CBDT Releases Income Tax Return Forms for the Assessment Year 2024-25

  • 12 Feb 2024
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Income Tax Return

CBDT Releases Income Tax Return Forms for the Assessment Year 2024-25

The Income Tax Department has recently unveiled the availability of I-T return forms 2, 3, and 5 for the filing of tax returns pertaining to the assessment year 2024-25.

Income Tax Return

The Income Tax Department has recently unveiled the availability of I-T return forms 2, 3, and 5 for the filing of tax returns pertaining to the assessment year 2024-25. Earlier, the notification for ITR-1, applicable to individuals with a total income of up to Rs 50 lakh, and ITR-6 for businesses, was issued in December 2023 and January 2024, respectively.

On January 31, 2024, the Central Board of Direct Taxes (CBDT) officially released Income-tax Return Forms (ITR Forms) 2, 3, and 5 for the Assessment Year (AY) 2024-25.

The notification includes all ITR Forms 1 to 6, which will be effective starting April 1, 2024.

The CBDT stated that modifications have been introduced in the ITRs with the aim of assisting taxpayers and enhancing the ease of the filing process.

Selecting the Appropriate ITR Form for the Assessment Year 2024-25

ITR-2:

Individuals and Hindu Undivided Families (HUFs) lacking income from business or profession (and ineligible for ITR Form-1 Sahaj) may submit ITR-2.

ITR-3:

Individuals with income from business or profession are eligible to file ITR Form-3.

ITR-4:

Sugam is intended for resident individuals, HUFs, and firms (excluding LLPs) with a total income of up to Rs 50 lakh and income from business or profession.

ITR-5:

Partnership firms and LLPs have the option to submit ITR Form-5.

ITR-6: 

Companies other than those exempt under Section 11 can file ITR Form-6.

New tax regime

Advantages

1. The new tax regime is advantageous for individuals with income up to Rs 7 lakh or those with higher incomes unable to claim tax benefits of at least Rs 4.5 lakh.

2. Tax calculation in the new regime is more straightforward.

3. Adopting the new tax regime simplifies the taxpayer’s life by eliminating the need to keep records of exemption claims.

Disadvantages

1. Individuals relying on significant exemptions may find the old tax regime more beneficial.

2. The new tax regime lacks incentives for taxpayers to invest in savings, such as in ELSS or PPF schemes.

Consideration for taxpayers

The new regime offers lower tax rates and a streamlined structure but comes with fewer exemptions and limited tax planning opportunities. Individuals should thoroughly evaluate their income, deductions, and tax obligations to determine which regime suits them better.

Read More: Starting April 1, 2024, MSME Registration and Recognition Status Required for New ITR-5 & ITR-6 Filing

The new income tax regime is tailored for individuals seeking minimal deductions or aiming to avoid the complexities of extensive tax preparation. This includes non-salaried taxpayers like consultants who are ineligible for Section VIA exemptions and deductions. Additionally, older individuals without a pension from employment, making them ineligible for the Rs 50,000 standard deduction, may find the new regime more suitable. On the contrary, senior citizens, relying significantly on interest income, can benefit from the recently introduced Section 80TTB, allowing them to claim Rs. 50,000 as an interest income deduction. Consequently, they may find greater security under the old tax regime.

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Starting April 1, 2024, MSME Registration and Recognition Status Required for New ITR-5 & ITR-6 Filing.

msme registration

Starting April 1, 2024, MSME Registration and Recognition Status Required for New ITR-5 & ITR-6 Filing.

Intending to simplify tax procedures and promote transparency, the Income Tax Department has implemented substantial revisions to income tax return (ITR) forms, taking effect from April 1, 2024.

msme registration

Intending to simplify tax procedures and promote transparency, the Income Tax Department has implemented substantial revisions to income tax return (ITR) forms, taking effect from April 1, 2024. These changes cover a range of requirements designed to streamline business tax compliance and strengthen reporting standards.

1. Streamlining Business Tax Procedures

Acknowledging the necessity for simplified tax processes, the income tax department has eased the criteria for presumptive taxation as per Section 44AD of the Income Tax Act, 1961. This measure seeks to reduce the tax burden on businesses by incorporating a new section in ITR forms 5 and 6 for reporting cash turnover or gross receipts.

The cash turnover threshold has been increased to Rs. 3 crores, given that cash receipts remain below 5% of the total turnover or gross receipts from the preceding year.

GST Amnesty Scheme

2. Enhanced Requirements for MSMEs in ITR-6 Submission

Companies utilizing ITR-6 to submit income tax returns are now confronted with extra prerequisites, which encompass the necessity to provide the Legal Entity Identifier (LEI), MSME registration number, and details justifying tax audits as per Section 44AB of the IT Act.

The revised form also mandates the disclosure of proceeds from online games under Section 115BBJ of the IT Act and the inclusion of virtual digital assets.

Read More: Impact of Section 43B(h) on Micro, Small, and Medium Enterprises (MSMEs)

3. Rigorous Reporting Standards for Companies Pursuing Refunds

Companies aiming for refunds exceeding Rs. 50 crores are subject to stringent reporting standards, demanding the Legal Entity Identifier (LEI) provision. Furthermore, ITR-6 mandates the inclusion of acknowledgment numbers and Unique Document Identification Numbers (UDIN) for tax audit reports under Section 44AB of the IT Act and transfer pricing reports under Section 92E of the IT Act.

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Impact of Section 43B(h) on Micro, Small, and Medium Enterprises (MSMEs)

Section 43B(h)

Impact of Section 43B(h) on Micro, Small, and Medium Enterprises (MSMEs)

Under the Finance Act of 2023, Section 43B(H) has been introduced by the Finance Ministry. This section mandates that payments for goods supplied by MSMEs must be made within 45 days. 

Section 43B(h)

Under the Finance Act of 2023, Section 43B(H) has been introduced by the Finance Ministry. This section mandates that payments for goods supplied by MSMEs must be made within 45 days. The inclusion aligns with the guidelines outlined in Section 15 of the MSMED Act, 2006, aiming to guarantee timely payments and safeguard MSMEs from potential disruptions in fund flow due to delays.

To bolster assistance for Micro, Small, and Medium Enterprises (MSMEs), notable modifications have been introduced through the recent amendment to Section 43B of the Income Tax Act.

Features of the Section 43B(h) Amendment

1. Amendment Overview

 Clause (h) was incorporated into Section 43B by the Finance Act of 2023, following clause (g), with a specific emphasis on payments to Micro or Small Enterprises (MSEs).

 

2. Qualification Standards for MSEs

The criteria for categorizing MSEs depend on their investment in Plant and Machinery or Equipment, as well as their Annual Turnover thresholds. Micro enterprises have investment and turnover limits set at 1/5 crore, while small enterprises have limits of 10/50 crore, respectively.

3. Payment Schedules

The amendment enforces payment timelines for MSEs, aligning with the limits outlined in Section 15 of the MSME Act, 2006, i.e., 15/45 days. Deductions for payments exceeding these limits are permitted in the year of actual payment rather than the year they are due.

4. Applicability and Exclusions

Effective from the Assessment Year 2024-25, the amendment does not apply to outstanding amounts as of March 31, 2023. It exclusively pertains to Micro or Small Enterprises, excluding Medium Enterprises. The amendment is only relevant to payments for outstanding creditors as of March 31, 2024. It does not apply to assesses opting for presumptive taxation under sections 44AD/44ADA/44AE. The buyer is not obliged to be an MSME.

5. Tax Consequences

Non-compliance results in the amount being considered taxable income for the assessee, with deductions available in the year of payment.

6. Interest Liabilities

Delayed payments trigger compound interest obligations for the supplier, with rates tied to RBI-notified Bank Interest.

7. Supplier Obligations

 

Suppliers must inform buyers of their MSME registration to prevent disallowance under Section 43B(h).

8. Capital Expenditure

Exemption No disallowance under Section 43B(h) is applicable for outstanding dues related to capital expenditure.

Read More: Understanding TAN in Income Tax How to Fill Out an Online Application

9. Exclusion of Traders

 

Section 43B(h) does not extend to outstanding dues to traders, as per the MSMED Act’s enterprise definition.

10. Udyam Registration and Compliance

 

Enterprises with Udyam Registration must update their information on the portal to uphold their status.

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