Income Tax return: No relief for Indian citizens with foreign assets

The
Income Tax Department will retain the detailed questions on foreign assets and
income of resident Indian citizens in the revised tax return forms, to be
issued shortly. The relaxation announced by the finance ministry on Sunday
pertains only to expatriates, who would be required to disclose foreign assets
acquired before their India stint only if those assets do not yield income in
the year for which return is filed. Resident Indian citizens are excluded from
this relief.

“In the
absence of disclosure by taxpayers, the department will have to issue notices
seeking clarification every time information is received on the foreign assets
and income of a resident Indian citizen from other nations under information
exchange agreements. An upfront disclosure of such assets and income would
spare the assessee from such notices,” said a person familiar with the
department’s move.
The finance ministry announced that the
revised tax return forms to be notified soon will not have the prying questions
on foreign travel details and balances in bank accounts of assesses that were
originally sought in ITR2 when it was brought out last month. The ministry’s
statement however, remained conspicuously silent on the expanded list of
questions on foreign assets and income of resident Indian citizens that were
also introduced in ITR2 to be filed by individuals having income from more than
one house property but do not have income from business or profession.
Sources said that everything that has not
been specifically excluded in the ministry’s statement would be retained. The
ITR2 brought out last month increased the depth of foreign asset and income
reporting. In the case of immovable property abroad, for example, the number
columns to give additional information was increased to 10 from three given in
the return for 2014-15 assessment year.
Similarly,
the scope of foreign bank account details to be disclosed in the return for
2015-16 assessment year too was widened to include the interest accrued in
those accounts and the amount offered to tax in India. In the return for the
year before, assessees were asked to disclose only the name of the account
holder, account number, bank address and the peak balance. Also, in the case of
financial interest in a foreign entity, reporting requirement has been expanded
to include the nature of interest, date since it has been held, the income
accrued, its nature and the amount offered to tax in India under the return.
The same is true in the case of trusts set up outside the country too.
While
seeking information about foreign assets of resident Indian citizens from other
countries under tax treaties is a routine practice, the tax administration
recently decided to also seek help of other nations to recover tax dues by
attaching foreign assets of defaulters. In nearly half of the 94 double tax
avoidance agreements (DTAA) and in some of the 15 tax information exchange
agreements (TIEA) India has with other countries, there are provisions to seek
such assistance. This is possible only in cases where the defaulter has no
further legal recourse available in India to prevent the recovery of the tax
dues by way of attaching assets, had these been located in India.

Taxpayers have time till August 31, 2015 to file returns as per the revised forms.
E-filing software would be ready in the tax department’s website by June 3.

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