1. Reporting overseas assets in income tax returns a must

Reporting overseas assets in income tax returns a must

Reporting of foreign assets and investments in I-T returns was made mandatory in...

Published: February 3, 2015 12:09 AM

Reporting of foreign assets and investments in I-T returns was made mandatory in AY12-13, i.e., tax year 2011-12. Only Indian residents with the status of ‘resident and ordinarily resident’ need to report the details, irrespective of the value of such foreign assets/investments. This does not apply to those regarded as ‘not ordinarily resident’ in India (NOR) — an individual present in India for less than 730 days over the last seven tax years, or who hasn’t been a tax resident for nine out of the last 10 tax years.

Six types of global assets have been identified: foreign bank accounts, financial interest in any entity, immovable property, other assets in the nature of investments (excluding personal effects, any account located outside India in which one is the signing authority, details of trusts, created under the laws of a country outside India, in which one is a trustee, beneficiary or settler.)

Who is to report. Though such reporting of foreign assets has to be done by a person resident in India, the country has many foreign nationals or persons of Indian origin working here. There is a large foreign student community as well. Given these individuals and their accompanying spouses could have assets overseas, a reporting requirement is triggered where these individuals are considered ‘residents in India’. Accordingly, a foreign national/his or her spouse/a student having overseas bank account or investments would be covered under this reporting requirement if their presence in India exceeds 182 days even in the first year of arrival.

Where to report. One has to evaluate the correct form(s) for filing returns online. One cannot use SAHAJ and SUGAM forms if he has assets located outside India, even if s/he has only salary income/interest income.

What to report. Foreign bank accounts: While reporting the bank balance in such account(s), the information to be provided includes country name, country code, name and address of the bank, name of the account holder and the peak balance in the foreign bank account during the year after converting the same into Indian currency.

Financial interest in any entity: It is applicable to the following: (i) Owner of record or holder of legal title of any financial account, irrespective of whether he is the beneficiary or not. This also includes the owner of record or holder of title being an agent, nominee, attorney or a person acting in some other capacity on behalf of the resident assessee with respect to the entity; (ii) a corporation in which one owns, directly or indirectly, any share or voting power; (iii) a partnership in which one owns, directly or indirectly, an interest in partnership profits or an interest in partnership capital; (iv) a trust of which one has beneficial or ownership interest; and (v) any other entity in which one owns, directly or indirectly, any voting power or equity interest or assets or interest in profits.

Details of immovable property outside India. The value of investment needs to be filled up as peak investment (at cost) in immovable property held during the year after converting it into Indian currency. Investment in other assets has a wide range, including vehicles and jewellery. However, investments in the nature of stock-in-trade or assets used for the purpose of business are not required to be reported here.

The taxman is on the lookout for residents with taxable income from foreign assets. Failure to disclose such income amounts to wilful concealment, leading to fines. Such cases can be reopened for up to 16 years.

The writer is managing partner of Nangia & Co. With inputs from Neha Malhotra

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