The Finance Act 2017 introduced last year came with multiple changes in regard with filing of income tax return (“ITR”) for A.Y. 2018-19. Thus, it is necessary for you to keep abreast of the latest amendments at the time filing the current year’s return of income. Also, the CBDT introduced the new ITR forms A.Y 2018-19 on 5th April, 2018 with alterations as compared to the ITR forms of the previous A.Y. Here we list down 10 critical changes that we should consider while filing the income tax return of taxpayers who are required to furnish their return of income for A.Y 2018-19 by 31st July, 2018.
- Income tax rate
Despite the fact that the tax slabs remain the same, there has been a slight revision in the income tax rates. The income tax rate for the slab INR 2,50,001 – INR 5,00,000 (applicable to Individuals, HUF, AOP, BOI and Artificial Juridical Person) has been reduced from 10% to 5%. The basic exemption limit for a resident individual aged between 60 and 80, is INR 3,00,000 and for a resident individual aged 80 or above, this limit is INR 5,00,000.
The tax slabs applicable for filing return of income for A.Y 2018 -19 for a non-senior citizen are as below:
|Total income||Tax rates|
|Up to INR 2,50,000||NIL|
|INR 2,50,001 to INR 5,00,000||5%|
|INR 5,00,001 to INR 10,00,000||20%|
|INR 10,00,000 and above||30%|
- Rebate under section 87A
A taxpayer can claim the benefit of rebate under section 87A if he/she fulfils both of the following conditions:
- The taxpayer is a Resident Individual
- The total income less deductions (under Chapter VI-A) is equal to or less than INR 3,50,000
Until A.Y 2017-18, the limit to claim rebate was set at INR 5,00,000 instead of INR 3,50,000
- Surcharge and Cess
The rates of surcharge applicable to Individuals and HUF have been revised A.Y 2018-19 onwards.
- Where the Individual/HUF has taxable income of more than INR 50 lakhs but not exceeding INR 1 crore, surcharge shall be levied at 10%.
- Further surcharge of 15% is levied for individuals having an income of more than INR 1 crore. The higher and secondary education cess shall continue to be levied at 3% for the current A.Y.
- Set off of loss from house property
Until AY 2017-2018, there was no limit on the amount of loss arising from house property that could be set off against other heads of income. With effect from A.Y 2018-19 the set off of loss arising from house property against other heads of income is restricted to INR 2,00,000 and the unadjusted loss is to be carried forward for set off against income from house property for eight subsequent assessment years.
- Capital gains
- Base date for Cost Inflation Index (CII)
Earlier the Base Date for CII was 1st April, 1981. However, with the changes brought about by the Finance Act, 2017, the base date for CII has been shifted from 1st April, 1981 to 1st April, 2001. The tax payers would have the option to consider the FMV of such asset as on 1st April, 2001 or the actual cost of such capital asset as the cost of acquisition while computing long term capital gains. The cost of improvement would include capital expenditure incurred after 1st April, 2001.
- Holding period of capital assets
In order to determine whether the gain arising on the transfer of a capital asset, is a long term capital gain or a short term capital gain, the holding period of the capital asset is a key factor. Gains arising from the transfer of listed shares, units of equity oriented mutual funds and zero-coupon bonds shall be considered as long term if the period of holding such assets is more than 12 months. Further in case of unlisted shares and immovable property (land and building) the period of holding has been reduced to 24 months from 36 months. For the remaining capital assets, the period of holding continues to be 36 months.
- Section 50CA
A new section, Sec 50CA was introduced by Finance Act, 2017. This section deals with the transfer of unlisted shares and provides that consideration for transfer of such shares shall be deemed to be the fair market value calculated by a Merchant Banker or a Chartered Accountant as on the valuation date if the transfer price is less than its FMV.
- Penalty for late filing of returns
The Finance Act, 2017 introduced a new fee under section 234F if the taxpayer did not furnish the return of income on or before the due dates prescribed under Section 139(1). The fees shall be levied as under:
- INR 5,000 if return is furnished after the due date but before December 31 of the assessment year [INR 1,000 if total income is up to INR 5 lakhs].
- INR 10,000, in any other case.
Care must be taken to ensure that wherever applicable, this fee is paid before filing the return. The new ITR forms contain fields for inputting the amount of fee paid u/s 234F.
- Tax deducted as source and advance tax
- Individuals and HUF (apart from those subject to tax audit) paying rent to a resident exceeding INR 50,000 per month are required to deduct TDS at the rate of 5%. This amendment was put into effect from 1stJune, 2017 as per section 194-IB. Attention must be paid to ensure that any TDS appearing in the tax payer’s form 26AS against this section is also taken into consideration while computing the income and tax payable/refundable.
- The advantage of paying advance tax on or before 15thMarch by way of one instalment instead of four instalments has been extended to professionals declaring profits and gains in accordance with presumptive taxation regime. This may be taken into consideration while computing interest, if any, u/s. 234B / 234C.
- Income from other sources – Gift
Finance Act, 2017 has widened the scope of provisions dealing with the taxability of gifts. A new clause (x) was inserted in Sec 56(2) whereby any sum or property received without any consideration or inadequate consideration (in excess of INR 50,000) shall be taxable as ‘Income from other sources’. This clause is applicable to all taxpayers. Earlier this provision was applicable only to an Individual and HUF.
- Details to be furnish in ITR forms
- Taxpayers earning Income from Salary and Income from House Property are required to furnish break up of amounts as against only the final taxable figures as per ITR forms for the previous A.Y. They are expected to report particulars with respect to value of perquisites, profit in the lieu of salary, taxable allowances and deductions u/s 16 in case of Income from Salary and the gross rent, tax paid to local authorities, interest payable on borrowed capital in case of Income from House Property. Consequently, additional rows have been added in order to report the above figures.
- Non-Residents would have an option to furnish details of any one foreign bank account for the purpose of claiming income-tax refund. Earlier they were allowed to provide details pertaining to bank accounts in India only.
Taxpayer’s eligible to claim DTAA relief under Capital Gains and Income from Other Sources shall be required to furnish the following details:
ii) Rate as per Income tax
iii) Section of the Income-tax Act
iv) Applicable rate [lower of (i) or (ii)]
- Selecting the correct ITR form
The most important point to be kept in mind while filing the return of income is to file the correct ITR form. The CBDT recently notified the ITR forms for A.Y 2018-19. The taxpayers should select and file the form depending upon the sources from which they derive income. The various ITR forms and the taxpayers to which they apply have been listed below. It may be noted that ITR 4 is no longer in force for A.Y. 2018-19.
|ITR 1||For a resident individual (other than not ordinarily resident) having income from salaries, one house property, other sources (interest etc.) and having total income up to Rs.50 lakh|
|ITR 2||For other Individuals and HUFs not having income from profits and gains of business or profession|
|ITR 3||For individuals and HUFs having income from profits and gains of business or profession|
|ITR 4- SUGAM||For presumptive income from business & profession|
|ITR 5||For persons other than (i) Individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7|
|ITR 6||For companies other than companies claiming exemption under section 11|
|ITR 7||For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F)|
If you require any assistance in filing your personal income tax returns, corporate tax returns, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Click Here.