The Central Board of Direct Taxes (CBDT) has maintained the applicability criteria of Income Tax Return (ITR) forms for Assessment Year (AY) 2024-25 as it was for AY 2023-24. The forms applicable to different classes of taxpayers and the methods of furnishing returns remain unchanged. Taxpayers should continue to use the same ITR forms that were applicable in the previous year.
The applicability of forms depends on the nature of income and the status of the assessee. For example, ITR 1 and ITR 4 can be filed only by individuals or Hindu Undivided Families (HUFs) who are ordinarily residents of India, with ITR 4 applicable mainly for presumptive business income. Other forms, such as ITR 2, 3, 5, 6, and 7, cater to more complex scenarios involving multiple sources of income, business profits, or entities like companies, firms, associations, and trusts.
Applicability of ITR Forms Based on Nature of Income
The selection of the appropriate ITR form is largely dependent on the types of income earned by the taxpayer during the financial year. For salaried individuals, ITR 1, 2, 3, and 4 are relevant. ITR 1 and 4 are typically for simpler cases involving salary income, one house property, and limited other sources of income. ITR 2 and 3 are used for individuals with more complex income sources, such as multiple house properties, capital gains, and income from business or profession.
Taxpayers receiving income from business or profession are required to file ITR 3 or ITR 4, depending on whether they opt for presumptive taxation schemes under sections 44AD, 44ADA, or 44AE. ITR 3 also caters to partners receiving income from a partnership firm.
Capital gains from the sale of assets or investments, dividend income exceeding prescribed limits, unexplained income taxable at a higher rate, and foreign assets disclosure are some of the conditions that necessitate filing more comprehensive forms like ITR 2 or ITR 3.
Status-wise Applicability of ITR Forms for Entities
Entities other than individuals and HUFs have designated ITR forms based on their legal status and type of income. Firms excluding Limited Liability Partnerships (LLPs) that opt for presumptive taxation under sections 44AD, 44ADA, or 44AE are required to file ITR 4. Firms, including LLPs, associations of persons, bodies of individuals, local authorities, and artificial juridical persons, must file ITR 5.
Companies other than those claiming exemption under section 11 are mandated to file ITR 6. Certain persons, including companies required to furnish returns under sections 139(4A) to 139(4D), are to file ITR 7.
Verification of ITR for Individuals and HUFs Liable for Audit
An important change introduced in AY 2024-25 is that individuals and Hindu Undivided Families (HUFs) who are liable for tax audits under section 44AB can now verify their income tax returns through an electronic verification code (EVC). Previously, such taxpayers were required to verify returns only through a digital signature. This amendment aims to simplify the verification process and improve compliance ease.
The option to use EVC for verification reduces dependency on digital signature certificates and facilitates quicker and easier filing of returns for audit-assessed taxpayers.
Default Adoption of the New Tax Regime
The Finance Act 2023 introduced a significant change by making the new tax regime under Section 115BAC the default tax regime for individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Juridical Persons (AJPs). Taxpayers who prefer the old tax regime must now explicitly opt out.
For taxpayers with income other than business or profession, the choice between old and new tax regimes is indicated directly on the ITR form filed under Section 139(1). Those earning business or professional income, opting for the old regime, must file Form 10-IEA on or before the due date for return filing.
This amendment requires the new ITR forms to incorporate fields capturing the taxpayer’s choice of tax regime, ensuring clarity and compliance with the updated tax provisions.
Inclusion of Legal Entity Identifier (LEI) Details
The new ITR forms (ITR 2, 3, 5, and 6) now include a provision for furnishing the Legal Entity Identifier (LEI). LEI is a 20-character alphanumeric code that uniquely identifies entities in global financial transactions. This addition aligns the tax filing process with Reserve Bank of India regulations, which mandate LEI reporting for single payment transactions of INR 50 crores and above conducted through NEFT and RTGS systems.
Taxpayers seeking refunds exceeding INR 50 crores are required to furnish LEI details in their ITR forms to ensure accurate identification and compliance with financial reporting standards.
Requirement to Furnish Reason for Tax Audit under Section 44AB
ITR forms 3, 5, and 6 have been amended to require taxpayers subject to audit under Section 44AB to disclose the reason for the audit. This includes whether the audit obligation arises due to exceeding turnover or gross receipts limits specified under Section 44AB, non-offering of presumptive income under sections 44AD/44ADA/44AE/44BB despite eligibility, or other reasons.
Providing this information enhances transparency and assists the tax department in audit administration and risk assessment.
Submission of Audit Report,, Acknowledgment Number,, and UDIN
Taxpayers filing ITR 3, 5, and 6 are now required to submit the acknowledgment number of their audit report along with the Unique Document Identification Number (UDIN) generated by the Chartered Accountant who conducted the audit. This applies to audits under Section 44AB and transfer pricing audits under Section 92E.
Including these details in the ITR form ensures the authenticity of audit reports and strengthens the verification process.
Addition of “Receipts in Cash” Column for Presumptive Taxation Eligibility
The Finance Act 2023 increased the turnover threshold for eligibility under presumptive taxation schemes in sections 44AD and 44ADA, subject to cash receipt limits. To align with this, ITR forms 3, 4, and 5 have introduced a new column to report “receipts in cash.”
Taxpayers opting for presumptive schemes must disclose cash receipts, which include cheque or bank drafts not marked “account payee.” This measure aims to curb cash transactions and encourage digital payments while providing the tax authorities with detailed turnover composition.
Disclosure of Delayed Payments to Micro and Small Enterprises
The Finance Act 2023 amended Section 43B to disallow deductions for payments to Micro or Small Enterprises (MSEs) that are overdue beyond the time frame specified under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Consequently, ITR forms 3, 5, and 6 now include a new column under Part A-OI (Other Information) requiring taxpayers to disclose any sum payable to MSEs beyond the prescribed time limit.
This provision aims to promote timely payments to MSMEs, ensuring their cash flow is not adversely affected by delayed settlements.
Enhanced Reporting for Capital Gains Account Scheme
Schedule-CG in ITR forms 2, 3, 5, and 6 has been revised to include additional details regarding deposits made into the Capital Gains Account Scheme (CGAS). Taxpayers must now provide the date of deposit, account number, and IFSC code along with previously required information.
This enhanced reporting requirement improves transparency and assists in tracking capital gains funds deposited for claiming exemptions.
Reporting of Winnings from Online Games under Section 115BBJ
A new provision, Section 115BBJ, was introduced by the Finance Act 2023 to tax winnings from online games starting AY 2024-25. Corresponding TDS provisions under Section 194BA mandate deduction of tax from net winnings.
To accommodate this, Schedule-OS in ITR forms 2, 3, 5, and 6 has been amended to require taxpayers to disclose income from online game winnings chargeable under Section 115BBJ.
This change reflects the government’s intent to widen the tax base and regulate income from emerging digital sources.
Introduction of Schedule 80GGC for Political Contributions
ITR forms 2, 3, 5, and 6 now include a new Schedule 80GGC, which requires detailed disclosure of contributions made to political parties or electoral trusts. The schedule requires furnishing the date of contribution, amount contributed (broken down into cash and other modes), eligible amount for deduction, transaction reference numbers for electronic payments or cheque numbers, and bank IFSC codes.
This expansion in disclosure requirements aims to enhance transparency in political funding and align tax deductions with stricter audit trails.
Schedule for Tax Deferred on ESOPs
The ‘Schedule – Tax Deferred on ESOP’ has been amended in ITR forms 2 and 3 to include additional details such as the Permanent Account Number (PAN) of the employer startup and the Department for Promotion of Industry and Internal Trade (DPIIT) registration number.
This schedule captures information related to tax deferral on Employee Stock Option Plans (ESOPs) granted by eligible startups, facilitating better compliance and monitoring of tax liabilities on such perquisites.
Addition of Section 80CCH Deduction Column for Agniveer Corpus Fund
Following the Finance Act 2023’s insertion of Section 80CCH, which grants deductions to individuals enrolled in the Agnipath Scheme contributing to the Agniveer Corpus Fund, ITR forms 1, 2, 3, and 4 have been amended to include a column for declaring the amount eligible under this new deduction.
Schedule 80DD for Maintenance and Medical Treatment of Disabled Dependents
ITR Forms 2 and 3 have introduced a new Schedule 80DD that requires disclosure of deductions claimed for maintenance and medical treatment of a dependent with disability under Section 80DD. Taxpayers must provide details including the nature of disability, relationship with the dependent (such as spouse, son, daughter, etc.), PAN and Aadhaar of the dependent, date and acknowledgment number of Form 10-IA, and UDID number. This facilitates accurate documentation of medical and insurance expenditures eligible for deductions.
Reporting Dividend Income from Units in the International Financial Services Centre
The Finance Act 2023 amended Section 115A to reduce the tax rate on dividend income received from units located in the International Financial Services Centre (IFSC) to 10 percent from the earlier 20 percent. The new ITR forms have accordingly revised Schedule OS to capture dividend income details from such IFSC units. This change benefits taxpayers investing in IFSC units by providing a lower tax rate on dividends.
Addition of Bonus Payment Declaration under Life Insurance Policies
Schedule OS in ITR forms 2 and 3 has been amended to include a column for declaration of bonus payments received under life insurance policies. The Finance Act 2023 inserted provisions to tax sums received from excess or high premium life insurance policies under ‘income from other sources.’ Including this information ensures such income is correctly reported and taxed.
Reporting of Income Received by Unitholders from Business Trusts
To address the issue of potential dual non-taxation of income distributed by business trusts to their unitholders, the Finance Act 2023 introduced important provisions aimed at ensuring tax transparency and fairness in this area. Business trusts, which pool income-generating assets and distribute income to unitholders, had a structural advantage where certain distributed amounts were escaping taxation both at the trust level and at the recipient unitholder level. This created a tax leakage that the government sought to plug through legislative amendments.
Under the new provisions, any amounts received by unitholders from business trusts, which were previously not taxable or inadequately taxed, are now required to be included under the head ‘Income from Other Sources’ in the hands of the unitholders. This ensures that income distributed by business trusts is subjected to tax at the recipient level, thereby eliminating instances of dual non-taxation. This step promotes tax equity and prevents unintended tax avoidance through complex trust structures.
In order to operationalize this change and facilitate compliance, the Income Tax Return (ITR) forms 2, 3, and 5—typically filed by individuals, proprietors, firms, and companies—have been amended. A new column has been added in Schedule OS, which captures income under ‘Income from Other Sources.’ This new section specifically requires taxpayers to report sums received from business trusts under the Finance Act 2023 provisions. By providing a dedicated field, the tax forms help standardize disclosures, thereby simplifying the process for taxpayers and improving data accuracy for tax authorities.
Additionally, the amended ITR forms provide an option for unitholders to claim a deduction corresponding to the cost of acquisition of units on redemption. This means that when units held by unitholders are redeemed or sold, they can deduct the original purchase price or acquisition cost from the income received, ensuring that only the net gain is taxed. This is consistent with the principles of capital gains taxation and prevents double taxation of the capital invested by the unitholder.
The inclusion of these provisions and corresponding ITR form amendments highlights the government’s intent to bring greater transparency and uniformity in the taxation of business trust distributions. It facilitates the correct reporting of such income and helps taxpayers comply with their obligations without ambiguity. Furthermore, the explicit recognition of acquisition cost deductions balances the tax burden, making the framework equitable and consistent with other investment income taxation norms.
Requirement to Disclose All Bank Accounts Held During the Year
The new ITR forms require taxpayers to disclose details of all bank accounts held at any time during the year, excluding dormant accounts. This measure increases transparency and aids the income tax department in cross-verifying income and refund payments.
Adjustment of Unabsorbed Depreciation Related to Additional Depreciation
For taxpayers opting for the new tax regime under Section 115BAC, a critical change has been introduced concerning the treatment of unabsorbed depreciation related to additional depreciation. The Finance Act, 2023, mandates that unabsorbed depreciation,inut additional depreciation, cannot be set off against income under this regime. This represents a significant departure from the previous provisions where taxpayers could carry forward and set off unabsorbed depreciation, including that arising from additional depreciation, against business income in subsequent years.
Additional depreciation typically refers to an enhanced depreciation allowance provided to certain manufacturing and production assets, enabling taxpayers to claim a higher depreciation deduction than the standard rates. This concession is intended to incentivize investment in new machinery and plant, thus promoting capital formation and industrial growth. However, with the introduction of the new tax regime under Section 115BAC—which offers concessional tax rates with reduced exemptions and deductions—the government has streamlined depreciation benefits by disallowing the carry forward and set off of unabsorbed additional depreciation losses.
To operationalize this change, the Finance Act 2023 requires an adjustment to be made in the written-down value (WDV) of the asset block as on April 1, 2023. Specifically, the unabsorbed additional depreciation accumulated up to that date must be reduced from the WDV of the relevant block of assets. This adjustment ensures that the depreciation claim going forward under the new regime reflects the actual depreciable value of the assets without including the carry-forward losses from additional depreciation.
In alignment with these legislative changes, the Income Tax Return (ITR) Forms 3 and 5 have been amended to include modifications in Schedule DPM (Depreciation on Plant and Machinery). Schedule DPM is the section in the ITR forms where taxpayers report details regarding depreciation claims on plant and machinery assets. The amendments in Schedule DPM require taxpayers to disclose the adjusted WDV of asset blocks after accounting for the unabsorbed additional depreciation that cannot be set off under the new regime.
These changes are vital to ensure accurate computation of depreciation expenses and taxable income under Section 115BAC. By reflecting the adjustment in the WDV, taxpayers can avoid overstating depreciation deductions, thereby aligning their tax filings with the updated legal framework. The modification also aids tax authorities in verifying depreciation claims and assessing the correctness of taxable income declared by taxpayers opting for the new regime.
Additionally, the amendments to Schedule DPM introduce clarity and standardized reporting for taxpayers transitioning to the new regime. This is particularly important for businesses with significant investments in plant and machinery, as the proper adjustment of unabsorbed additional depreciation directly impacts their tax liability. Taxpayers must maintain detailed records and schedules to support these computations and facilitate smooth compliance during the filing process.
Schedule 80LA for Offshore Banking Units and IFSC Entities
Schedule 80LA has been introduced in the ITR forms 5 and 6 specifically to capture detailed information about deductions claimed under Section 80LA of the Income Tax Act. This section provides a significant tax benefit to offshore banking units (OBUs) and units operating in International Financial Services Centres (IFSCs) by allowing them to claim a 100% deduction of their income for specified consecutive assessment years. The introduction of Schedule 80LA in the ITR forms underscores the government’s commitment to ensuring transparency and proper compliance in availing these incentives, which are critical to promoting India as a global financial hub.
Offshore banking units and IFSC units play a pivotal role in enhancing India’s financial services sector, attracting foreign investments, and facilitating cross-border financial transactions. Section 80LA was designed to incentivize these units by offering tax exemptions on their income earned in designated financial centers. However, such exemptions come with stringent conditions and eligibility criteria to ensure that only qualifying units benefit from the tax relief. Schedule 80LA in the ITR forms ensures that taxpayers disclose their claims in a structured manner, thereby enabling tax authorities to verify the legitimacy and accuracy of these deductions.
The schedule requires detailed information regarding the nature and amount of income eligible for deduction, the specific assessment years for which the exemption is claimed, and confirmation that all conditions stipulated under Section 80LA have been met. This includes compliance with prescribed activities, operational guidelines, and regulatory approvals required for offshore banking and IFSC units. By standardizing the reporting format, Schedule 80LA helps reduce ambiguity and discrepancies that could arise from incomplete or inconsistent disclosure of deductions.
Conclusion
The changes introduced in the ITR forms for Assessment Year 2024-25 reflect the government’s ongoing efforts to enhance transparency, simplify compliance, and align tax filing with recent legislative amendments. These updates are part of a broader strategy to make tax administration more robust and taxpayer-friendly while ensuring adherence to evolving tax laws and global financial practices.
One of the most significant changes is the default adoption of the new tax regime in the ITR forms. This shift underscores the government’s intent to promote a simplified tax structure that offers lower tax rates but fewer exemptions and deductions. Taxpayers now have the option to opt into the old regime only if they explicitly choose to do so, encouraging wider acceptance of the new system. This approach aims to streamline the filing process and reduce confusion about the applicability of different tax regimes, especially for salaried individuals and professionals.
In addition to the tax regime default, the ITR forms have incorporated more detailed disclosure requirements for taxpayers undergoing audits. This includes expanded schedules that require comprehensive reporting of audit findings and compliance status, helping the tax authorities better assess risk and prevent tax evasion. The enhanced audit-related disclosures are expected to improve the quality of information shared with tax authorities and reduce discrepancies during assessments.
The government has also introduced new fields for disclosing political contributions, reflecting the growing emphasis on transparency in political financing. Taxpayers making donations to political parties must now furnish details such as the amount contributed and the mode of payment. This inclusion is aligned with efforts to curb the circulation of unaccounted money and promote clean funding practices.
Recognizing the surge in digital transactions, the revised ITR forms mandate detailed reporting of various types of digital financial activities. This includes disclosures related to digital wallets, UPI payments, and other cashless transaction modes. By capturing this information, tax authorities can better track the flow of funds and identify unreported income, thus reducing the scope for underreporting and tax avoidance.