Reporting of foreign assets, income in your tax returns

Written by Sreenivasulu Reddy | Updated: Jul 30 2013, 20:28pm hrs
With increasing cross-border movement of employees, the number of people coming into and going out of India is increasing. As per the Indian tax laws, a reporting requirement will be triggered if taxpayers have assets located outside India and if they qualify as Resident and Ordinarily Residents (ROR) in India. As the due date to file the tax returns is just round the corner, it is important to familiarise and comply with this additional reporting requirement.

The Finance Act, 2012, made it mandatory for the RORs having foreign assets to file a tax return electronically using the relevant form, irrespective of their income.

This may even be applicable to spouses/family members (qualifying as ROR) who do not have any income in India, but hold assets overseas. Income is not only the criteria to file the tax returns in India now.

As per the tax return forms, the following categories of foreign assets have to be disclosed in Schedule FA foreign bank accounts, financial interest in any entity, immovable property, signing authority in any institution, details of any trust in which the taxpayer is a trustee and any other assets in the nature of investments.

The information to be reported includes name of the bank, account number, peak balance during the year, address and cost of the immovable property, name, address and nature of the institution in which the taxpayer has financial interest, the details of foreign trust, etc. The value should be in rupees for reporting purposes and the SBI buying rate on the date of peak balance/investment should be considered to convert foreign currency into rupees.

Revenue authorities have also changed the manner and detail in which the global income needs to be reported in the tax return forms. A new schedule called Schedule FSI has been introduced to disclose the overseas income under the various heads of income. Also, taxpayers have to provide further details like overseas income to which the provisions of treaty applies and the Tax Identification Number (TIN). The tax payers may disclose their passport number in case TIN is not available.

The above disclosures may help authorities to track and question unaccounted overseas money/assets. Failure to disclosure of such overseas assets/income will amount to willful concealment and may lead to penalty. Also, taxpayers who claim the treaty relief are now under the scanner, and should prove their eligibility for such claims. Though the disclosure of foreign assets is a welcome move, this may pose a challenge for RORs with no taxable income to gather such information for reporting purposes.

The writer is senior tax professional, EY. Views expressed are personal