Bank accounts where the specific has the authority to sign (for instance minor children’s accounts) are also required to be reported. Individuals qualifying as ordinary residents of India for the purpose of taxation are gratified not only to offer all their incomes, including those earned outside India, to tax in India but to also disclose details of assets held outside India in the Income Tax Return Form
What this article says
If you look back at the journey of income tax return, since the manual filing of SARAL Forms to e-filing at the present day, the first thing that attacks is the, data necessity in the current tax forms vis-à-vis what it used to be in the past. W hat once used to be a one or two-pages form is now successively to well over 45 pages. Though the scope of taxation has not increased considerably, mandatory disclosures by individual taxpayers in terms of number of days of stay in India, directorship held during the relevant financial year (FY), assets and liabilities, etc., have enlarged manifold in the last few years. Disclosures mainly related to foreign income and assets have become exhaustive.
In this article we have outlined the disclosure necessities in the tax return on foreign assets and stock awards.
Abroad assets and financial interest
Entities qualifying as ordinary residents of India for the persistence of taxation are obliged not only to offer all their incomes, including those earned outside India, to tax in India but to also issue details of assets held outside India in the Income Tax Return Form (Schedule TR-FA). Both immovable and movable assets are sheltered under this schedule. The categories of assets that required to be listed in this schedule are bank accounts, securities accounts (demat/ share-trading), shares or securities, insurance contracts, immovable property, trusts in which the specific is a trustee or beneficiary and any other asset outside India held at any time during the calendar year 2021. It is mandatory to note that bank accounts where the individual has the authority to sign (for instance minor children’s accounts) are also mandatory to be reported. The details to be provided in respect of foreign assets are pretty comprehensive. For instance, where a bank account is held outside India, an individual is compulsory to report its account number, name of the bank, branch address, date of account opening, maximum balance maintained in the account during the FY, earned income and closing balance. Similarly, for an immovable property, details such as cost, address, zip code of country, date of procurement, ownership (whether direct or beneficial) and income earned from such a property are required to be reported in the schedule. Given that the financial years of other countries do not exactly align with that of India, the details of the foreign assets (both movable and immovable) required to be provided for the calendar year 2021 of a particular financial year 2021-22. The individual is compulsory to provide cost (of investment in property, investment in shares) rather than market value. Further, the amounts in foreign currency required to be converted into INR using the telegraphic transfer buying rate of the State Bank of India.
Any asset attained during the period 1 January 2022 to 31 March 2022 need not be disclosed in the calendar of foreign assets in the tax return for FY 2021-22. However, any income earned from this asset during the same period would still be taxable in India and requires to be mentioned in proper schedule (such as income from house property or income from other sources) in the Tax Return Form.
Virtual Digital Assets (VDAs)
The Union Budget 2022 had announced taxation of Virtual Digital Assets. When it comes to the tax return, VDAs would require to be disclosed under “Any other Capital Asset held (including any beneficial interest) at any time during the calendar year ending as on 31 December 2021". As the taxation of VDAs is effective 1 April 2022, we could suppose more disclosure necessities in the tax return which will be notified for FY 2022-23.
Shares allotted to individuals as part of ESOP by the employer are involved in the salary income as perquisites. Any shares achieved through this mode need to be disclosed in Foreign Assets (FA) schedule if the shares are held outside India. This reporting is mandatory, regardless of the quantum of the individual’s taxable income.
If the shares are held in Indian companies and if the individual’s income exceeds ₹50 lakh for FY 2021-22, disclosure is essential in Schedule of Assets and Liabilities (Schedule AL) with the rate of shares held as on 31 March 2022 (end of FY 2021-22). The tax return Form of FY 2021-22 includes the ESOPs Schedule which is a discrete feature, applicable for ESOPs issued by eligible start-up companies. This schedule entails an individual to report the entire movement of shares in his portfolio and the applicable taxes. ESOPs schedule would help entities keep track of their unutilised options and deferred tax. While the above necessities might sound burdensome, one has to appreciate the fact that these days tax returns are prefilled with several data points, such as salary income, bank interest, taxes paid etc. Further, these data necessities in the tax return have facilitated quick processing of tax returns. Refunds are issued much faster these days than earlier when the Forms were modest.
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