Union Budget  2012 proposes that, with effect from tax year 2011-12, every resident individual who has an asset outside India has to file the tax return mandatorily irrespective of income. In other words, income is not the only criteria to file an income tax return in India.

While the Finance Bill is yet to be passed by the Parliament, CBDT brought out the tax return forms (Forms ITR-2, 3 and 4) in line with the above requirements vide Notification No.14/2012 [F.No.142/31/2011-TPL]/S.O. 626(E), DATED 28-3-2012. The new forms that have been notified include a separate schedule wherein the details of foreign assets are to be reported.

The schedule specifically requires the details of bank accounts, financial interest in any entity and immovable property. It also requires the assessee to furnish the details of ‘any other asset’ and ‘accounts where the individual has signing authority’.

It is very interesting to note that the wordings used in the Finance Bill or in the tax return ‘any asset’ is wide enough to cover all assets held by an individual outside India. It should also be noted that they require specific information like peak balance in bank account during the year.

 Overseas assets to be disclosed may include the following:

‒    Bank accounts – indicating location of the country, name and address of the bank, the account holder’s name and the peak balance maintained in the account during the year;

‒    Financial interests in an entity – mentioning the country name and code, name and address, and nature of the entity where the interest is held and the total investment;

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‒    Immovable property /other asset –country name and code, location of property/asset and total investment;

‒ Details of accounts with signing authority that have not been included in the above together with the name and address of the institution where the account is held, the account holder’s name and the peak balance maintained/investment made during the year

b. Individuals claiming foreign tax relief to mention overseas location’s tax identification number along with details of income earned, taxes paid and relief claimed.

 Other additional information required to disclosed

1. Co-ownership details in respect of house property to be furnished [i.e. Name, Permanent Account Number (PAN) and ownership share of co-owners];

2. Long term capital gains calculated with and without claiming benefit   of  indexation of  cost for inflation to  be reported separately;

3. Detailed information (name,   address and          PAN) of done required for claiming  deduction in respect   of   specified donations;

4. Unique Tax Deduction at Source (TDS) certificate Number and Financial Year in which TDS is deducted to be reported for TDS on income other than salary;

5. Reporting of capital investment and percentage share in the profit of the partnership firms introduced in addition to reporting share of income. Share of income to be reported in schedule IF as well schedule EI (details of Exempt Income);

6. Detailed reporting of Unabsorbed Depreciation loss introduced (applicable mainly in case of business income).

Additionally, the electronic filing of tax return has been made mandatory for individuals having total income more than Rs 10 lakh and for a Resident individual who has any asset outside India.

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0 responses to “New Income tax return filing to create more hassles”

  1. Shirishkumar says:

    Can you please let me know what is the country code for USA? Thanks.

  2. Chandresh says:

    Can anyone answer my following queries : 1. If the individual is the second holder of an asset located outside india, is it required to be disclosed, 2. What if the asset has been purchased by the spouse of the assessee, however, the assessee name appears as the first holder. 3. What are the defination of the word “peak” and “year” with respect to the above changes.

  3. rugram says:

    Reply to Mr. Naveen

    Please read the following article from the Economic Times, Mumbai, dated 1.5.2012. It seems the matter is still not clear. Maybe CBDT would issue a clarification soon.

    Expert Take :

    New Returns Process Likely to be More Taxing for Aam Aadmi

    One should appreciate the intent and focused attention of Indian tax authorities to improve the tax filing experience, like introduction of online tax filing forms and making it mandatory for a specified category, the Centralised Processing Centre, and outsourcing the process to external vendors.
    While the corporate governance policies require companies to mandatorily disclose various aspects to all stake holders, the tax authorities have taken one step ahead to apply ‘disclosure’ principles for individuals.
    The Finance Bill 2012 proposes that, with effect from tax year 2011-12, every resident individual who has an asset outside India has to file the tax return mandatorily irrespective of income. In other words, income is not the only criteria to file an income tax return in India. While the Finance Bill is yet to be passed by the Parliament, tax authorities have acted swiftly and brought out the tax return forms (Forms ITR-2, 3 and 4) in line with the above requirements. The new forms that have been notified include a separate schedule wherein the details of foreign assets are to be reported. The schedule specifically requires the details of bank accounts, financial interest in any entity and immovable property. It also requires the assessee to furnish the details of ‘any other asset’ and ‘accounts where the individual has signing authority’.
    It is very interesting to note that the wordings used in the Finance Bill or in the tax return ‘any asset’ is wide enough to cover all assets held by an individual outside India. It should also be noted that they require specific information like peak balance in bank account during the year.
    On a separate note, if you have income or loss from a jointly-owned house property, there is a need to disclose the relevant share in the property, the name and PAN of the joint owner. Further, if you are claiming deduction for charity and donations, you have to provide the details such as name, address and permanent account number of the donee. If you are claiming relief under the double taxation avoidance agreement for the taxes paid in foreign country, then the details such as country name, tax identification number in that country, income and taxes paid in that country, need to be furnished.
    Additionally, the electronic filing of tax return has been made mandatory for individuals having total income more than . 10 lakh and for a Resident individual who has any asset outside India.
    These disclosures and online filings will help the tax authorities to get more visibility into the tax payer’s data and help them to scrutinise the same in detail. Further, the online filing process helps in quick processing of tax return and issuance of refund, selection of cases for scrutiny on certain criteria, and convenience for tax payers etc.
    Although, the above requirement may bring more information to the tax authorities, but the same brings a lot of hassles for individuals and the tax return filing will become a complicated task going forward.
    An important question that comes to one’s mind is whether the above provisions would be applicable to an individual who is a Resident, but Not-Ordinarily Resident (‘NOR’). As per the provisions of the Income Tax Act, a person has to be a Resident to become a NOR and hence, it could be said that, a NOR individual would also be required to report his foreign assets. On the other hand, the income of a NOR, which is sourced and received outside India is not taxable in India and hence not required to be reported in the tax return. The same principle could be applied for disclosure of foreign assets as well. Given the ambiguity, a clarification from the tax authorities on the applicability of disclosure norms to a NOR will be of great help.
    Though, the major changes in the tax return forms and filing process is a well-thought initiative, the same should not result in undue hardship to an individual and people should be provided enough time to organise their documents to meet the new requirements.
    (Views expressed are personal)

  4. Naveen says:

    Hi will somebody tell / clarify whether Resident which has been mentioned in the notification includes ROR or will it include RNOR also……..

  5. C.GURUVEL says:

    IF THE ASSESSEE, HAS NOT DISCLOSED THE FOREIGN ASSETS, HOW THE I-T DEPARTMENT WILL COME TO KNOW

  6. rugram says:

    Schedule FA (Foreign Assets): I dont have anything to report in this Schedule but would someone be able to clarify the following?
    What is the rupee rate to be taken for conversion of the foreign currency – would it be on the day of the ‘peak balance/date of investment’? This would involve quite some work at least for the first time (AY 2012-13) as the past details of foreign currency rates on the dates of investment/peak balance would not be readily available.One would notalso be able to predict the exact date on which the ‘peak balance’ would occur andso this would mean that one has to keep a record of the daily conversion rate for all 365 days of the FYin order to comply with the requirement of this Schedule. Would it not have been better if the information was called for in the currency of the bank balance/investment as this would be readily available with the assessee?

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