New Changes introduced in ITR-1 (Sahaj) and ITR-4 (Sugam)

Individual taxpayers who prefer the old, with-exemptions framework must indicate in their income tax returns (ITR) for the financial year 2023-24 (assessment year 2024-25) that they do not want to opt for the new, limited exemptions tax regime.

This is because, as announced in the Finance Act of 2023, the new tax structure will be the default regime beginning this financial year.

“The new ITR-1 includes the requirement to select a tax regime.” In the case of ITR-4, a taxpayer must file form 10-IEA to opt out of the new tax regime,” according to a tax and consulting firm.

So, if you do not answer no to the question ‘Do you desire to use the option u/s 115BAC (6) of opting out of the new tax regime?’ The new tax regime’s tax rates and conditions will be reflected in your ITR form.

The income tax (IT) department updated this question in the ITR forms ITR-1 (Sahaj) and ITR-4 (Sugam) issued on Friday. Until last year, the forms required taxpayers to specify whether they preferred the new regime.

ITR forms are distributed well in advance

The Central Board of Direct Taxes (CBDT) has issued ITR forms for the financial year 2023-24 (assessment year 2024-25) far ahead of schedule. The two forms released on Friday are for salaried individuals as well as firms or professionals using the presumptive income approach.

According to the announcement, the forms will go into force on April 1, 2024. By releasing the forms well in advance of the financial year end, taxpayers and consultants will be able to comprehend and prepare in advance, ensuring they are ready when the ITR filing window opens for income received in the financial year 2023-24.

Early release of ITR forms may assist taxpayers with simple tax situations and no significant tax deducted at source in filing their returns as soon as the financial year ends.

The deadline for filing returns using ITR-1 or 4 is usually July 31. Until recently, these forms were provided in April/May, and the utility (software that helps fill out the form) for filing the forms on the Income Tax site was released in June, and if there was any change, assesses had to rush at the last minute.

Will ITR online filing utilities be available soon?

This time, the forms were made available much earlier. The utility for filing the forms is expected to be provided before April 2024, and assesses will be able to file the forms far before the due date.

Despite the availability of the forms, the vast majority of taxpayers will be unable to file their tax returns when the window opens. This is due to the fact that the utility has not yet been released. In addition, the TDS statement, which must be cross-referenced before filing, is normally delivered in June.

The CBDT has just notified the ITR-1 and ITR-4, however, actual return filing cannot begin until the e-filing tool and accompanying schema are available.

The I-T department wants all e-filing software to be available as soon as possible so that return filing may begin immediately after the fiscal year ends. However, how far this can aid taxpayers remains to be seen, as the returns cannot be filed unless the tax deductor submits the TDS return in form 24Q / 26Q / 27EQ, etc., and provides the Form 16 / 16A / 16B / 16C (TDS credit statements), which should be accessible by the middle of June 24.

Minor modifications to ITR-1

There have been no significant changes to the new ITR forms, simply a few minor alterations to the updated ITR forms.

ITR-1 (Sahaj): This form is used by resident individuals with income from salary, one house property, family pension, and other sources (such as interest from bank and post office savings), as well as agricultural income up to Rs 5,000. The individual’s total income for the financial year shall not exceed Rs 50 lakh.

Keep in mind that the ITR-1 form is not intended for persons who are Resident Not Ordinarily Resident (RNOR) or Non-Resident Indians (NRI). Individuals who have earned money from lotteries, racehorses, or legal gambling cannot utilize this form.

Furthermore, persons who have taxable capital gains, interests in unlisted stock shares, commercial or professional income, or a directorial position in a firm are ineligible to employ ITR 1.

There are a few minor changes in the recently announced ITR 1 for AY 2024-25. A new field, 80CCH, has been added to ‘Part C – Deductions and Taxable Total Income’ to allow deductions for contributions to the Agnipath plan. Similarly, in ‘PART E – Other Information,’ where details of all bank accounts held in India at any time during the previous year (excluding dormant accounts) are captured, a new drop-down for kind of account has been included that was not there in the previous ITR-1.

The Agniveer corpus deductions are also mentioned under section 80CCH. Individuals who enlist in the Agnipath program and subscribe to the Agniveer corpus fund on or after November 1, 2022, would be eligible for a 100 percent tax deduction on the total amount put in the Agniveer corpus fund.

Aside from that, ‘Type of Bank Account’ must be revealed by picking from the e-filing utility’s menu. This may imply that if a person has no business or profession but has a current account with a bank, he must report it and may be forced to provide a list of transactions separately.

ITR-4 (Sugam) – a full turnover breakdown is required

This form is for resident persons, Hindu Undivided Families (HUFs), and corporations (other than LLPs) with taxable income of up to Rs 50 lakh computed under the presumptive taxation scheme (sections 44AD, 44ADA, or 44AE). Similarly to ITR-1, RNOR and non-resident Indians cannot use ITR-4.

A person utilizing this plan to submit returns can declare income at a specified percentage of gross turnover or receipts, relieving them of the time-consuming task of maintaining books of accounts and having the accounts audited.

Return-filing using ITR-4 (Sugam): Under Section 44ADA, contractual IT professionals, tuition teachers (academic, dance, or drawing), or those providing professional services from home can also file tax returns under the presumptive taxation scheme (PTS).

The one significant modification under ITR 4 is that the turnover u/s 44AD and 44ADA must be divided into three groups. One must provide a breakdown of revenue collected by a/c payee cheques, a/c payee bank drafts, the bank electronic clearing system, and prescribed electronic means, in addition to cash receipts and any other manner.

Another change is that the unique number/document identification number (DIN) and date of such notice or order are no longer required to be provided in returns submitted in response to notice u/s 139 (9) /142 (1)/148/153C or order u/s 119 (2) (b). This is a welcome change that makes it easy to complete the form.