EY Tax Alert. Executive summary. CBDT notifies ITR Forms for Company/ Firms/ LLP/ Trusts and others. 05 August 2015 October 2014

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1 05 August 2015 October 2014 EY Tax Alert CBDT notifies ITR Forms for Company/ Firms/ LLP/ Trusts and others Executive summary Tax Alerts cover significant tax news, developments and changes in legislation that affect Indian businesses. They act as technical summaries to keep you on top of the latest tax issues. For more information, please contact your EY advisor. This Tax Alert summarizes amendments made to the Income Tax Return (ITR) Forms for tax year , vide Notification No. 61/2015 dated 29 July 2015 (Notification) issued by the Central Board of Direct Taxes (CBDT). The Notification notified ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 as applicable to an individual/hindu Undivided Family (HUF) (being partner in a firm or carrying on proprietary business or profession), partnership firm, Limited Liability Partnership (LLP), Association Of Persons (AOP), Body Of Individuals (BOI), Artificial Juridical Person, cooperative society, companies and trust. The CBDT had already notified ITR 1, ITR 2, ITR 2A and 4S as applicable to individuals and HUFs for the tax year , vide Notification No. 49/2015 dated 22 June 2015 [1]. [1] Refer EY Tax Alert CBDT notifies ITR Forms for individual and HUF taxpayers dated 26 June 2015

2 Background The CBDT had, vide Notification No. 49/2015 dated 22 June 2015, notified ITR Forms in the case of individuals and HUF taxpayers (not being partner in a firm or carrying on proprietary business or profession) as applicable to tax year Key additional changes similar to those made in ITR 1 and ITR 2 in June 2015 The CBDT, vide Notification No. 49/2015 dated 22 June 2015, modified ITR Forms for individuals and HUFs by inserting the following additional requirements which are now notified to apply to ITR 3 to 7: Now, vide this Notification, the CBDT has notified other ITR Forms for tax year viz., ITR 3 (for individuals/hufs being partner in a firm/llp), ITR 4 (for individuals/hufs carrying on proprietary business or profession), ITR 5 for partnership firms/llps, ITR 6 for companies and ITR 7 for other entities, including business trusts[2]. Unlike the usual custom, the notified ITR Forms are not accompanied by a separate set of instructions which are general guidelines for filling the particulars in the ITR Forms. 1.0 Significant amendments in the ITR Forms The significant changes made to ITR 3, ITR 4, ITR 5, ITR 6, ITR 7 are summarized briefly under three captions, as under: Key additional changes similar to those made in ITR 1 and ITR 2 in June 2015; Key additional changes specific to ITR 5 and ITR 6 (Para 1.02). Other changes (Para 1.03). Sr. No Particulars of change compared to tax year Aadhar number and passport number to be furnished, if available Availability of Aadhar number will facilitate a taxpayer to authenticate the ITR with Electronic Verification Code as an additional option 2 Furnishing details of all bank accounts held by the taxpayer (except dormant accounts which have not been operational during the last three years) viz., bank name, IFS code, account number of current/savings account held at any time during the year 3 Furnish details of utilization of amount deposited in capital gains account scheme for past years to enable monitoring of reinvestment supporting capital gains exemption 4 Provide information about capital gains accruing to non-resident taxpayers claimed exempt due to favorable tax treaty provisions 5 and Income from other sources, chargeable to tax at a special rate provided in the tax treaty in the hands of non-resident taxpayers Enlarged scope of reporting on foreign assets and foreign income Made applicable to ITR forms ITR 3,4 ITR 3,4,5,6,7 ITR 3,4,5,6 ITR 3,4,5,6 ITR 3,4,5,6,7 [2] Business trust is defined under Section 2(13A) of the Income Tax Act

3 Filing of tax return pursuant to application made before the Tax Authority (applicable to ITR 3, 4, 5, 6, 7) Based on provisions of the Income Tax Act (ITA), the new ITR Forms provide an option to file tax return beyond the statutory time limit for any claim or relief by the taxpayer, along with an application to the Tax Authority to condone the delay and admit the taxpayer s claim. However, the return will be treated as valid only after such application is admitted by the Tax Authority. The application may be entertained by the Tax Authority on the merits of each case. Details of interest and remuneration payable to partners/members. In addition to details of name and address of partners, their percentage of share in profits, PAN etc., the new ITR Form requires disclosures of the rate of interest paid on capital of the partners. Furthermore, it also requires the taxpayer to specify, separately, the amount of remuneration/salary, if any, paid/payable to the partners or members, including as part of the schedule dealing with items of profit and loss (P&L) account. Bifurcation of interest paid to resident and non-resident Key additional changes specific to ITR 5 and ITR 6 a) Other changes specific to ITR 5 applicable to firms (including LLPs/AOPs) Details of change in partners/members. The new ITR Form requires a taxpayer to furnish details of change in the partner/member, by way of admission or retirement during the tax year. The details include name of the partner/member, status as to whether admitted or retired with date thereof and percentage of his share. Such particulars are currently required to be furnished in the tax audit report in the case of taxpayers which are liable to tax audit [3]. Likewise, as part of item of P&L account, the ITR Form requires separate disclosure of interest paid to partners and others, under the following captions. Interest paid outside India or paid in India to a non-resident. Interest paid in India or paid to a resident. b) Changes specific to ITR 6 as applicable to company taxpayer Company taxpayers will have to specifically disclose the amount of expenditure incurred on Corporate Social Responsibility (CSR) activities as debited to P&L account under the head amounts debited to P&L account to the extent disallowable under Section 37, under the caption other information. c) Changes common in ITR 5 and ITR 6 Foreign Portfolio Investors (FPIs)/ Foreign Institutional Investors (FIIs): Companies or firms which are FIIs and FPIs are required to furnish their SEBI registration number allotted to them by the Securities and Exchange Board of India (SEBI) [4]. [3] Where turnover/gross receipts/sales exceeds INR 1crore in case of business or INR25 lakhs in case of profession, during the particular tax year. [4] Securities regulator in India

4 1.03 Other changes (applicable to ITR 3, 4, 5, 6, 7) In case where the tax return for any year is required to be modified pursuant to entering into an Advance Pricing Agreement (APA) with the Tax Authority, the new ITR Forms require taxpayers to verify that the critical assumptions specified in the APA have been satisfied and all the terms and conditions therein have been complied with. Comments Most of the changes notified in the new ITR Forms, ITR 3 to ITR 7, are similar to those made in ITR 1 and ITR 2 earlier. Additionally, certain other changes have also been made to these ITR Forms, which the taxpayer will need to note while filing the tax return for tax year

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