Investors in unlisted firms can't file ITR-1, ITR-4 forms, says CBDT

Photo: Shutterstock
Directors and people with investments in unlisted companies and start-ups will now have to make extensive disclosures in the new income-tax return (ITR) forms, according to a Central Board of Direct Taxes notification for assessment year 2019-20 . This will help the tax department to clamp down on shell companies and check routing of black money.  

The board has widened the reporting requirements in most categories, including ITR-1 or Sahaj, which is for the salaried class with income up to Rs 50 lakh. 

It has also sought details of agricultural land in ITR-2. In case net agricultural income exceeds Rs 5 lakh, an individual will have to furnish details about measurement of the agricultural land and name of the district where the land is located. Agriculture income is exempt from income tax. Thus, details have been sought in the exempt income schedule.

An assessing officer said disclosures of holdings in the form of unlisted shares would help keep a check on whether such routes were being used to generate unaccounted money. 

He said the tax department had observed cases where either the shares were traded in physical form where the gains could remain undisclosed or shares were issued by unlisted companies to garner funds from persons who wanted to avoid know-your-customer scrutiny.

Experts said the new modalities were comprehensive in nature. "The new forms, ITR-2 and ITR-3, specifically ask about investments and holding of a person in unlisted shares of a company and if the person held such shares any time during the year. Such individuals cannot file their return in ITR-1 and ITR-4, irrespective of the quantum and nature of income," said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP. The board has rationalised the new ITR-1. An individual who is a director of a firm, has investment in unlisted shares or has income on which TDS has been deducted in other person’s hands, can’t file these forms.

In case of individual assesses, ITR-2 asks them to furnish elaborate details about their residential and directorship details. Further, the new form seeks details of foreign assets and income from any source outside India, including offshore depository and custodial accounts. 

Apart from these, the forms seek bifurcation between donation in cash and other modes under Section 80G for deduction purposes.  

ITR-4, which is meant to be filed by individuals, Hindu Undivided Family (HUF) and firms (other than LLP) having income of up to Rs 50 lakh and having presumptive income from businesses and vocations, has made a lot of exclusions. This form cannot be used by individuals/HUF who are non-residents, non-resident partnership firms, directors of companies or persons having investments in unlisted equity shares or having over more than one residential property. 

The information regarding the turnover and gross receipts required for goods and services tax is included in ITR-3 and ITR- 6 forms. Until last year, this was only applicable for taxpayers filing ITR-4. 

The deadline to file ITR is July 31 for people who do not require an audit of their accounts.

Forms Tweaked

  • ITR-1 has been rationalised; certain exclusions in ITR-4
  • Seeks disclosures of directorship
  • Additional disclosures for people having agricultural income

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel