Know the change in eligibility criteria of newly notified ITR1, ITR 4

The Income Tax Department notified tax forms ITR 1 to ITR 7 for the assessment year FY22 on Thursday.

NEW DELHI: The Income Tax Department notified tax forms ITR 1 to ITR 7 for the assessment year FY22 on Thursday. Given the pandemic, the tax department has not introduced significant changes. But there are still a few changes in the new ITR1 and ITR 4 forms that you should know.

The tax department has added two more conditions as per which some taxpayers will not be eligible for filing these forms.

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A person whose tax has been deferred in respect of ESOPs allotted by an eligible startup can’t file Form ITR-1 or ITR-4. Now, the employee need not pay tax on exercising the option of converting ESOPs into shares.

Also, those whose TDS were deducted under the Section 194N of the Income Tax Act, can’t file ITR 1 and ITR 4.

“For the FY 2020-21, return in Form ITR-1 cannot be filed by a taxpayer whose tax has been deducted under Section 194N. TDS is required to be deducted under Section 194N by banks, co-operative banks or a post-office from any sum paid in cash from one or more accounts maintained by the recipient. Tax is deducted at the rate of 2% or 5% depending on the amount withdrawn and the fact that the taxpayer has filed income tax return in the past 3 years or not,” said Tarun Kumar, a Delhi-based chartered accountant.

There is another set of taxpayers who won’t be able to use these two forms.

“As per amendment in Budget 2020, from the FY 2020-21, an employee receiving ESOPs from an eligible start-up need not pay tax in the year of exercising the option. The TDS on the ‘perquisite’ stands deferred to earlier of the events that is expiry of five years from the year of allotment of ESOPs or date of sale of the ESOPs by the employee or date of termination of employment. Such employees will not be able to file ITR-1 and ITR 4, they will have to file ITR-2. ITR-2 and ITR-3 are more detailed forms,” said Archit Gupta, founder and CEO, Cleartax.

ITR 1 and ITR4 are relatively simple ITR forms, as they require a taxpayer to fill out lesser details. Apart from these newly introduced changes there are certain other conditions under which a taxpayer can’t file ITR 1 and ITR 4.

ITR 1 can be filed by a person whose salaried income doesn’t exceed Rs50 lakh and has only one house property and agriculture income is below Rs5,000. ITR 4 can be filed by taxpayers who have opted for presumptive tax regime and their turnover doesn’t exceed 2crore.

(Do you have a personal finance query? Send in your queries at [email protected] and get them answered by industry experts.)

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