All classes of tax payers will henceforth file their annual returns for assessment year 2007-08 using eight new return forms classified as the ITR series 1 to 8. With an eye on making life simpler for tax payers, Finance Minister P Chidambaram on Saturday unveiled a major revamp of forms and the filing procedure.
The changes include the scrapping of all existing forms including the 'not so Saral form 2D, 2E' and the dreaded annual cash flow statement, which was part of Form 2F. All the newly designed forms are annexure-less, barring one that is to be used by political parties and charities. The Saral form has been replaced with ITR-1.
Another key change includes allowing all classes of taxpayers except charities, non-profit organisations and political parties - the option to file their annual returns electronically from this year onwards.
Chidambaram hopes to make e-filing mandatory in the years to come. "There is no timeframe. Eventually, all will be asked to do e-filing. It will be a gradual process," he said.
E-filing of returns is already mandatory for companies since 2006-07. From this year onwards, the provision is being extended to all firms (an estimated 800,000 of them) which are liable to tax audit under Section 44 AB of the Income Tax Act.
While the cash flow statement - which required a tax payer to provide personal expenditure and income source details - has been scrapped, individual taxpayers will have to now mandatorily enclose all high value financial transactions in the ITR-1 to 4 returns.
"We have taken a fresh look and dropped it in response to demands from the public and the Parliamentary Standing Committee on Finance," Chidambaram said.
Currently, seven kinds of transactions are captured through the annual information returns, including cash deposits of Rs 10 lakh or more in savings accounts, credit card payments of Rs 200,000 and more in a year and property purchase or sale of Rs 30 lakh (Rs 3 million) and more.
The failure to include this sort of information will trigger scrutiny and investigation of the returns.
More transactions are expected to be brought under the ambit of this system, but Chidambaram said a decision has not yet been taken on these, as well as expanding the list of transactions that require quoting the PAN number.
The new forms have been put up on the Income Tax department website. The Institute of Chartered Accountants of India is being consulted and suggestions for changes will be incorporated before the forms are formally notified on May 14, so that tax payers can use them to file returns by July 31 this assessment year.
Chidambaram also took a dig at the designer of the Saral forms. "With due respect, it (the form) was anything but Saral and needed five to six annexures. ITR-1 is a three-page form and completely annexure-less. It will become popular," he said. The logic behind annexure-less forms is the move towards e-filing, e-processing of returns and e-assessment.