One Nation One ITR Form

Context:

The Central Board of Direct Taxes (CBDT) has proposed a single income tax return (ITR) form for all taxpayers. A draft form has been released, to which all stakeholders can provide inputs up to December 15.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. How many kinds of ITR forms are there now?
2. What is the change that has been proposed?
3. Need for One nation, One ITR form
4. About Central Board of Direct Taxes (CBDT)

How many kinds of ITR forms are there now?

• There are seven kinds of ITR forms, which are used by different categories of taxpayers.
  • ITR Form 1, called ‘Sahaj’, is for small and medium taxpayers. Sahaj forms can be filed by individuals who have an income up to Rs 50 lakh, with earnings from salary, one house property/ other sources (interest etc).
  • ITR-2 is filed by people with income from residential property.
  • ITR-3 is intended for people who have income as profits from business/ profession
  • ITR-4 (Sugam) is, like ITR-1 (Sahaj), a simple forms, and can be filed by individuals, Hindu Undivided Families (HUFs) and firms with total income up to Rs 50 lakh from business and profession.
  • ITR-5 and 6 are for limited liability partnerships (LLPs) and businesses respectively.
  • ITR-7 is filed by trusts and non-profit organisations.

What is the change that has been proposed?

• According to the proposal, all taxpayers, barring trusts and non-profit organisations (ITR-7), will be able to use a common ITR form, which will include a separate head for disclosure of income from virtual digital assets.
• The current ITR-1 and ITR-4 will continue. This will give an option to such taxpayers to file the return either in the existing form (ITR-1 or ITR-4), or the proposed common ITR, at their convenience.
• New ITR form would be available alongside the old forms ITR-1 and ITR-4, but taxpayers filing ITR-2, ITR-3, ITR-5 and ITR-6 would not have the option to file the old forms.

Need for One nation, one ITR form

• The draft form aims to make it easier to file returns, and to considerably reduce the time taken for the job by individuals and non-business-type taxpayers.
• The taxpayers will not be required to see the schedules that do not apply to them. It intends the smart design of schedules in a user-friendly manner with a better arrangement, logical flow, and increased scope of pre-filling.
• It will also facilitate the proper reconciliation of third-party data available with the Income-Tax department vis-à-vis the data to be reported in the ITR to reduce the compliance burden on the taxpayers.
• The proposed ITR form would be customised for taxpayers with applicable schedules, based on certain questions answered by them.
• Once the common ITR form is notified, after taking into account the inputs received from stakeholders, the online utility will be released by the Income Tax department.
  • In such a utility, a customised ITR containing only the applicable questions and schedules will be available to the taxpayer.

About Central Board of Direct Taxes (CBDT)

• The Central Board of Direct Taxes (CBDT) is a Statutory Body functioning under the Central Board of Revenue Act, 1963.
• It is official Financial action task force unit.
• CBDT is a part of the Department of Revenue in the Ministry of Finance, Government of India.

Composition of CBDT

• The CBDT Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.
• The Central Board of Direct Taxes consists of a Chairman, and six members that deal with the following:
  • Income Tax & Revenue
  • Administration
  • Legislation & Computerization
  • Audit and Judicial
  • Investigation
  • Transaction Processing System (TPS) & System

Functions of CBDT:

• CBDT is responsible for administration of the direct tax laws through Income Tax Department.
• The officials of the Board in their ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection of direct taxes.
• CBDT provides essential inputs for policy and planning of direct taxes in India as well.

It deals with matters related to levying and collecting Direct Taxes.

• Formulation of various policies.
• Supervision of the entire Income Tax Department
• Suggests legislative changes in Direct Tax Enactments
• Suggests changes in tax rates
• Proposes changes in the taxation structure in line with the Government policies.

-Source: Indian Express