The deadline for filing income tax return for the financial year 2023-24 (assessment year 2024-25) is approaching on July 31. If you haven’t started the process yet, it’s important to begin preparing now. One of the initial steps is identifying the correct ITR form for your situation.
This year, the new ITR forms released by the income tax (I-T) department require additional details about tax deductions, such as donations to political parties, information on disabled dependents’ PAN and Aadhaar for deductions under section 80DD, and data on high-value policies.
Here are the key changes across forms that you should be aware of before you start filing your returns:
More Disclosures Around Exemptions
The aim is to prevent incorrect tax deductions. Last year, the I-T department issued numerous notices to taxpayers, asking them to justify their claimed tax breaks. For example, you now need to provide more information about donations to political parties, including the amount, mode of payment, and specific transaction number for donations made under section 80GGC.
It’s crucial to keep all documentary proofs for tax-saver investments in case of queries.
Day Traders
Day traders must now report the details of cess and turnover if assets are bought and sold on the same day.
Bank Accounts and Life Insurance Policies
If you’ve received annual bonuses from life insurance policies, you must declare the bonus payments in ITR-2 and ITR-3. Additionally, you need to report if any money received from a high-premium life insurance policy is taxable, listing it under income from ‘other sources.’ This includes proceeds from policies where annual premiums exceed 10% of the sum assured or specified limits for ULIPs and endowment policies.
If you use forms other than ITR-1, you must disclose not only current bank accounts but also any maintained at any time, excluding dormant accounts.
Disabled Dependents
For deductions under Section 80DD, you must now provide additional details about the dependent, including their exact disability, relation to you, PAN, and Aadhaar. Also, the date of submitting Form 10-IA, the acknowledgement number, and the UDID Number are required.
Employee Stock Options (ESOPs)
Employees of select start-ups can defer taxation on ESOPs. To claim these benefits, you need the tax amount, linked year, PAN of the eligible startup, and the DPIIT registration number.
Virtual Assets and Online Winnings
You must furnish a quarter-wise break-up of crypto investments or virtual digital assets (VDA) in ITR-1, 2, and 4. For online game winnings, Schedule OS has been updated to include prize money details chargeable under Section 115BBJ.
These changes are supported by the recently introduced Annual Information Statement (AIS), which dynamically updates with reported tax information about an individual. The I-T department has also introduced a verification system to help individuals report errors early, improving the accuracy of data and processing of returns.
