Disclosure of overseas belongings in I-T returns

Just computing your taxable revenue and revenue tax payable, and paying the correct quantity of your revenue tax legal responsibility is just not 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 the essential facets of the revenue tax return that you have to take note of is Schedule FA, the disclosures referring to overseas belongings. 

This schedule is to be crammed in by all individuals who’re resident and ordinarily resident in India through the 12 months. It is just not required to be crammed in by non-residents or by individuals who’re resident and never ordinarily resident in India through the 12 months. 

Typically, the individuals who would want to make disclosures below this schedule can be individuals who’ve invested overseas or acquired belongings utilizing the Liberalised Remittance Facility, workers 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 belongings overseas, in addition to expatriates who’ve been in India for greater than two years and have subsequently develop into resident and ordinarily resident in India.

The goal of this schedule is to check the knowledge obtained from the US and different jurisdictions below FATCA and Common Reporting Standard (CRS), which offer particulars to the Indian tax authorities about individuals with an Indian connection having monetary and different belongings in these jurisdictions.

It is feasible that you’ll have acquired the overseas belongings by means of an Indian middleman. For occasion, you’ll have acquired shares of overseas firms by means of a transaction facilitated by your native financial institution, or you’ll have acquired crypto-currencies on-line. 

The shares of a overseas firm, or models of a overseas mutual fund are thought to be overseas belongings, regardless of from whom they’re bought. Crypto-currencies saved in a overseas crypto-wallet would even be thought to be overseas belongings. However, if you happen to maintain shares of an Indian mutual fund, which has invested in shares of overseas firms or abroad trade traded funds, the models that you simply maintain, being in an Indian fund, can be thought to be home belongings, and never overseas belongings.

One level to notice is that you’re additionally required to state the nation by which the asset is held. That might not essentially be the identical nation by which the asset was acquired. For occasion, if you happen to maintain shares of a US firm acquired on the Singapore Stock Exchange, the nation by which the asset is held must be disclosed as USA, and never Singapore. This is as a result of it’s the US firm which might report the very fact of getting an Indian shareholder below FATCA.

An attention-grabbing side is that the disclosure of the overseas belongings needs to be vis-à-vis the previous calendar 12 months. Therefore, in case you have acquired a overseas asset after 31 December 2021, that isn’t required to be disclosed within the return of revenue that you simply file for the monetary 12 months 2021-22, however within the following 12 months’s tax return. Again, this requirement stems from the truth that the reporting below each FATCA and CRS is made on the idea of the calendar 12 months, and never the Indian 12 months of taxation from April to March. Therefore, this may facilitate comparability by the Indian tax authorities of the knowledge obtained below FATCA/CRS with the knowledge supplied within the revenue tax return.

The language used within the schedule is a bit complicated. There is 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 below FATCA/CRS, principally referring to deposits held by monetary establishments and monetary belongings held by a depository/portfolio supervisor for shoppers, respectively.

Another 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 through the calendar 12 months have to be disclosed within the Schedule FA.

Great care must be exercised in filling up Schedule FA, as summons are being despatched by the tax authorities to confirm whether or not overseas belongings, particulars of that are obtained by them below FATCA/CRS, have been disclosed by the taxpayer or not. Failure to reveal a overseas asset can appeal to a penalty of as a lot as ₹10 lakh, below the Black Money (Undisclosed Foreign Income and Assets) 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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