By Ashley Coutinho
Despite a much-improved experience, foreign portfolio investors (FPIs) continued to grapple with a host of issues while filing income tax returns this year.
FPIs are required to maintain Form 10F and provide the same along with other documents when asked by the income tax officer to claim tax treaty benefits. This year, however, the CBDT issued a notification in mid-July, making it mandatory to file Form 10F electronically for tax payers claiming tax treaty benefits. A digital signature certificate (DSC) is required for furnishing Form 10F electronically, but non-corporate FPIs are typically not required to obtain a DSC.
“If you are not a company, you do not need DSC for signing tax returns. Non-corporate entities can electronically transmit the data and subsequently submit the physically-signed acknowledgment copy with CPC. Using a DSC only for electronically furnishing Form 10F is a practical challenge,” said Sunil Badala, partner and head, financial services, tax, KPMG.
The tax return form has fields to furnish balance sheet-related items and profit and loss account details. Until last year, if an FPI did not fill in these details while uploading, tax returns did not throw up an error. This year, however, there was an error message displaying for a potential defect in returns to be filed.
“FPIs carry investment activities in India, and not business activities. These schedules for balance sheet and profit and loss account items should not apply. We are hoping that these returns are not flagged as defective when CPC processes them,” said Badala.
A notice for defective return could be sent for reasons such as not submitting returns in the prescribed format, not attaching relevant books of account, claiming TDS as refund and not providing complete income details.
Assessees are usually given 15 days to rectify the defects, failing which it is deemed that they have not filed any return of income.
FPIs also faced issues with respect to pre-filling of TDS, advance tax and self-assessment tax information. A pre-filled file includes ready-made data filled by the income tax department based on details sourced from Form 26AS. However, this year, files did not contain pre-filled entries with respect to advance tax and self-assessment tax and had to be manually filled in. Also, TDS entries showed a mismatch in details, said people familiar with the matter.
First-time non-resident assessees have to register themselves on the income tax portal for filing returns by providing their mobile number and email ID. An OTP gets generated after that which is valid for 15 minutes. At the time of registration this year, OTPs that got generated were sent to the email IDs of assessees but not to their mobile numbers.
“The filing process was seamless vis-à-vis the previous year. However, some issues remain,” said Suresh Swamy, partner, Price Waterhouse & Co. “The income tax utility should be released along with the notification of the income tax forms to provide sufficient time for preparation of income tax returns. The technical glitch on pre-fill of TDS, advance tax and self-assessment tax should be plugged and the registration process for non-resident assessees could be smoothened further.”
Last year, the new I-T portal had experienced a slew of glitches, resulting in hundreds of notices being slapped for defective returns.