Simply computing your taxable revenue and revenue tax payable, and paying the correct quantity of your revenue tax legal responsibility will not be the tip of your revenue tax obligations. You additionally want to make sure that your return of revenue is correctly crammed up and filed on time. One of many essential elements of the revenue tax return that it’s good to take note of is Schedule FA, the disclosures regarding overseas property.
This schedule is to be crammed in by all individuals who’re resident and ordinarily resident in India in the course of the 12 months. It’s not required to be crammed in by non-residents or by individuals who’re resident and never ordinarily resident in India in the course of the 12 months.
Usually, the individuals who would want to make disclosures underneath this schedule can be individuals who’ve invested overseas or acquired property utilizing the Liberalised Remittance Facility, staff who’ve been granted and have exercised inventory choices and been allotted shares of overseas firms, NRIs who’ve returned to India and have retained property overseas, in addition to expatriates who’ve been in India for greater than two years and have due to this fact grow to be resident and ordinarily resident in India.
The target of this schedule is to match the knowledge acquired from the US and different jurisdictions underneath FATCA and Widespread Reporting Commonplace (CRS), which give particulars to the Indian tax authorities about individuals with an Indian connection having monetary and different property in these jurisdictions.
It’s doable that you could have acquired the overseas property by an Indian middleman. As an example, you could have acquired shares of overseas firms by a transaction facilitated by your native financial institution, or you could have acquired crypto-currencies on-line.
The shares of a overseas firm, or models of a overseas mutual fund are considered overseas property, no matter from whom they’re bought. Crypto-currencies saved in a overseas crypto-wallet would even be considered overseas property. Nevertheless, when you maintain shares of an Indian mutual fund, which has invested in shares of overseas firms or abroad change traded funds, the models that you just maintain, being in an Indian fund, can be considered home property, and never overseas property.
One level to notice is that you’re additionally required to state the nation through which the asset is held. That won’t essentially be the identical nation through which the asset was acquired. As an example, when you maintain shares of a US firm acquired on the Singapore Inventory Alternate, the nation through which the asset is held must be disclosed as USA, and never Singapore. It is because it’s the US firm which might report the very fact of getting an Indian shareholder underneath FATCA.
An attention-grabbing side is that the disclosure of the overseas property must be vis-à-vis the previous calendar 12 months. Subsequently, if in case you have acquired a overseas asset after 31 December 2021, that’s not required to be disclosed within the return of revenue that you just file for the monetary 12 months 2021-22, however within the following 12 months’s tax return. Once more, this requirement stems from the truth that the reporting underneath each FATCA and CRS is made on the premise of the calendar 12 months, and never the Indian 12 months of taxation from April to March. Subsequently, this may facilitate comparability by the Indian tax authorities of the knowledge acquired underneath FATCA/CRS with the knowledge supplied within the revenue tax return.
The language used within the schedule is a bit complicated. There’s a reference to depository accounts and custodial accounts. Depository Account doesn’t imply demat accounts in a depository, however deposits with a monetary establishment. These phrases are the identical as these used underneath FATCA/CRS, mainly referring to deposits held by monetary establishments and monetary property held by a depository/portfolio supervisor for purchasers, respectively.
One other side to be saved in thoughts is that in case of overseas retirement accounts, the place the revenue is taxable within the overseas nation on retirement, whereas one might choose to pay tax in India additionally on withdrawal, but the overseas retirement account balances in addition to revenue earned in the course of the calendar 12 months have to be disclosed within the Schedule FA.
Nice care must be exercised in filling up Schedule FA, as summons are being despatched by the tax authorities to confirm whether or not overseas property, particulars of that are acquired by them underneath FATCA/CRS, have been disclosed by the taxpayer or not. Failure to reveal a overseas asset can entice a penalty of as a lot as ₹10 lakh, underneath the Black Cash (Undisclosed International Revenue and Property) and Imposition of Tax Act, 2015, although the overseas asset might have been acquired out of disclosed revenue.
Gautam Nayak is associate, CNK & Associates LLP.
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