Taxpayers have to be vigilant concerning the particulars in ITR

A well known coverage goal of the federal government is to widen the tax base and convey unaccounted revenue and wealth to tax. In doing so, the income-tax (I-T) division gathers data from completely different sources reminiscent of banks, mutual fund homes, and international tax authorities, in addition to the knowledge furnished by the taxpayer. The data collected is validated and cross-verified utilizing knowledge analytics. The reporting necessities within the I-T return (ITR) kinds have been enhanced over a time period. The  data being collected immediately from taxpayers now contains particulars of directorships held, particulars of funding in unlisted fairness shares and a separate Assets and Liabilities schedule, which is relevant the place the full revenue of the taxpayer throughout the monetary yr exceeds ₹50 lakh. This is clearly supposed to determine shell firms, dummy directorships, unaccounted belongings, and so forth. 

An particular person who’s a director or has invested in unlisted fairness shares or has a complete revenue exceeding ₹50 lakh can solely file ITR-2 (no enterprise revenue) or ITR-3 (with enterprise revenue). An particular person, who’s a director in an organization, has to furnish the title, sort (home or international) and PAN of the stated firm. Such a person can also be required to furnish the director identification quantity (DIN) and point out whether or not the corporate’s shares are listed in a acknowledged inventory change in India.

If the person is a director in a international firm, then DIN is just not required and the PAN of the international firm must be talked about provided that such international firm has been allotted a PAN. In case of a person qualifying as non-resident, who’s a director solely in a international firm and such international firm doesn’t have any revenue acquired in India, or accruing or arising in India, the directorship particulars of such a international firm are usually not required to be reported within the ITR. A resident particular person is required to furnish particulars of directorship for each Indian in addition to international firms. 

Another extra requirement is linked with funding in unlisted fairness shares. An particular person who has invested in unlisted fairness shares of an organization is required to furnish particulars of title, sort and PAN of the corporate, opening steadiness of the shares with value of acquisition, particulars of shares acquired/ transferred throughout the yr together with date of subscription/buy, face worth per share, situation worth per share and buy worth and shutting steadiness of the shares with a price of acquisition. This can embrace shares that had been initially listed when acquired however subsequently acquired delisted. However, if the shares are listed on a acknowledged inventory change in India or outdoors India, there isn’t any requirement to report these shares. This is a hardship for people who qualify as non-resident, or resident however not ordinarily resident, who could have invested in unlisted firms outdoors India. Even although international belongings are usually not required to be reported for such people, particulars of funding in unlisted fairness shares outdoors India are nonetheless required to be reported. An particular person qualifying as resident and ordinarily resident (ROR) is required to report unlisted fairness shares, doubly, right here and within the schedule for international belongings. It is vital to notice that particulars of directorship and funding in unlisted fairness shares are required to be reported if these had been held for any time period throughout the monetary yr. Even if the directorship was vacated or unlisted fairness shares had been bought throughout the monetary yr, the main points are nonetheless required to be reported within the ITR.

Separately, a person is required to report the worth of immovable belongings together with tackle, movable belongings and liabilities in relation to the belongings within the Assets and Liabilities Schedule. For a non-resident, solely India belongings are required to be reported. RORs need to report international belongings. The worth of belongings is required to be at “value”. However, liabilities could extra appropriately be reported at their closing / excellent steadiness at year-end. In the case of collectively held properties, all co-owners are required to report the collectively owned asset of their respective ITR topic to assembly the situation of complete revenue exceeding ₹50 lakh. 

These extra reporting necessities intention to usher in larger transparency, promote voluntary compliance, and assist in direction of efficient and environment friendly tax administration. There aren’t any particular provisions to levy curiosity/ effective/ penalty in case of non-disclosure of directorship, funding in unlisted fairness shares or belongings and liabilities, however prosecution threat for furnishing false particulars or verification might be invoked by authorities. Hence, taxpayers have to be vigilant and make sure that all particulars required are reported appropriately and fully within the ITR.

Sonu Iyer is tax companion and other people advisory companies chief, & Siddharth Deb is tax director, folks advisory companies, at EY India.

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