Key Changes in New ITR Forms Applicable for Income Taxable under Presumptive Taxation Scheme

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  • Last Updated on 8 April, 2021
Following are the major changes introduced in the new Income-tax return forms applicable for Assessment Year 2019-20 for the incomes chargeable to tax under the presumptive taxation scheme: – 

Foreign companies to report Gross receipts and Net Profit if income is taxable on presumptive basis:

In case of a foreign company whose total income comprises solely of presumptive income computed in accordance with Sections 44B, 44BB, 44BBA or 44BBB, it shall now be required to furnish the gross receipts and net profits from such business, computed under each provision, in Part A – P&L.

Non-residents cannot use ITR-4 to file return:

Form ITR 4 is used for filing of return by an Individual, HUF or Firm (Other than LLP) who are opting for presumptive taxation scheme of Section 44AD, 44ADA and 44AE. The presumptive taxation scheme under Section 44AD and 44ADA shall be available to a resident person only. However, presumptive taxation scheme of Section 44AE can be availed by resident and non-resident person both. Up to last year, ITR 4 could be used by both resident and non-resident person. From Assessment Year 2019-20, a non-resident, or a non-ordinarily resident person, opting for presumptive tax scheme under Section 44AE cannot use ITR-4 for filing of return of income. Therefore, ITR-3 or ITR-5, as the case may be, shall be filed by them in such cases.

ITR-4 cannot be used if total income is more than Rs. 50 lakhs:

A taxpayer whose total income is more than Rs. 50 lakh shall not be able to file the return of income ITR-4 for Assessment Year 2019-20. Consequently, Schedule AL, wherein details of personal assets and liabilities of taxpayer are furnished, has been removed from ITR 4.

Person claiming deduction under section 80RRB or 80QQB cannot use ITR-4:

Assessees who have income by way of royalty from patents or books are entitled for deduction under Sections 80RRB or 80QQB, respectively (subject to certain conditions). The new ITR 4 has removed the option to claim the deduction under these Sections 80RRB and 80QQB. Therefore, if a person wishes to claim deduction under aforesaid sections then he has to choose the ITR form 2 or 3.

Who cannot use ITR-4?

As stated in above discussions, the scope of ITR-4 for the Assessment Year 2019-20 has been curtailed substantially. Following persons, who have filed return in this form in AY 2018-19, would not be able to use it in Assessment Year 2019-20: a) HUF, being a not ordinarily resident b) Not Ordinarily or Non-resident Individual c) Non-resident Partnership Firm d) Ordinarily Resident Individual, HUF or Resident Firm:

  • whose income is more than Rs. 50 lakhs
  • who held unlisted shares during the year 

e) A Ordinarily Resident individual who:

  • wishes to claim deduction under Section 80QQB or 80RRB 
  • is governed by the Portuguese Civil Code
  • is a Director in a company
  • is taxable for an income in respect of which tax is deducted in the name of other person

‘Schedule IF’ inserted in Form ITR-5:

Form ITR-3 includes Schedule IF wherein partners are required to furnish the details of their partnership firm. Following information about the partnership firm is furnished in this schedule: a) Name of the Firm b) PAN of the firm c) Whether the firm is liable for tax audit? d) Whether the firm is liable for transfer pricing audit?  e) Profit sharing ratio in firm f) Share of profit from firm g) Capital balance on 31st March of the previous year in the firm  As ITR-3 can be furnished by an Individual and HUF only, these details are not sought from other persons who are the partners in a partnership firm. Accordingly, this schedule has also been inserted in ITR-5.

Separate schedules to report income taxable on presumptive basis:

An assessee can file return in ITR 4 if he has opted for presumptive taxation scheme under sections 44AD, 44ADA or 44AE. This form has separate schedules for computation of income on presumptive basis under the aforesaid provision. However, in the other forms, there were no specific schedules to report such income.  Accordingly, in new ITR forms, separate schedules for computation of income taxable on presumptive basis under section 44AD/44ADA/44AE have been inserted under Profit and Loss Account.  

Income Tax Forms Changes Updates

Assessee opting for presumptive scheme needs to disclose Business name, code & Description:

New ITR forms require assessee opting for presumptive scheme under Section 44AD/44ADA/44AE to mention the name of business, business code and description of the business.

Taxability under section 44AE on basis of tonnage capacity of goods carriage:

A taxpayer who is engaged in the business of plying, hiring or leasing of Goods Carriage and having not more than 10 good carriages, has an option to avail of presumptive taxation scheme under section 44AE.  Up to Assessment Year 2018-19, income of taxpayer is deemed to be Rs. 7,500 per goods carriage per month irrespective of tonnage capacity of goods carriage. Accordingly, the big transporters who own large capacity/size goods carriages were also eligible to avail the benefit of section 44AE. The Finance Act, 2018 made an amendment  under section 44AE to provide that in the case of heavy goods vehicle (more than 12MT gross vehicle weight), the income would be deemed to be an amount equal to Rs. 1,000 per ton of gross vehicle weight or unladen weight per month for each goods vehicle. The vehicles other than heavy goods vehicle will continue to be taxed as per the existing scheme. Now, consequent amendments have been made in ITR forms.  

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