Below is a table where, Income tax department has released a list of FAQ discussing various situations where an Income tax return could be considered as defective and how one can resolve such defect.
| Question No. | Relevant ITR Types | Description | Response |
| 1 | ITR- 6 – PFA/ Defective | I have offered income of “Chapter- XII-G (tonnage)” in Schedule BP. While calculating the tax MAT is getting calculated on the same, but provisions of MAT are not applicable in this case. How to disclose the same in return of income? | While calculating MAT, any incomes on which MAT is not applicable needs to be reported at Sl. No. 6k – Others. Accordingly, tonnage tax income also needs to be reduced at Sl. No. 6k.
Also check the rules regarding filing of relevant statutory form(s). |
| 2 | ITR- 6 – PFA/ Defective | If a foreign company is selecting to offer income only under section 44AE/44B/44BB/44BBA/44BBB/44D,
is it mandatory to fill Sl. No. 62 of profit & loss account? |
Yes, if a foreign company is selecting to offer income only under section 44AE/ 44B/ 44BB/ 44BBA/ 44BBB/ 44D it is mandatory to declare receipt & profit from the same at Sl. No. 62 of profit & loss account.
However, if the income is not offered under the said sections, the audit liability needs to be checked by the assessee and appropriate audit reports need to be filed. Taxpayer is required to select “Yes” in SI.No. B of Audit information and also required to select the condition “ bii or biii” by virtue of which he is liable for audit. |
| 3 | ITR- 6 – PFA/ Defective | If a Company is declaring business income other than presumptive income, then is it mandatory to fill manufacturing account / trading account / profit and loss account / balance sheet? | Yes, if a Company is declaring business income other than presumptive income, then it is mandatory to maintain books of account therefore it is also mandatory to fill manufacturing account / trading account / profit and loss account as applicable & balance sheet. |
| 4 | ITR-3, 5 & 6 – PFA/Defective | Can Income chargeable to tax at special rate be shown only in Part-B- TI, without giving the details of the same in the relevant schedules? | Income chargeable to tax at special rate needs to be shown in the relevant income schedules along with Part B-TI. |
| 5 | ITR-3, 5 & 6 – PFA/Defective | I was trying to file return after due date by claiming loss from Business & profession which is on account of “Unabsorbed depreciation”. Can the said losses be carried forward to next year? | If the return is filed after due date, then Business loss cannot be carried forward to next year as per the Act. Further if the loss in Business & profession is on account of unabsorbed depreciation then the same needs to be reduced from Schedule CFL & to be entered in Schedule UD to carry forward the same to next year. |
| 6 | ITR-3, 5 & 6 – PFA/Defective | If the return for previous years were filed after due date, then brought forwarded loss from those years can be adjusted from current year income? | If the return for any year was filed after due date, then the loss is not allowed to be carry forwarded to next year, hence the same is not allowed to be adjusted in current year also except below.
1. House Property Loss 2. Unabsorbed Depreciation 3. Allowance under section 35(4) |
| 7 | ITR- 6 – PFA/ Defective | In earlier years either me or persons known to me have received notice of 37BA proposing to restrict credit for TDS. What precautions to be taken at the time of filing of return to avoid the same? | It should be ensured to disclose the gross receipts shown in Form 26AS on which credit for TDS has been claimed, in the respective income schedules in return of income as applicable. If the income is not offered to tax during this year, then credit for the corresponding TDS can only be claimed in the year in which the income is offered to tax. Thus, the assesses has the option of carry forward of the said TDS to the subsequent years. |
| 8 | ITR-3, 5 & 6 – PFA/Defective | What precautions to be taken to claim TDS/TCS deducted/collected in the hands of others? | Before claiming credit of TDS/TCS from other PANs, please ensure that the other assessee has provided the requisite details in the TDS/TCS schedules of his return of income, including the claimant’s PAN and the extent to which credit is being claimed. |
| 9 | ITR-3, 5 & 6 – PFA/Defective | How to enter quarterly breakup in schedule CG? | In Schedule CG quarterly breakup to be entered on the basis of applicable tax rate. Further the same should match with applicable rate wise capital gain income remaining after set- off in column 5 of Schedule BFLA. |
| 10 | ITR 1&4 – PFA/Defective | Whether ITR 1 or ITR 4 can be filed if taxpayer wants to disclose the special rate incomes in the ITR? | If Taxpayer has received any special rate income like Income from lottery, Income from transfer of property, Income from virtual digital assets etc. then the taxpayer is not eligible to file the ITR 1 and ITR 4 and taxpayer should file other ITR type. |
| 11 | ITR 2,3,5,6 – PFA/Defective | Whether current year losses can be carried forwarded to next year without adjusting the same against the current year income? | In Schedule CYLA, current year losses will not be allowed to be carried forward to the next year to the extent of incomes available for set off. |
| 12 | ITR 1,2,3,4 – PFA/Defective | Whether deduction u/s. 80DD or 80U can be claimed without filing the form 10IA? | Taxpayer is required to e-file the form 10IA to claim the deduction u/s. 80DD or 80U. |
| 13 | ITR-3, 5 & 6 – PFA/Defective | Can I adjust brought forward business loss or brought forward depreciation against the presumptive income declared u/s. 44BB or 44BBB? | No. Taxpayer cannot setoff the amount of brought forward business loss or brought forward depreciation against the presumptive income declared u/s. 44BB or 44BBB. |
| 14 | ITR-3, 5 & 6 – PFA/Defective | How to disclose income received from Virtual Digital Assets (VDA) in the ITR? | In case taxpayer has earned any income from sale of virtual digital assets then he is required to disclose the details like sales consideration, purchase consideration, date etc in the schedule VDA. Please note that setoff of losses will not be allowed against the income from transactions in virtual digital asset. Further, taxpayer is required to ensure that the value of sale consideration mentioned in column 6 of schedule VDA is not less than the amount of gross receipts mentioned against TDS u/s. 194S in the form 26AS. If the income shown in the ITR at the requisite schedule / SI.No. is less in comparison to the income in form 26AS then the provisions of section 139(9) may be invoked. |
| 15 | ITR-3, 5 & 6 – PFA/Defective | How to disclose income received from winning from lottery, crossword puzzles, races, card games etc. in the ITR? | In case taxpayer has received any income from winning from lottery, crossword puzzles, races, card games etc. then he is required to disclose such income in SI.No. 2(ai) of schedule OS. Further, taxpayer is required to ensure that income shown in SI.No. 2(ai) of schedule OS is not less than the amount of gross receipts mentioned against TDS u/s. 194B in the form 26AS. If the income shown in the ITR at the requisite schedule / SI.No. is less in comparison to the income in form 26AS then the provisions of section 139(9) may be invoked. |
| 16 | ITR-3, 5 & 6 – PFA/Defective | How to disclose Income from the activity of owning and maintaining race horses in the ITR? | In case taxpayer has received any income from the activity of owning and maintaining race horses then he is required to disclose such income in SI.No. 8(a) of schedule OS. Further, taxpayer is required to ensure that income shown in SI.No. 8(a) of schedule OS is not less than the amount of gross receipts mentioned against TDS u/s. 194BB in the form 26AS. If the income shown in the ITR at the requisite schedule / SI.No. is less in comparison to the income in form 26AS then the provisions of section 139(9) may be invoked. |
| 17 | ITR-3, 5 & 6 – PFA/Defective | How to disclose Income by way of winnings from online games in the ITR? | In case taxpayer has received any income by way of winnings from online games then he is required to disclose such income in SI.No. 2(aii) of schedule OS. Further, taxpayer is required to ensure that income shown in SI.No. 2(aii) of schedule OS is not less than the amount of gross receipts mentioned against TDS u/s. 194BA in the form 26AS. If the income shown in the ITR at the requisite schedule / SI.No. is less in comparison to the income in form 26AS then the provisions of section 139(9) may be invoked. |
| 18 | ITR-3, 5 & 6 – PFA/Defective | in Part A – Other Information, why the entry at Sl. No. 10(h) “Any sum payable to a micro or small enterprise beyond the time limit specified in the Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006” is not allowed? | Since the provisions of disallowance are applicable from the AY 2024-25, allowance on payment basis is applicable only from the AY 2025-26. Thus, taxpayer cannot enter any amount in the field at Sl. No. 10(h) “Any sum payable to a micro or small enterprise beyond the time limit specified in the Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006” in Part A – Other Information. |
To read the FAQ issued by Income tax department CLICK ME.
Although Income tax department has tried to cover many defects, it has still not answered the question where, assessee is being issued defective notice where he has offered any income to tax under the head income from other sources and TDS has been deducted u/s 194C, 194D, 194H or 194J or any such section as Income tax – TIS, consider such income as business receipt and accordingly they believe that such income should be offered only under the head Income from PGBP which is not true as such disclosure is at the discretion of assessee.
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