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New ITR Form – What you need to know?

The Income Tax Department has introduced the new Income tax return form with some major changes in the form. The new ITR forms for the assessment year 2018-19 mandate the taxpayers to provide detailed information about their incomes including their GST number and turnover and the salaried class assesses to provide their salary breakup.

 For the first time, a penalty will be levied on returns filed after the due date. The new Income Tax Returns have been uploaded on the official website of the income tax department (www.incometaxindia.gov.in). To help an employee cope with change in the new income tax returns (ITR­1) form, the assessee will have to give a breakup of his income, including basic salary, house rent allowance, bonus, and professional tax. This is done to assure that the amount of Provident Fund withdrawn by a person is taxable or not.

What does the law say?

According to the laws made by the Income-tax department, if any amount is withdrawn by an employee from the Provident Fund account before the expiry of 5 years, it is taxable in the hands of the assessee irrespective of the fact that the amount was accumulated by a single or multiple employers.

The taxation of employee’s contribution depends on the fact whether the deduction is claimed under section 80C or not in the ITR of the previous assessment years. Also, the taxability of the withdrawal amount differs in the case of withdrawing the amount before 5 years of continuous service and after 5 years of continuous service. If the amount of PF is withdrawn after 5 years of continuous service, the entire amount is exempt from tax and if the amount is withdrawn before the expiry of 5 years of continued service, the withdrawal amount is taxable in the year of withdrawal.

If the deduction under section 80C is not claimed at the time of filing the ITR in the previous years, then that amount will not be taxable in the hands of employee at the time of withdrawal from the PF and only the employer’s contribution and the interest earned on both the employee’s and employer’s contributions will be taxable.

However, if the employee has claimed deduction under section 80C in the previous years of the amount contributed by him to PF, then the amount withdrawn in respect of employee’s contribution, to the extent of Section 80C deduction claimed earlier, will be taxable in the hands of the employee along with the employer’s contribution and the interest earned on both the contributions.

In all the above cases, the rate of income tax applicable will be the applicable income slab rate in the year in which actual PF contributions were made and not the tax rate of the year in which the withdrawal was made.

The revision of ITR-2 and 3 was required for the purpose of providing year-wise details of respective contributions made to PF and amount of tax to be paid in case of withdrawal of PF amount before the expiry of 5 years period by the assessee.

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