Most individuals who have travelled outside India for jobs, open a bank account in the visited country. In most cases, the account is not closed. Then, there are some individuals who own a residential house property outside India. They may not go there or have any taxable income. Yet, all individuals falling in any of the above categories need to file their income tax return online, declaring all foreign assets. The new tax laws are not applicable to non-residents. Only residents and not-ordinarily residents are obliged to file ITR with details of foreign assets even if there is no taxable income.
E-filing Made Mandatory to check Black Money
Those who became residents of India and failed to report global income in the past 16 years would be under the scanner of Income Tax Department. In order to avoid last minute rush while filing ITR in July 2012, it’s already time to look at these assets or financial interests and ensure that tax liability has been discharged. Till now, the tax man was allowed to go back to up to 6 years only. His inability to reopen assessments older than 6 years was used by some to convert black money into white money. For example, one can buy an NSC from post office by cash payment. In such transactions, the money that comes back to the taxpayer at the end of the term (usually more than 6 years) is official and cannot be questioned by the tax department.
In a first of its kind estimate released by the government recently, around $500 billion (Rs 24.5 lakh crores) deposited in tax havens abroad is held by Indians. The intent of the government is to detect the undisclosed income through these foreign assets by ensuring that they are reported in the ITR. Hence, all residents of India who have any asset located outside India or are a signing authority in any account outside India will have to e-file an income-tax return even if their taxable income is below the basic exemption limit.
Alongside, the government has proposed levying a tax of flat 30 per cent on undisclosed money, credits, investments and expenditures, irrespective of the income slab of the individual. Moreover, a penalty of up to 300% of the tax amount, interest and prosecution can be levied on undisclosed income.
To strengthen its efforts to control black money flow, the wealth tax laws are also proposed to be changed under DTC to ensure that those amassing wealth outside pay due taxes.
ITR filing for Taxpayers with Assets/Accounts Abroad
Sahaj (ITR 1) and Sugam (ITR 4 S) will not be applicable for person having foreign assets. The tax authorities have introduced a new ITR 2 form, which includes additional fields seeking details of foreign assets in the Income Tax Return (ITR) forms for the Assessment Year 2012-13. Taxpayers, who hold foreign bank accounts or properties, will now have to furnish details of their foreign assets which include information like:
- Country name
- Address of the bank
- Name mentioned in the account
- Peak balance during the year, after converting the value of the foreign currency in INR
Similar information will also have to be provided by the taxpayer to I-T authorities if s/he holds financial interest in any entity abroad, immovable property overseas and or any other asset outside India. The Income Tax Department, in the new ITR, has also asked the taxpayer to furnish the details of account/accounts abroad in which the taxpayer has “signing authority”.
To ensure that you are complying with all the applicable income tax laws as updated by Budget 2012, file your ITR using the Salary eFile Premium package. The service includes automatic selection of the new ITR form, auto-computation of taxes, auto-upload of return, after review by a tax expert. Additionally, you can keep your tax documents secure in an online Tax Vault for 16 years.