Tax man introduces ITR 1 and ITR 4 forms – Here’s what it means

• An assessee filing ITR 1 is only required to indicate his choice of tax regime in the return of income.
• An assessee filing ITR 4 will be required to file Form 10-IEA to opt out of the new tax regime.
• ITR forms 1 and 4 have been amended to include a column to furnish the amount eligible for deduction under section 80CCH.

The Central Board of Direct Taxes (CBDT) has revealed the Income Tax Return (ITR) Forms 1 and 4 for Assessment Year 2024-25. These forms apply to filing income tax returns for earnings in the previous year 2023-24 (from 01-04-2023 to 31-03-2024).

“The department usually notifies the ITR form before the start of the subsequent assessment year, i.e. in February or March. An early notification of ITR forms not only extends the window for filing returns but also signifies a proactive stride towards empowering taxpayers,” says Abhishek Soni, CEO, Tax2Win.in, a tax filing platform.

The CBDT has not amended Rule 12 of the Income-tax Rules, 1962, which outlines the criteria for the applicability of ITR forms to different classes of taxpayers and method of furnishing returns.

The ITR 1 is for individuals with income up to ₹50 lakh from salary, pension, one house property, interest, and agricultural income (up to ₹5000).

ITR 4 is for individuals and Hindu Undivided Families with income up to ₹50 lakh, who use the presumptive income scheme for businesses or professions, and additionally have income from salary, pension, one house property, and other sources (excluding lottery and horse races).

Tax payers must opt out to choose old regime

The Finance Act 2023 has revised section 115BAC, making it the default tax structure for individuals. If an assessee prefers not to follow the new tax system, they must explicitly opt out and choose to be taxed under the previous regime.

Section 115BAC(6) provides an avenue for eligible assesses to opt out of the new tax scheme. To exercise this choice, individuals with income (excluding earnings from a business or profession) need to specify their preferred tax structure in the income tax return for the relevant assessment period.

A taxpayer earning from a business or profession also has the choice to exit the new tax structure and revert to the previous tax system for a specific year. To exercise this choice, they must utilise Form No. 10-IEA on or before the filing deadline specified under Section 139(1) for submitting the income tax return.

“In simple words, an assessee filing ITR 1 is only required to indicate his choice of tax regime in the return of income. An assessee filing ITR 4 will be required to file Form 10-IEA to opt out of the new tax regime,” says Naveen Wadhwa, deputy general manager at Taxmann, an online source of tax and law-related information.

New column added to claim deduction under Section 80CCH

The Finance Act 2023 added a new Section 80CCH, which states that individuals enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after 01-11-2022 will be eligible for a tax deduction for the total amount deposited in the Agniveer Corpus Fund.

“ITR forms 1 and 4 have been amended to include a column to furnish the amount eligible for deduction under section 80CCH,” says Wadhwa.

"Receipts in Cash" column added to ITR-4 to claim enhanced turnover limit

The Finance Act, 2023 has enhanced the turnover threshold limit from ₹2 crores to ₹3 crores for opting for the presumptive taxation scheme under Section 44AD if the receipts in cash do not exceed 5% of the total turnover or gross receipts for the previous year.

It is also provided that the meaning of cash would include the cheque or a bank draft, which is not an account payee. Similarly, Section 44ADA was amended to enhance the threshold limit of gross receipts from ₹50 lakhs to ₹75 lakhs, if the receipts in cash do not exceed 5% of the total gross receipts for the previous year.

“To give effect to the above amendments, the CBDT has amended ITR-4 to include a new column of "receipts in cash” for disclosing cash turnover or cash gross receipt,” says Wadhwa.

These changes can pave the way for improved and more accurate tax submissions, elevating the compliance process for both individuals and entities.