Key Changes in New ITR Forms Applicable For Income Chargeable to Tax as PGBP

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  • Last Updated on 10 May, 2021
The new Income-tax return forms (ITR) applicable for Assessment Year 2019-20 have been notified by the Income-tax Department. Various changes have been brought in the new ITR forms. The following are some major changes incorporated in the new ITR forms applicable with respect to income chargeable to tax under the head “Profits and gains from business or profession”:

1. No separate reporting of interest paid to partner by firms: 

Up to last year, a partnership firm was required to disclose separately the amount of interest paid to the partners and to others in Schedule P&L. The new ITR-5 has removed this requirement of separate reporting. Thus, the partnership firm can show the aggregate amount of interest paid during the previous year in this Schedule.

2. Schedule P&L has been enlarged to seek more information: 

In new ITR forms, in place of existing Part A P&L, the following new Parts have been inserted:

a) Manufacturing Account

b) Trading Account

c) Profit & Loss Account

Thus, if assessee is engaged in manufacturing activities then he shall be required to arrive at cost of goods sold through the manufacturing account, gross profit through the trading account, and net profit through the profit and loss account. A manufacturing account is not meant for service providers and traders. Hence, they can start directly from the trading account.

3. Separate reporting is required for income generated from partial agricultural partial business operations: 

Income from agricultural activities is exempt from tax by virtue of Section 10. However, where a person earns income from partial agricultural and partial business activities, the total income shall be bifurcated into agricultural income and business income as per Rules 7, 7A, 7B, and 8 of the Income-tax Rules, 1962. In new ITR forms, if a person is having income from aforesaid activities then he has to separately report income from business activities under schedule BP (Business Profits) and income from agricultural activities in schedule EI (Exemption Income).

4. Reporting of name and address of the debtor in case of bad debts: 

Any person claiming bad debts of the amount of more than Rs. 1 lakh, in respect of a debtor, is required to report the PAN of such debtor (if available) in ITR forms. However, no information about these debtors was required to be furnished in old ITR forms if PAN was not available. In new ITR forms, the name and address of the debtor are required to be furnished in case PAN of such debtors isn’t available. 

5. Reporting of turnover and profit from speculative activities under profit & loss account: 

In new ITR forms, a separate schedule has been inserted in Schedule P&L for persons earning income from speculative activities. Following information has to be furnished in that schedule: a) Turnover from speculative activities b) Gross profit c) Expenditure d) Net income from speculative activities The separate disclosures are required on speculative income and losses because losses from speculative business can be set-off only against speculative income and the unabsorbed losses can be carried forward only for 4 years vis-à-vis 8 years in case of losses from non-speculative business. Under ITR-6 also, turnover and income from intra-day transactions are required to be reported under the trading account.

Updated ITR Forms AY 2019-20

6. Reporting of GSTIN & GST turnover: 

ITR forms released last year had incorporated a new Schedule requiring GSTIN of the assessee and turnover as per GST return filed by him. However, this information was required only in the case of taxpayers who had opted for a presumptive taxation scheme and filing return in form ITR-4. The same schedule has now been incorporated in ITR Forms 3, 5, and 6.

7. Reporting of business transaction with registered and unregistered suppliers under GST removed: 

A new schedule was inserted in ITR 6 last year, which required every company, which was not required to get its accounts audited under Section 44AB, to provide the details in respect of transactions entered into during the year with a registered or unregistered supplier under GST. This reporting requirement has been removed in the new ITR-6.

8. Reporting of disallowance under section 14A: 

Under new ITR forms, separate reporting in Schedule-OI (Other Information) is required for disallowance made under Section 14A.

9. Set-off of losses against income from life insurance business: 

Business income arising from life insurance business is taxable at the special rate of 12.5%. In old ITR forms, income from the life insurance business was directly transferred from Schedule BP (Business Profit) to Schedule SI (Special Income). Hence, an assessee was not eligible to adjust inter-head losses and brought forward losses against such income. Now, this mistake has been rectified under new ITR forms and income from life insurance business is routed through Schedule CYLA and Schedule BFLA for adjustment of inter-head losses and brought forward losses respectively.

10. Report audit requirement under other Acts separately: 

The New ITR-3 form inserted a new clause asking for the details regarding the liability of assessee for audit under any Act other than the Income-tax Act, wherein assessee is required to mention the relevant Act and section under which audit is required and date of furnishing of the audit report for the same.  

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