(Illustration: Sudhir Shetty)
(Illustration: Sudhir Shetty)

ITR filing: What has changed this year?

  • You will have to separately show in your income tax return (ITR) an amount for HRA exemption, LTA exemption and gratuity exemption
  • Employers must also mention all Section 80 deductions separately

It is time to prepare for filing your (ITR) for financial year (FY) 2018-19. Even though the due date for filing of the returns is July 31, 2019, filing your return early helps finish this important compliance in time. Besides, if you have a refund due, you can get it back sooner. Your ITR forms have undergone some revision this time. The Central Board of Direct Taxes (CBDT) has also revised Form 16. Let’s understand these changes and how they will impact your tax filing.

Changes in reporting of exempt allowances in ITR, Form 16

Those who earn income from salary have been asked to report some additional details. They must provide a break-up of allowances on which exemption has been claimed. Usually salaried taxpayers receive allowances such as house rent allowance (HRA) and leave travel allowance (LTA) or they may have been paid gratuity or leave encashment. A portion (or whole) of these allowances may be claimed as an exemption from tax. This exemption must now be reported separately for each allowance.

Therefore, you will have to separately show in your tax return an amount for HRA exemption, LTA exemption and gratuity exemption. A similar change in the reporting of exempt allowances has been made in Form 16, which is an important document for salaried taxpayers who use it to prepare their tax return. Employers who issue Form 16 must now ensure that they are reporting the value of exempt allowances, each one of them, separately. Employers must also mention all Section 80 deductions (also called Chapter VIA deductions) separately. Many employers were already reporting these deductions such as 80C, 80D and 80G as separate values in the Form 16.

This change brings your Form 16 in sync with your ITR. Most websites for e-filing, allow filers to upload their Form 16, which helps in populating IT returns automatically for all the information related to salary and the employer. Therefore, though there’s more disclosure needed, you may not face issues while filing IT returns.

Other important changes

Those who have held unlisted equity shares at any time during financial year 2018-19 can no longer file. This disclosure will include those who are investors or employees who have exercised their stock options, of companies which are either unlisted or listed outside India. They have to report any sales or fresh acquisitions made during the year and the price at which these were transacted. Any individual who has been a director at any time during the FY 2018-19 cannot file ITR-1. They must file ITR-2 and report name of the company, its PAN, whether its shares are listed or unlisted and mention their director identification number (DIN).

Why the change?

The main reason for this change is that the IT department will be able to reconcile your exemptions with tax deducted at source (TDS) made by your employer. Form 16 is a certificate of salary paid to you and TDS deducted on it by the employer. The employer also has to submit a consolidated TDS return that has information and breakup of all the TDS deducted on salary. This TDS return is called Form 24Q; the changes mentioned above have been replicated to Form 24Q as well. The IT department will now have exemptions and deductions claimed by you that flow from Form 16 to your ITR and match with TDS return submitted by the employer.

Archit Gupta is founder and CEO, ClearTax

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