[Analysis] Changes Introduced in the New ITR-2 | ITR-3 | ITR-5 for Assessment Year 2024-25

Table of Contents

1. Individuals/HUFs liable for audit can verify ITR using EVC
2. Furnishing of due date for filing of return
3. The new tax regime is the default tax regime; taxpayers must choose to opt-out to go with the old regime
4. Details of Legal Entity Identifier (LEI)
5. Furnishing of the reason for tax audit under Section44AB
6. Furnishing of acknowledgement number of the Audit Report and UDIN
7. “Receipts in Cash” column added to claim enhanced turnover limit
8. Disclosure of the sum payable to MSME beyond the prescribed time limit
9. Disclosure of information pertaining to the Capital Gains Accounts Scheme
10. Disclosure of Winnings from online games chargeable under Section 115BBJ
11. New Schedule 80GGC seeks details of contributions made to political parties
12. ‘Schedule – Tax Deferred on ESOP’ seeks PAN and DPIIT Registration Number of the eligible startup
13. New column added to claim deduction under Section 80CCH
14. Schedule 80U inserted for claiming deduction if the assessee is a person with a disability
15. New Schedule 80DD seeks details towards maintenance & medical treatment of the person with a disability
16. Reporting of dividend income derived from a unit located in IFSC
17. Schedule-OS includes an additional column for the declaration of bonus payments received under life insurance policies
18. Reporting of sums received by a unitholder from the business trust
19. Reporting of all banks held at any time
20. Adjustment of unabsorbed depreciation (pertaining to additional depreciation) from WDV of the block of assets as on 01-04-2023
21. New Schedule 80-IAC seeks details in respect of eligible startup
22. New Schedule 80LA seeking details towards offshore banking unit or IFSC
23. New ‘Schedule 115TD’ inserted for reporting tax payable on accreted income
24. Assessee recognized as MSME
25. New field for opting concessional regime under Section 115BAE

The CBDT has notified the Income-tax Return (ITR) Forms 2, 3 and 5 (‘New ITR Forms’) for the Assessment Year 2024-25 vide Notification No. 19/2024, dated 31-01-2024.

The applicability of ITR forms to different taxpayers remains unchanged in the new versions. Nevertheless, the new forms require additional details from taxpayers. Further, many changes in the ITR forms are consequential to the amendments made by the Finance Act 2023.

We have done a thorough analysis of new ITR Forms and highlighted all key changes and new requirements in current ITR forms viz-a-viz last year’s ITR Forms.

These changes are explained below

1. Individuals/HUFs liable for audit can verify ITR using EVC

[ITR 3]

Rule 12 has been amended to allow individuals and HUF who are liable to tax audits under Section 44AB to verify the return of income through an electronic verification code. Earlier, they could verify the returns only through digital signature.

2. Furnishing of due date for filing of return

[ITR 3 and 5]

A new column has been inserted in ITR Forms seeking information on the deadline for submitting the income tax return. The taxpayer is required to select the applicable due date for filing the return from the provided dropdown options, namely, July 31^st, October 31^st or November 30^th.

3. The new tax regime is the default tax regime; taxpayers must choose to opt-out to go with the old regime

[ITR 2, 3 and 5]

The Finance Act 2023 has amended the provisions of Section 115BAC to make it the default tax regime for the assessee being an Individual, HUF, AOP, BOI and AJP. If an assessee does not want to pay tax according to the new tax regime, he will have to explicitly opt out of it and choose to be taxed under the old tax regime.

To exercise this option, the assessee having income (other than income from a business or profession) must indicate his choice of tax regime in the return of income to be furnished for the relevant assessment year under Section 139(1).

An assessee having income from a business or profession can also opt out of the new tax regime and switch to the old tax regime for a relevant year. However, he has to exercise this option in Form No. 10-IEA on or before the due date for filing the return of income under Section 139(1).

In simple words, an assessee filing ITR 2 is only required to indicate his choice of tax regime in the return of income. An assessee filing ITR 3 will be required to file Form 10-IEA to opt out of the new tax regime.

The new ITR Forms have been amended to incorporate this change.

4. Details of Legal Entity Identifier (LEI)

[ITR 2, 3 and 5]

The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code used to uniquely identify parties in financial transactions worldwide. It has been implemented to improve the quality and accuracy of financial data reporting systems for better risk management.

As per the RBI Regulations, all single payment transactions of INR 50 crores and above undertaken by entities (non-individuals) should include remitter and beneficiary LEI information. This applies to transactions undertaken through the NEFT and RTGS payment systems.

In order to be in line with the RBI regulations, the new ITR Forms have incorporated a column for furnishing details of the LEI number. Such taxpayer is required to furnish the LEI details if he is seeking a refund of INR 50 crores or more.

5. Furnishing of the reason for tax audit under Section44AB

[ITR 3 and 5]

New ITR-3 seeks additional details from the assessee subject to audit under Section 44AB. The additional information pertains to the circumstances under which the company is obligated to undergo an audit, such as:

• Sales, turnover or gross receipts exceed the limits specified under Section 44AB;
• Assessee falling under Section 44AD/44ADA/44AE/44BB but not offering income on presumptive basis;
• Others

6. Furnishing of acknowledgement number of the Audit Report and UDIN

[ITR 3 and 5]

When providing information about audits conducted under Section 44AB, including audit under Section 92E, companies are required to furnish the acknowledgment number of the audit report and the UDIN.

7. “Receipts in Cash” column added to claim enhanced turnover limit

[ITR 3 and 5]

The Finance Act, 2023 has enhanced the turnover threshold limit from INR 2 crores to INR 3 crores for opting for the presumptive taxation scheme under Section 44AD if the receipts in cash do not exceed 5% of the total turnover or gross receipts for the previous year. It is also provided that the meaning of cash would include the cheque or a bank draft, which is not an account payee.

Similarly, Section 44ADA was amended to enhance the threshold limit of gross receipts from INR 50 lakhs to INR 75 lakhs, if the receipts in cash do not exceed 5% of the total gross receipts for the previous year.

To give effect to the above amendments, the CBDT has amended ITR forms to include a new column of “receipts in cash” for disclosing cash turnover or cash gross receipts under the Schedule BP.

8. Disclosure of the sum payable to MSME beyond the prescribed time limit

[ITR 3 and 5]

Section 43B deals with specified deductions which are to be allowed on a payment basis. Thus, even if an assessee follows the mercantile method of accounting, deduction pertaining to the specified expenses shall be allowed only when payment has been made.

Part A-OI (Other Information) consists of information wherein the assessee is required to furnish the details of any amounts disallowed under Section 43B in any previous year but allowable during the year.

The Finance Act 2023 has inserted a new clause (h) in Section 43B to provide that any sum payable to a micro or small enterprise beyond the time limit specified in Section 15 of the Micro, Small and Medium Enterprises Development Act 2006 (MSME Act) shall not be allowed as a deduction.

Accordingly, a new column is inserted under Part A-OI (Other Information) to disclose the sum payable to Micro or small enterprises beyond the specified time limit per the MSMED Act.

9. Disclosure of information pertaining to the Capital Gains Accounts Scheme

[ITR 2, 3 and 5]

The Schedule-CG of ITR forms seeks information about the capital gains earned by the taxpayer. This schedule requires various details, including information about the capital asset sold, the particulars of the buyer, and specifics regarding the amount spent for claiming exemptions.

In the newly notified ITR-2, Schedule-CG has been modified to gather more information pertaining to sums deposited in the Capital Gains Accounts scheme (CGAS). The revised schedule now requires the inclusion of the following additional details towards CGAS:

• Date of deposit
• Account number
• IFS code

Until the previous Assessment Year, taxpayers were only required to provide details pertaining to the sum deposited in CGAS.

10. Disclosure of Winnings from online games chargeable under Section 115BBJ

[ITR 2, 3 and 5]

The Finance Act 2023 has inserted a new Section 115BBJ to tax winnings from online games, w.e.f. Assessment year 2024-25. A corresponding Section 194BA has also been inserted with effect from 01-04-2023 for the deduction of tax from the net winnings from online games. Thus, all winnings from online games on or after 1-4-2023 shall be taxable under Section 115BBJ and subject to TDS under Section 194BA.

To report such income in ITR form, Schedule OS has been amended to disclose income by way of winning from online games chargeable under Section 115BBJ.

11. New Schedule 80GGC seeks details of contributions made to political parties

[ITR 2, 3 and 5]

Section 80GGC allows for a deduction for contributions to a political party or electoral trust. The new ITR forms include a new Schedule 80GGC, which requires the furnishing of the following details:

• Date of Contribution
• Contribution Amount (with a breakdown of contributions made in cash and other modes)
• Eligible Contribution Amount
• Transaction Reference Number for UPI transfer or Cheque Number/IMPS/NEFT/RTGS
• IFS Code of the Bank

Unlike the previous ITRs, the new ITR forms require disclosing additional information beyond just the amount eligible for deduction under Section 80GGC.

12. ‘Schedule – Tax Deferred on ESOP’ seeks PAN and DPIIT Registration Number of the eligible startup

[ITR 2 and 3]

When an employer allots securities to an employee under ESOP scheme, free of cost or at concessional rate, it is taxable as perquisite in the year of allotment of securities. However, the liability for payment or deduction of tax on such perquisite is deferred in the case of an employee of an eligible startup.

Information relating to such tax-deferral as mentioned in Section 17(2)(vi) is furnished in the ‘Schedule – Tax Deferred on ESOP’. This schedule seeks information such as assessment year, amount of deferred tax brought forward, amount of tax payable in the current assessment year, balance amount of tax deferred to be carried forward to next assessment year, etc.

In order to enhance transparency, the new ITR forms amended this schedule to seek additional details such as the PAN of the employer (an eligible startup) and its DPIIT Registration number.

13. New column added to claim deduction under Section 80CCH

[ITR 2 and 3]

The Finance Act 2023 inserted a new Section 80CCH, which states that individuals enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after 01-11-2022 will be eligible for a deduction for the amount deposited in the Agniveer Corpus Fund.

New ITR forms have been amended to include a column to furnish the amount eligible for deduction under Section 80CCH.

14. Schedule 80U inserted for claiming deduction if the assessee is a person with a disability

[ITR 3]

Deduction under Section 80U is allowed to a resident individual who is suffering from a disability or severe disability. An absolute deduction of INR 75,000 or INR 1,25,000 is allowed under this provision if an individual is suffering from a disability or severe disability, respectively.

In the previous ITR forms, taxpayers were required to mention the amount claimed as a deduction under Section 80U in Schedule VI-A. However, in the new ITR-3, a new ‘Schedule 80U’ has been added, seeking details of deduction in case of a person with a disability.

The ‘Schedule 80U’ seeks the following details:

• Nature of disability
• Date of filing Form 10-IA
• Acknowledgment number of the Form 10-IA
• UDID number (If available)

15. New Schedule 80DD seeks details towards maintenance & medical treatment of the person with a disability

[ITR 2 and 3]

Deduction under Section 80DD is allowed to a resident individual or HUF who incurs medical expenditure or pays an insurance premium for the benefit of a family member suffering from a disability. An absolute deduction of INR 75,000 or INR 1,25,000 is allowed under this provision if an individual is suffering from a disability or severe disability, respectively.

In the previous ITR forms, the taxpayers were required to mention the amount claimed as a deduction under Section 80DD in Schedule VI-A. The new ITR forms have introduced a new ‘Schedule 80DD’ seeking details of deduction in respect of maintenance, including medical treatment of a dependent with a disability.

These details comprise:

• Nature of the disability
• Type of dependent (spouse, son, daughter, father, mother, brother, sister or member of the HUF)
• PAN of the dependent
• Aadhaar of the dependent
• Date of filing and acknowledgement number of Form 10-IA
• UDID Number

16. Reporting of dividend income derived from a unit located in IFSC

[ITR 2, 3 and 5]

The Finance Act, 2023 has amended the provisions of Section 115A by inserting a proviso to Section 115A(1)(a)(A) to provide that the dividend income received from a unit in an IFSC, as referred to in Section 80LA(1A) shall be taxed at a reduced tax rate of 10% instead of 20%.

‘Schedule OS’ has been amended in new ITR forms to incorporate such change.

17. Schedule-OS includes an additional column for the declaration of bonus payments received under life insurance policies

[ITR 2 and 3]

The Finance Act 2023 made various amendments with respect to the taxation of life insurance policies. A new clause (xiii) has been inserted in Section 56(2), which provides that the sum received from excess or high premium life insurance policies is chargeable to tax under the head ‘other sources’.

ITR forms have been updated to incorporate reporting of such income in Schedule-OS.

18. Reporting of sums received by a unitholder from the business trust

[ITR 2, 3 and 5]

In order to avoid the dual non-taxation of certain sums distributed by the business trusts to its unitholders, the Finance Act, 2023, inserted clause (xii) to Section 56(2).

Section 56 of the Act provides for the chargeability of any income under the head “Income from Other Sources”. Section 56(2)(xii) provides that the sum received by the unitholder shall be taxable under the head of other sources. Further, in case of redemption of units, it is provided under the proviso to clause (xii) of Section 56(2) that the cost of acquisition of the unit shall be allowed to be deducted from the sum received on redemption.

To report income earned by the unitholder under Section 56(2)(xii), ITR forms have been amended to include a new column under Schedule-OS.

19. Reporting of all banks held at any time

[ITR 2, 3 and 5]

The ITR forms require information about the taxpayer’s bank accounts, including the selection of the specific account for receiving income tax refunds.

In the new ITR forms, it is obligatory for the taxpayer to disclose all the bank accounts they have ever held, with the exception of dormant accounts.

20. Adjustment of unabsorbed depreciation (pertaining to additional depreciation) from WDV of the block of assets as on 01-04-2023

[ITR 3 and 5]

The Finance Act 2020 inserted Section 115BAC, with effect from the assessment year 2021-22, to provide for an alternative regime with lower tax rates in the case of an individual or a HUF. The Finance Act 2023 extends the scope of this regime to AOP, BOI, and AJP as well and makes it a default tax regime. However, an assessee has to forego various exemptions and deductions under this regime.

An assessee opting for Section 115BAC is not eligible to set off the unabsorbed depreciation attributable to additional depreciation. Such unabsorbed depreciation relating to additional depreciation which has not been given full effect shall be adjusted to the written down value (WDV) of the block of assets as on 01-04-2023 in the prescribed manner. Third proviso to Rule 5(1) provides that the WDV of the block of asset as on 01-4-2023 shall be increased by such depreciation not allowed to set off.

In the new ITR Forms, Schedule DPM, which deals with depreciation on Plant and Machinery, has been amended. It provides that the WDV of the block as on 01-4-2023 shall be increased by the amount of unabsorbed depreciation (pertaining to additional depreciation), which was not allowed to be adjusted on account of opting for Section 115BAC.

21. New Schedule 80-IAC seeks details in respect of eligible startup

[ITR 5]

Deduction under Section 80-IAC is available to an eligible startup for 3 consecutive assessment years out of 10 years at the option of such a startup. These deductions are allowed subject to the fulfilment of certain conditions.

New ITR-5 has a new Schedule seeking details with respect to the deductions claimed by companies under Section 80-IAC. This includes the following:

• Date of incorporation of the startup
• Nature of business
• Certificate number as obtained from Inter-Ministerial Board of Certification
• First AY in which deduction was claimed
• Amount of deduction claimed for current AY.

In the previous ITR Forms, only the information about the amount eligible for deduction under Section 80-IAC was sought.

22. New Schedule 80LA seeking details towards offshore banking unit or IFSC

[ITR 5]

Section 80LA provides deductions in respect of certain incomes of Offshore Banking Units and the International Financial Services Centre (IFSC). A Schedule Bank, a foreign Bank, or a unit of IFSC is eligible to claim a deduction under this provision. In the case of a bank, 100% of the income is deductible for 10 consecutive assessment years. In the case of a unit of an IFSC, 100% of income is deductible for 10 consecutive assessment years out of 15 years.

A new Schedule 80LA has been inserted in the ITR-5 seeking the following details from the company:

• Type of entity
• Type of income of the unit
• Authority granting registration
• Date of registration
• Registration number
• First AY during which deduction is claimed
• Amount of deduction claimed for current AY

23. New ‘Schedule 115TD’ inserted for reporting tax payable on accreted income

[ITR 5]

Any fund or institution approved under Section 10(23C) or registered under Section 12AB is liable to pay additional income tax on the accreted income, which arises on its conversion into a non-charitable form, failure to apply for renewal of registration, or on the transfer of assets on its dissolution to a non-charitable institution.

If an entity, such as a Section 8 company, gets converted into a form that is not eligible for registration under Section 12AB or approval under Section 10(23C), it will be ineligible to file its income tax return in ITR-7. It shall pay tax as per the normal provisions and report such income in the ITR. Additionally, it will be liable to pay tax on its accreted income, which will be levied at the maximum marginal tax rate. This tax is in addition to income tax, which is chargeable in the hands of the specified trust or institution.

Therefore, a new Schedule 115TD has been inserted in the ITR form for the reporting of tax payable on accreted income. This schedule requires various details such as the computation of accreted income (FMV of total assets as reduced by the total liability), tax payable on accreted income and details of challans for deposit of tax on accreted income.

24. Assessee recognized as MSME

[ITR 5]

The new ITR-5 mandates that an assessee should furnish information regarding its recognition status as a Micro, Small, and Medium Enterprise (MSME). It is also required to provide the registration number allotted as per the Micro, Small and Medium Enterprises Development Act, 2006.

25. New field for opting concessional regime under Section 115BAE

[ITR 5]

A new tax scheme has been introduced by the Finance Act 2023 for the resident co-operative societies engaged in the manufacturing or production of an article or thing. If a co-operative society opts for this scheme, then income will be taxable at a concessional rate if certain conditions are fulfilled.

In order to avail the benefit of Section 115BAE, the co-operative society is required to furnish Form No. 10-IFA on or before the due date specified under Section 139(1) in the first return of income for any previous year relevant to the assessment year commencing on or after 1st day of April 2024.

To align the changes brought by the Finance Act of 2023, a new field has been inserted seeking details on whether the assessee is a manufacturing co-operative society opting for taxation under Section 115BAE.

Further, date of filing Form 10-IFA and its acknowledgement number is required to be furnished.