Monday, December 25, 2023

Unveiling the Changes in FY 23-24 Income Tax: An In-Depth Look at the New ITR Forms

In a surprising and welcome move, the Income Tax Department has rolled out the Income Tax Return (ITR) Forms 1 and 4 for the Assessment Year 2024-25 much earlier than usual. This unexpected development provides taxpayers with additional time to grasp the changes, compile necessary documents, and file their returns more accurately. Let's delve into the significant changes introduced by these new forms, as outlined in the Central Board of Direct Taxes (CBDT) Notification Reference G.S.R. 908(E) dated 22nd December 2023.

1. Stability in ITR Form Applicability: Rule 12 of the Income-tax Rules, 1962, remains unaltered. The criteria for determining which ITR forms apply to various taxpayer categories and the process of filing returns stay consistent. Taxpayers will continue using the same forms as applicable for AY 2023-24, depending on the nature of their income.

2. Default Tax Regime and Opt-Out Option: The Finance Act 2023 has introduced amendments to Section 115BAC, establishing it as the default tax regime for individuals, HUFs, AOPs, BOIs, and AJPs. If taxpayers prefer sticking to the old tax regime, they must explicitly opt-out. ITR Forms 1 and 4 now incorporate Form 10-IEA for ITR 4 filers to make this choice.

3. Introducing Section 80CCH and a New Deduction Column: Section 80CCH emerges as a new addition through the Finance Act 2023, offering a fresh deduction opportunity. Individuals enrolled in the Agnipath Scheme contributing to the Agniveer Corpus Fund after November 1, 2022, can now benefit. ITR Forms 1 and 4 include a dedicated column for specifying the amount eligible for deduction under Section 80CCH.

4. "Receipts in Cash" Column for Enhanced Turnover Limit: For small businesses, the turnover threshold under Section 44AD has increased from Rs. 2 crores to Rs. 3 crores. Notably, the definition of cash now includes cheques or bank drafts not marked as "account payee." ITR-4 introduces a new "Receipts in Cash" column for disclosing cash turnover, aligning with the Finance Act, 2023 changes.

5. Official Notification – Income-tax (Thirtieth Amendment) Rules, 2023: To solidify these changes, the CBDT has issued a crucial notification – G.S.R. 908(E) dated 22nd December 2023. These rules amend the Income-tax Rules, 1962, effective from the 1st day of April 2024. This notification ensures that the legal framework aligns seamlessly with the modifications introduced in the new ITR Forms for the Assessment Year 2024-25.

Taxpayers are encouraged to stay informed, take note of these changes, and seek advice from tax professionals for personalized guidance. The extended timeline provides an excellent opportunity for thorough familiarization and preparation to ensure precise and hassle-free tax filings for the Financial Year 2023-24.