Pre-filled ITR forms: A Brief Introduction
An explanation to Pre-filled ITR forms
In this post, we will see about the pre-filled ITR forms and its purpose, eligibility, and other key points.
The Government of India implemented many measures to avoid pandemic disaster, which have led to the birth of several issues like unemployment, recession, less economic growth, financial instability.
As per the third Union Budget presented on February 1, 2021, the pre-filled Income Tax Returns (ITR) will be been given to individual taxpayers. Senior citizens above 75 years no longer need to pay their Income Tax return.
In this post, we will cover the following topics:
All your income information will be pre-filled in your Income Tax Returns (ITR) forms, and you just need to approve it on the Income Tax portal.
At first, when ITR forms were released, it had some information pre-filled (like bank account number, bank interest, and salary details with the standard deduction, etc).
There was no mention of covering details of capital gains from securities and dividends etc. Budget 2020 may have more announcements to modify existing ITR forms.
Purpose of pre-filled ITR forms
Pre-filled Income Tax Returns (ITR) forms were introduced to use technology to make tax compliance easier for the taxpayer. As a result, the Government of India introduced the interchangeability of PAN and Aadhaar, Faceless e-assessment, and pre-filing of income tax returns (ITR).
Eligibility for pre-filled ITR forms
These are only for salaried taxpayers with a total income of less than Rs 5 lakh.
Pre-fill ITR forms for capital gains, dividends from stock market transactions
- The revenue department is looking to seek information from stock exchanges and KYC Registration Agencies (KRAs) launched by the Securities and Exchange Board of India (SEBI), on share and stock related transactions.
- It automatically provides information on their capital gains from the sale of stocks and mutual funds, dividends, etc. So, when filing Income Tax Returns (ITR), you do not have to manually enter data from different sources and fill the returns.
- It helps honest taxpayers to prepare their IT returns. So, there won’t be any mistakes or forget any transactions.
- Tax authorities have details on all your taxable transactions. Therefore, you need to disclose it in IT return to avoid any future complications.
- The KRAs, maintain investor’s KYC records on behalf of capital market intermediaries registered with the Securities and Exchange Board of India (SEBI).
- IT department has already started sharing information among direct tax, indirect tax, and customs departments.
Challenges you may face
- People who don’t know to use the internet/technology (senior citizens) will need extra help to file the returns.
- For people who don’t know or know less English language.
- If you opt for filing returns/submissions in Hindi, it is not so user-friendly.
- Now the only residents above 80 years (earning income other than business income) can file a return in paper form using ITR1 and ITR4.
- Increases the compliance burden on banks and mutual funds etc. It requires synchronisation of databases and information systems among several intermediaries, including banks and other financial institutions.
- The system integration process has to pass tests like data security and requires strong checks and balances. Taxpayers must be sure about auto-populated information and its impact on the final calculation.
Details on MOU signed by IT Department
The IT department last year signed a Memorandum of Understandings (MoUs) with the market regulator Securities and Exchange Board of India (SEBI) and Ministry for information sharing (MSME).
Steps taken by the government to increase the tax collection efficiency are given below:
- Enhancing the tax department’s scrutiny of stock market transactions that are aimed at evading taxes.
- Ensured that both the Central Board of Direct Taxes (CBDT) and Securities and Exchange Board of India (SEBI) have seamless linkage for data exchange.
- In addition to regular exchange of data, the Central Board of Direct Taxes (CBDT) and Securities and Exchange Board of India (SEBI) will exchange with each other, on request and without request. (Any information for carrying out scrutiny, inspection, investigation, and prosecution).
- Receives information on large transactions from banks, mutual funds, under Section 285BA.
Key Points for pre-filled ITR forms
- Educate the taxpayer on the new change and other plans for improvement.
- The government should provide an authentic source to extract authentic Information for verification.
- Provide a column in return form to specify the reason for mismatch (if any).
- If implemented in the corporate field it is challenging as the majority of corporate income arises from the business. So, they may pre-fill the turnover but can’t pre-fill the relatable expenses /stocks held at the end of the FY.
- It includes auto-filling of stock market transactions and bank transactions to IT forms.
- Enables auto-filling data obtained from depositories or mutual funds and banks.
- Income not subject to TDS deduction, such as capital gains on the sale of securities or mutual fund broker earnings, does not appear in the pre-filled IT forms.
- Automation of Income Tax Returns (ITR) will also ensure the accuracy of the data you have entered.
With that, we have come to the end of this post. Share your queries with us in the comment section below.