KEY CHANGES IN ITR FORMS A.Y 2023-24

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KEY CHANGES IN ITR FORMS A.Y 2023-24

The ITR forms for AY 2023-24 introduced four disclosure changes that every Indian taxpayer must understand today: Schedule VDA for virtual digital assets, an expanded Schedule FA for foreign holdings, an explicit tax regime choice field under Section 115BAC, and granular ESOP perquisite reporting for employees of unlisted companies. The CBDT has carried this disclosure architecture unchanged into AY 2027-28, covering FY 2026-27. Filing correctly in 2026 means mastering what the 2023-24 forms first required — because those requirements are the live standard right now.

Why AY 2023-24 Was a Structural Turning Point

The income-tax department's direction has been consistent for several years: move away from aggregate self-reporting toward granular, source-matched disclosure. AY 2023-24 was the year this shift became impossible to ignore on the face of the forms themselves.

Three legislative events triggered the changes simultaneously:

1. Finance Act 2022 enacted Section 115BBH, taxing virtual digital assets (VDAs) — cryptocurrency, NFTs, and any digital representation of value — at a flat 30 percent. It also inserted Section 194S, requiring TDS on VDA transfers. No new schedule existed to capture this income, so the CBDT created Schedule VDA in the AY 2023-24 forms.
2. Finance Act 2023 tightened the tax regime architecture under Section 115BAC, signalling that the new regime would become the default from AY 2024-25 onward. The AY 2023-24 forms first required an explicit, field-level regime declaration — you could no longer file without actively choosing.
3. Enhanced foreign reporting expanded Schedule FA to require calendar-year (January–December) peak-balance disclosure for foreign accounts and investments, directly feeding India's obligations under FATCA and the OECD Common Reporting Standard (CRS).

The CBDT has refined this same architecture in every subsequent year — adding AIS pre-fill layers, scrip-wise capital gains granularity, and MCA V3 cross-matching for directors. If you are filing for AY 2027-28 today, you are filing on a form that is the direct descendant of AY 2023-24.

Schedule VDA: Reporting Every Crypto and NFT Transaction

What Section 115BBH Actually Says

Section 115BBH taxes any income arising from the transfer of a virtual digital asset at 30 percent flat, plus surcharge and the 4 percent health and education cess. "Transfer" is deliberately wide — it covers outright sale, crypto-to-crypto exchange, gifting above the notified threshold, and using crypto as payment for goods or services.

Two features of this tax are unusually punishing and are frequently misunderstood:

• No deduction except acquisition cost. Exchange fees, brokerage, gas fees, and wallet costs are explicitly disallowed as deductions.
• No set-off, no carry-forward. A loss on one VDA cannot reduce a gain on a different VDA in the same year. It also cannot reduce income under any other head — salary, capital gains, or anything else. Each profitable transaction stands alone as a tax event.

What Schedule VDA Requires Transaction by Transaction

For each VDA transaction during the financial year, Schedule VDA requires you to enter:

• Nature of VDA (Bitcoin, Ether, specific NFT, etc.)
• Date of acquisition and cost of acquisition in rupees
• Date of transfer and sale consideration in rupees
• Net income (positive or negative — losses must still be reported even though they provide no relief)

Do not skip transactions on the assumption that small gains are below a threshold. There is no minimum threshold under Section 115BBH. Additionally, exchanges registered under Section 194S file TDS data with the department against your PAN. If you received VDA proceeds, the department already has the information.

Worked Example — Crypto Gain with a Dead Loss

In FY 2026-27, you buy 0.08 BTC for Rs. 3,60,000 in June 2026 and sell it for Rs. 5,80,000 in December 2026. Simultaneously, you had bought a small altcoin for Rs. 80,000 in April 2026 that crashes and is sold for Rs. 15,000 in November 2026 — a loss of Rs. 65,000.

Tax = 30% × Rs. 2,20,000 = Rs. 66,000 + 4% cess = Rs. 68,640. The altcoin loss is permanently disallowed. Both transactions must still appear in Schedule VDA.

Schedule FA: Foreign Assets Now Have Real Consequences

Who Must File and the Zero-Threshold Rule

Any individual who is ordinarily resident in India and who held a foreign asset at any point during the relevant calendar year must complete Schedule FA. The key word is any point — not just at year-end, not just if the account had activity.

Assets requiring disclosure include:

• Foreign bank accounts (including accounts closed during the year)
• Equity or debt interests in foreign companies or entities
• Foreign immovable property
• Interests in foreign trusts or as a beneficiary of a foreign entity
• Any other foreign capital asset — including foreign stock options not yet vested

There is no minimum balance exemption. A dormant account with USD 200 inherited from a stint abroad must appear in Schedule FA.

Calendar Year vs. Financial Year — a Critical Distinction

Schedule FA uses the calendar year ending 31 December as its reporting period, not the Indian financial year. For AY 2027-28 (ITR covering FY 2026-27), you report foreign assets held during 1 January 2026 to 31 December 2026. You must report the peak balance during this period — not just the 31 March 2027 closing balance. A taxpayer who transferred Rs. 40 lakh to a foreign account in April 2026 and spent it by October cannot simply report a zero balance.

The Penalty for Non-Disclosure Is Not Income-Tax — It Is Worse

Omitting a foreign asset from Schedule FA is not treated as an ordinary filing error. Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the penalty for failing to disclose a foreign asset is Rs. 10 lakh per asset per year. That is in addition to tax on any undisclosed income generated by that asset (at 30 percent) and a further penalty of up to three times that tax amount.

FATCA and CRS: The Department Knows Before You File

India's automatic exchange of financial information under FATCA (with the United States) and the OECD-CRS framework (with 100+ jurisdictions) means that banks in those countries report account details of Indian residents — balances, transactions, and identity information — to the CBDT every year. By the time you open your ITR utility, the department may already have your foreign account details loaded in AIS. If Schedule FA is blank and the AIS shows a foreign account, a notice is nearly certain.

Tax Regime Choice Under Section 115BAC

The Regime Timeline

From AY 2024-25 onward — and continuing in AY 2027-28 — if you take no action, you are taxed under the new regime. This matters because the new regime disallows most deductions and exemptions: Section 80C, HRA, LTA, interest on housing loan under Section 24(b), professional tax, and most others.

When the Old Regime Still Makes Sense

For a salaried taxpayer with a home loan, substantial Section 80C investments, and HRA, the old regime often produces a lower tax outflow. The decision is not automatic. You should run the calculation on the ITR utility or a spreadsheet before the filing deadline — not on the last day. Once you file under the new regime with business income and Form 10-IEA has been submitted, reverting to the old regime is restricted to once in a lifetime.

Impact on AY 2027-28 Filings

For AY 2027-28, the new regime's revised slab structure (as applicable from AY 2026-27 onward under Finance Act 2025) and enhanced rebate under Section 87A make it attractive for taxpayers with income in certain ranges. However, the rebate under Section 87A does not apply to tax computed on special-rate incomes — including VDA income, long-term capital gains under Section 112A, and short-term capital gains under Section 111A. These are computed separately and added to the regular tax. Verify the exact rates notified under Finance Act 2026 before filing, as further revisions may apply for AY 2027-28.

ESOP Disclosure and Capital Gains Reporting

ESOP Perquisite in Unlisted Company Shares

If you exercise Employee Stock Options (ESOPs) in an unlisted company, the perquisite is taxable as salary under Section 17(2) in the year of exercise. The Schedule for salary income in ITR-2 and ITR-3 requires:

• Name of employer
• Date of exercise
• Number of shares exercised
• Fair Market Value (FMV) per share at the date of exercise, as determined by a SEBI-registered merchant banker
• Exercise price per share
• Perquisite = (FMV − Exercise price) × number of shares

This perquisite must match the figure in Form 16 issued by the employer. Discrepancies trigger 143(1)(a) adjustments. If the employer has obtained a merchant banker certificate, ask for a copy — you will need it if the return is selected for scrutiny.

Deferred Tax on Startup ESOPs — Section 192(1C)

Employees of DPIIT-recognised startups may elect to defer TDS on ESOP perquisite. Under Section 192(1C), the TDS is payable by the employer on the earlier of: five years from the date of exercise, the date of sale of shares, or the date the employee ceases employment. If you are a beneficiary of this provision, your Form 16 will reflect deferred tax — ensure Schedule TDS in your ITR captures this correctly and does not double-count.

Capital Gains — Scrip-Wise, Not in Aggregate

AY 2023-24 introduced mandatory scrip-wise reporting for listed equity shares and equity-oriented mutual fund units. For AY 2027-28, this continues — with the added complexity of two capital gains regimes applying to the same financial year if you had sales both before and after a notified budget amendment date.

For FY 2026-27, the capital gains rates applicable (as per Finance (No.2) Act 2024, effective from 23 July 2024) are:

• Section 111A (STCG on equity/equity MFs via STT-paid route): 20 percent
• Section 112A (LTCG on equity above Rs. 1.25 lakh): 12.5 percent, no indexation

Each capital gain must be reported with: name of scrip/fund, ISIN, acquisition date, sale date, cost of acquisition (with grandfathering at 31 January 2018 FMV for pre-2018 holdings), and sale consideration. Reporting in aggregate will result in a defective return notice.

How the 2023-24 Framework Applies in AY 2027-28

The ITR forms for AY 2027-28 are structurally identical to their AY 2023-24 predecessors in terms of disclosure scope. What has changed is the pre-fill depth: AIS now draws from banks, registrars, mutual fund platforms, stock exchanges, GSTN, insurance companies, and overseas reporting institutions. TIS presents the category-wise summary.

When you open the ITR pre-filled JSON in 2026, the following will already be populated from external sources:

• Salary income — from employer TDS filings (Form 24Q)
• Interest income — from banks (SFT-001) and post offices
• Dividend income — from company filings
• Capital gains — from stock exchange/depository reporting (SFT-018)
• VDA transactions — from crypto exchange TDS filings (Section 194S)
• Foreign account balances — from FATCA/CRS exchange data
• High-value transactions — savings deposits, mutual fund redemptions, property registrations

Your job is to reconcile, not merely accept. Incorrect pre-filled data must be corrected, but every correction must be supported by documentation. Corrections without backing documents are flagged in the department's risk-scoring model and can accelerate scrutiny selection.

Common Pitfalls to Avoid

These are the most frequent errors seen in practice — each one results in either a defective return, a 143(1) adjustment notice, or a penalty proceeding:

• Filing ITR-1 as a director or unlisted company shareholder. Both categories are explicitly excluded from ITR-1 (Sahaj). Use ITR-2 even if your only income is salary.
• Skipping Schedule VDA for crypto losses. Loss transactions still require disclosure. If you transacted, the schedule is mandatory.
• Reporting Schedule FA balances as of 31 March. The requirement is the peak balance during the calendar year (1 January–31 December). A March closing balance often understates actual exposure.
• Not matching ESOP perquisite in ITR with Form 16. Any mismatch triggers an automatic adjustment under Section 143(1)(a), generating a demand.
• Accepting pre-filled capital gains without reconciling against broker contract notes. Pre-fill is sourced from SFT filings by brokers and may contain errors, especially for corporate actions (splits, mergers, bonus issues).
• Defaulting to the new regime without computing both options. The ITR utility will compute tax under both regimes — always use this before confirming regime choice.
• Filing without verifying within 30 days. An unverified ITR is treated as not filed. Late verification attracts the same late-filing consequences as a delayed return.

Worked Example: Three Disclosures in One Return — AY 2027-28

Consider a salaried employee — Rahul, a senior engineer at a listed company — with the following profile for FY 2026-27:

Return form: ITR-2 (director of subsidiary, foreign asset holder, VDA income — all three exclude ITR-1).

Regime choice: Old regime, because Rahul has Rs. 1,80,000 in 80C investments, HRA of Rs. 2,40,000, and a home loan. The old regime saves tax compared to the new regime after computing both.

Schedule VDA: One row — Bitcoin; acquisition date; cost Rs. 2,00,000; sale consideration Rs. 3,80,000; gain Rs. 1,80,000. Tax: 30% × Rs. 1,80,000 = Rs. 54,000 + 4% cess = Rs. 56,160. This cannot be offset against anything.

Salary Schedule: Rs. 24,00,000 salary + Rs. 3,00,000 ESOP perquisite = Rs. 27,00,000 gross salary. Must match Form 16 from the unlisted subsidiary and the listed employer (two Form 16s if two employers).

Schedule FA: One row for the US bank account. Date opened: 2019. Peak balance during calendar year 2026 = $400 (equivalent). Mark as "Dormant / nil income." This alone keeps Rahul clean under the Black Money Act.

Tax payable (approximate, old regime after deductions): Compute normally on Rs. 27,00,000 salary less permissible deductions, then add Rs. 56,160 VDA tax separately. Self-assessment tax, if any, must be paid via Challan 280 before filing.

AIS, TIS and the E-Filing Workflow for 2026

Step-by-Step Filing Sequence

1. Log in to incometax.gov.in and download your AIS and TIS from the "Annual Information Statement" section.
2. Cross-check every line in AIS against your bank statements, demat statements (depository-generated), Form 16 (from all employers), and broker contract notes.
3. File AIS feedback for any incorrect entries — with documentary support ready in case of scrutiny.
4. Download Form 26AS to verify TDS credits. Reconcile Form 26AS TDS with Form 16 / Form 16A.
5. Open the offline ITR utility (available on the e-filing portal) or use the online filing mode. Pre-fill the return using the PAN-linked data.
6. Complete every mandatory schedule: VDA (if transacted), FA (if ordinarily resident with foreign asset), capital gains (scrip-wise), salary (with ESOP detail if applicable), and regime choice.
7. Compute tax under both regimes using the utility's built-in comparison.
8. Pay any self-assessment tax due via Challan 280 — Net Banking or NSDL/Protean portal — before submitting the return.
9. Upload the JSON (offline mode) or submit directly (online mode). Save the acknowledgement number (ITR-V).
10. Verify within 30 days using: Aadhaar OTP (fastest), net banking EVC, bank account EVC, demat EVC, or a physical signed ITR-V sent by speed post to CPC Bengaluru.
11. Track processing status and refund on the e-filing dashboard. Respond to any notice under Section 143(1)(a) (adjustment), Section 139(9) (defective return), or Section 142(1) (inquiry) within the stated timeframe.

Due Dates to Protect

Filing even one day after 31 July triggers a late fee of Rs. 5,000 under Section 234F (capped at Rs. 1,000 if total income does not exceed Rs. 5,00,000). You also lose the right to carry forward most capital losses.

Key Takeaways

• Schedule VDA is non-negotiable if you transacted in crypto or NFTs in FY 2026-27 — even if you only booked losses. There is no minimum threshold, and TDS data under Section 194S is already with the department.
• Schedule FA has a zero-rupee exemption limit. Any foreign account, share holding, or property ever held by an ordinarily resident must be disclosed at peak calendar-year balance, not 31 March balance.
• Regime choice must be active, not passive. The new regime is the default for AY 2027-28. If the old regime is more tax-efficient for you, affirmatively select it in the return (or file Form 10-IEA for business income before the due date).
• ESOP perquisite in unlisted company shares must reconcile exactly with Form 16. The merchant banker's FMV valuation is the statutory basis — ask your employer for a copy before filing.
• Capital gains are reported scrip by scrip, not as a lump sum. Accepting pre-filled data without reconciling against broker notes is a common trigger for 143(1) adjustments.
• ITR-1 eligibility is narrower than most people assume. Directors, unlisted company shareholders, VDA income earners, and foreign asset holders must use ITR-2 or higher regardless of income level.
• Verification within 30 days is mandatory. Aadhaar OTP is the fastest method. An unverified return is legally equivalent to a return not filed — all penalties and interest apply from the original due date.