Tuesday, September 1, 2020

FAQs on ITR Filing AY 2020-21

The Income Tax Returns for AY 2020-21 are due to be filed by 30-Nov-2020. The following are a few FAQs that may answer queries that are often raised with us.

Who is eligible to file their Income Tax Return in Form ITR-1?

Any Individual being an Ordinary Resident can file his ITR in Form 1 if his total income includes:
- Salary/pension
- Rent/loss from 1 house property
- Income from other sources such as interest, other miscellaneous income (other than income chargeable at special rates)
- Income of spouse or minor child clubbed in his income, if falling in any of the above heads, and no TDS to be claimed as appearing in such other person's PAN

However, the form cannot be filed by the following category of individuals:

- Non Resident or Not Ordinarily Resident
- Director of a company
- Total income exceeds Rs. 50 lakhs
- Has income from more than 1 house property
- Holds unlisted equity shares at any time during the year
- Earning royalty income and claiming deduction u/s 80QQB or 80RRB
- Claiming deduction therefor u/s 10AA or Part-C of Chapter VI-A
- Brought forward loss to be carried forward
- Claim relief of tax paid in another country under section 90 or 91
- Having assets (incl. financial interest in any entity, or bank accounts) outside India
- Income to be apportioned in accordance with provisions of Section 5A
- Income from Business or Profession
- Capital Gains
- Income under Other Sources, taxable at special rate
- Dividends exceeding Rs. 10 lakhs
- Unexplained income taxable at 60% u/s 115BBE
- Agricultural income exceeding Rs. 5,000
- Claiming deduction u/s 57 from income under the head ‘Other Sources’, other than for family pension
- Income from any source outside India

Who shall file Form ITR-2?

An individual or HUF, whether resident or non-resident, earning incomes such as:
- Salary or pension
- Rental income or loss from one or more house properties
- Capital Gains or losses
- Income chargeable at special rates under Other Sources
- Clubbed income of spouse or minor in any of the abovementioned heads

Who shall file Form ITR-3?

Individual or HUF having income from Business or Profession

Who shall file Form ITR-4 (Sugam)?

Ordinary Resident Individual, HUF or Partnership Firm (not LLP) earning the following types of incomes:
- Presumptive Income computed u/s 44AD, 44ADA or 44AE
- Salary or pension
- Income or loss from 1 house property (not for brought forward loss)
- Family pension
- Other sources excl. those chargeable to tax at special rates
- Clubbing income of spouse or minor in any of the above heads, but not claiming TDS as appearing in their PAN in their own return

Who shall file Form ITR-5?

Partnership Firms, LLPs, Association of Persons (AOPs), Body of Individuals (BOIs), Artificial Juridical Persons (AJPs), Business trust, Investment Fund.

Who shall file Form ITR-6?

Companies other than companies claiming exemption under section 11 (i.e. income from property is held for charitable or religious purposes) must furnish their income tax return in ITR-6.

What should be the relevant accounting period for reporting in Schedule FA (foreign assets) and what to do if the transaction falls outside the accounting period but within the previous year?

The relevant accounting period shall be as follows:

01-01-2019 to 31-12-2019: applicable to a foreign country where calendar year is adopted for tax filing

01-04-2019 to 31-03-2020: applicable to a foreign country where our financial year is adopted for tax filing

12 month period ending any day after 01-04-2019: for countries where any other 12 month period is taken into consideration for tax filing

Foreign assets are to be reported only if such assets have been held at any time during the previous year (with reference to India) as also during the 'relevant accounting period' in the foreign tax jurisdiction.

How to claim benefit of taxes paid in foreign country while paying taxes in India?

Rule 128 of Income-tax Rules 1962 lays down broad principles and conditions for computation and claim of foreign taxes paid in overseas countries by the resident taxpayers.

A statement of foreign income offered to tax and the foreign tax deducted or paid on such income is required to be submitted in electronic Form No. 67 and the certificate or statement specifying the nature of income and foreign tax deducted or paid are required to be furnished on or before the due date for filing of ITR.

How to opt for lower tax regime u/s 115BAA and 115BAB in the ITR, in case of domestic companies?

Section 115BAA: Reduced tax rate @ 22%, without providing for specified exemption, deduction or incentives - Make an application under electronic Form 10-IC.

Section 115BAB: Reduced tax rate @ 15% for domestic manufacturing companies incorporated on or after 01-Oct-2019, without providing for specified exemption, deduction or incentives - Make an application under electronic Form 10-ID.

The same detail will also have to be furnished in Part A of the ITR Form.

How to report unlisted equity shares held during the year? Also, what will be the cost of acquisition in case they are received by way of gift, will, amalgamation, etc?

A table has been inserted in ITR forms 2, 3 & 5 seeking the following details of unlisted equity shares held at any time during the previous year:
- Name of the company
- Opening balance of number of shares and cost of acquisition
- Issues and acquisitions during the year - no. of shares, face value, issue price or purchase price and date of purchase
- No. and sale consideration of shares transferred during the year; and
- No. and cost of acquisition of shares held at the end of the previous year.

In case of acquisition through gift, will or acquisition, the amount may be reported as zero corresponding to the actual number of shares acquired.

What is the difference between Schedule FA and Schedule AL? Is holding reported in Schedule FA to be reported in Schedule AL as well?

Schedule AL is for individuals and HUFs having total income greater than Rs. 50 lakhs to report their Assets & Liabilities as on 31-Mar-2020.

However, Schedule FA reports foreign assets held even if just for a single day during the relevant accounting period.

A resident taxpayer is required to state whether he had any time during the previous year:
- held, as beneficial owner, beneficiary or otherwise, any asset (including financial interest in any entity) located outside India; or
- had signing authority in any account located outside India; or
- had income from any source outside India.

What kind of assets are to be reported in Schedule AL and how?

Assets, as listed below, must be disclosed at cost of acquisition:
- land, building
- financial assets such as shares & securities
- Bank deposits
- Loans & advances
- Insurance policies
- Cash in hand
- Jewellery and Bullion
- Vehicles

If any asset is a gift, or inheritance, the cost of such asset must be declared as per the cost provided by the previous owner and cost of improvement.

Liabilities may be in the form of:
- Housing Loan
- Vehicle Loan
- Personal Loan
- Unsecured Loan
- Statutory Dues
- Security Deposits
- Advance Money

How to calculate residential status if a non-resident could not leave India due to the COVID-19 outbreak and consequent lockdowns?

For such cases, the period of stay in India from 22-Mar-2020 to 31-Mar-2020 will be excluded in computing 182 days and other criteria for residential status.

For a person who had been quarantined in India on or after 01-Mar-2020, the date of start of quarantine up to the date of departure or 31-Mar-2020 to be excluded.

Which criteria (other than having taxable incomes) makes it mandatory for one to file ITR?

In addition to the base criteria, three new parameters have been introduced through the seventh proviso to Section 139(1), which requires every person, who is otherwise not required to file the return due to the reason that his income does not exceed the maximum exemption limit, to file their ITR if during the previous year they have:

- deposited more than Rs. 1 crore in one or more current account maintained with a bank; or
- incurred more than Rs. 2 lakh for himself or any other person for travel to a foreign country; or
- incurred more than Rs. 1 lakh towards payment of electricity bill.

I haven't verified ITRs for previous years and the same are treated as invalid. What can I do to rectify the same?

The CBDT has provided a one-time relaxation for verification of ITRs for AY 2015-16 to 2019-20. Thus, you can verify such returns either by sending a duly signed physical copy of ITR-V to CPC, Bengaluru through speed post, or verify the same using bank linked EVC or Adhaar linked OTP received on your registered mobile numbers by 30-Sep-2020.

My ITR has become invalid due to failure to respond to Notice issued for a defective return. How does one correct such return?

In case a return has been declared as invalid, it shall be deemed as if no return has been filed by the taxpayer. In such a case, a new return can be furnished if the time limit for furnishing the original/ belated return has not yet expired.

If the time limit for furnishing the return has expired, then one cannot file the return for such assessment year. The Assessing Officer can then proceed to make the best judgment assessment. Alternatively, one may approach the CBDT for condonation of delay in filing of return.

Are profits from Intra-Day Trading taxable as Business Profit or Capital Gains?

Intra-day trading is considered as speculation business and the income therefrom would either be speculation gain or speculation loss. Income from speculation gain is taxed at the normal rates. However, any losses arising from speculation business are to be set off only against the profit of any other speculative business.

How is interest u/s 234A to be computed for AY 2020-21 as the date has been extended to 30-Nov-2020?

No relief has been provided from the interest chargeable under section 234A if the tax liability of the assessee exceeds Rs. 1 lakh. Thus, if self-assessment tax liability of a taxpayer exceeds Rs. 1 lakh, he would be liable to pay interest under section 234A from the expiry of original due dates, i.e., 31-Jul-2020 or 31-Oct-2020.

What information is to be submitted for claiming deduction u/s 80G on donations?

- Name of the Donee
- PAN of the Donee
- Address with pincode
- Amount of Donation


You can read our other posts related to Income Tax here.