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Claiming exemptions now tougher

The objective is to keep false tax deductions in check. Last year, the I-T department sent out a host of notices to individual taxpayers, in effect, asking them to justify the tax breaks claimed.

“The means to claim tax exemptions and deductions have been made more stringent. Additional information has been sought to check false claims by individuals and companies for several areas such as political party donations and capital gains exemptions, etc,” says Paras Savla, partner at KPB & Associates.

Day traders, too, need to mention the details of cess and turnover if the assets are bought and sold on the same day.

Donations to political parties under the scanner

You will have to share the detailed low-down on donations made under section 80GGC to political parties, apart from the contribution amount, which can be claimed as 100 percent tax deduction. “Details of political party donations include not just contribution amount and its break-up in the form of mode of payment but the specific transaction number linked to Bank transfer will have to be furnished. Earlier only the amount claimed for deduction under Section 80GGC was required,” says Raju Shah, an Ahmedabad-based chartered accountant.

Also read: ITR filing: Using AI and tech, Income-Tax department sends notices to tax evaders for fake donations

Bank accounts and life insurance policies

For those who have received annual bonuses under life insurance policies, there is now a dedicated column in ITR-2 and ITR-3, where they need to declare the details of bonus payments received during the financial year.

Additionally, you also need to declare whether any money received from a high-premium life insurance policy is chargeable to tax. If that is the case, then the excess needs to be mentioned under income from 'other sources', which is a separate schedule. Maturity proceeds received from life insurance policies where annual premiums exceed 10 percent of the sum assured are taxable. In addition, as per Budget 2022 and Budget 2023 announcements, proceeds from unit linked insurance policies (Ulip) with annual premiums of over Rs 2.5 lakh as well as endowment policies with yearly premiums of more than Rs 5 lakh are taxable.

If you do not use the ITR 1 then chances are that you would have to disclose not just the bank accounts you currently hold but even those that you may have maintained at any point in time. You can, however, exclude the dormant bank accounts while filing ITR-2, 3 and 5.

Disabled dependents’ details needed too

Now onwards, you need to mention not only the amount claimed under Section 80DD but also share details including the exact disability, the specification of the dependent (your relation) and their PAN and AADHAAR. This deduction entails a benefit of Rs 75,000 or Rs 1.25 lakh.

The date of submitting Form 10-IA (certificate of the medical authority for certifying disabilities), the acknowledgement number and the UDID Number (unique identification number for people with disabilities), too, are needed.

Employee Stock Options (ESOPs)

Employees of select start-ups are permitted a deferment of taxation with respect to employee stock options (ESOPs) or shares allotted to employees free of cost or at a concessional rate.

To claim these tax benefits on ESOP you would need not just the tax amount and the linked year but also the PAN of the eligible startup along with the Department for Promotion of Industry and Internal Trade (DPIIT) registration number.

Virtual assets and online winnings

You will have to furnish additional details related to your crypto investments, or virtual digital assets (VDA), under ITR-1, 2, and 4. “Apart from just claiming the capital gains, one also needs to mention the quarter-wise break-up of the investments,” says Savla.

To report the online game winnings, Schedule OS has been altered to disclose the income won from online games, chargeable under Section 115BBJ. The backbone of this initiative has been the recently introduced Annual Information Statement (AIS), which carries all the information reported about an individual from the tax perspective. This is a dynamic statement that changes every time someone reports data about a taxpayer.

While in the past errors in AIS caused mismatch of data and hence processing of returns, the I-T department has launched a verification system to weed out misinformation early in the cycle, by helping individuals report errors through a feedback mechanism.