New ITR forms: 4 updates that could change the way you file your ITRs

Filing ITRs require forms. Hence it’s critical that one knows the essential parameters involved in the ITR forms for this year.

changes in ITR Forms

New ITR Forms Require  Details Of Virtual Digital Assets, Share Trading

Filing income tax returns using ITR forms is every taxpayer’s civic duty. Since the changes in taxing norms and new ITR forms affect many of us, we need to understand the developments and familiarise ourselves with them. 

These new forms will be used to file tax returns for the income earned in the upcoming financial year. Let’s look at the changes made and how you can use this information to plan your taxes better.

Role of digital assets in the new income tax return forms

With the surging popularity of digital payments and asset-based transactions like NFTs or crypto, documentation of these payments and taxing them becomes a concern. As these tokens are becoming more acceptable as forms of payment, it only makes sense to recognise them while filing your tax returns.

Hence, apart from direct taxes, income gained from digital assets and currencies is also taxable now. Here’s a list of all changes in the new ITR forms.

  1. Tax on virtual digital assets

The ITR forms have a separate VDA section for the income generated from virtual digital assets with effect from the 1st of April, 2022. However, now more information related to these transactions has to be disclosed.

Transactions can be of two kinds- one for capital gains and the other for gifts. In both cases, the new ITR forms require us to declare either the transfer head or the acquisition cost. 

According to the Budget 2022, income generated from the transfer of virtual digital assets will be taxed at a 30% rate. On top of that, no deductions are allowed on this income stream, except for the cost of acquisition, applicable in the case of gifts.

Also read: Your source for mutual fund tax information

  1. Disclosure of opted tax regime in new ITR forms

Taxpayers now have to disclose their regime choice in the last year. This means they need to declare whether they paid taxes based on the new or old tax regime.

Also read: Your employee benefits

  1. Payment of taxes on trading-based income

According to ITRs 3,5 and 6, trading income will be categorised into two types- intra-day trading and delivery. People must declare taxable income from each category and pay their taxes accordingly. People who trade in the equity market need to add extra information to their ITRs.

  1. Rules for taxing cryptocurrency and NFTs

Although the government has decided to tax income gained through digital currencies, income up to Rs. 10,000 isn’t taxable. The tax deducted at source for incomes above that is 1%. 

What are the implications of these changes in declaring ITRs?

Apart from direct taxes, taxing income generated through non-fungible tokens or cryptocurrency should be welcomed as a positive step. Declaring income from those sectors ensures fewer significant and hidden income sources exist. 

These modes of income have been in the news for being unpredictable. Hence, charging taxes on the more significant incomes is good. 

Another positive thing in this regard is the release of new forms well in time. This will give taxpayers ample time to prepare and ensure that there are no mistakes due to hurried submissions. 

Final Words

With new forms of income available, there’s a need for norms that organise income from these sources. NFTs and cryptocurrencies have amassed massive popularity in the last couple of years. Hence, disclosing these incomes while filing for tax returns is only logical and expected. 

Apart from that, splitting trading-based income into two categories also makes the process more organised. Hence, all changes in the new ITR forms will ultimately help the filer.

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