as requirement to file ITR under these sections is omitted.
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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