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Income Tax Department have been issued notices to holders of foreign assets

Home >> Blog >> Income Tax Department have been issued notices to holders of foreign assets

 Income Tax Department have been issued notices to holders of foreign assets

The Income-Tax department has issued notices to “Taxpayers who did not made any disclosure in their income tax return about holding of any asset or bank account in any foreign country along with income generated from such asset or bank account”, seeking action under the Black money and Benami transactions laws for not disclosing their foreign assets in assessment years from FY2013-14 to FY2017-18.

How Income tax department does finds out the individual’s details of holding foreign assets?

In past few year the Indian government has signed several agreements with foreign countries which requires to report tax information and account holders information in that country about Indian Citizens and in exchange Indian government will provide tax information of that country’s citizens to that respective country.

 

 

Time period for which notice can be issued?

For serious tax fraud cases, in which the concealment of income is Rs 50 lakh or more, the above period of 3 years would be taken as 10 years.

For Cases other than serious tax fraud, the time limit has been proposed to reduce to 3 years which is presently 6 years.

This move indicated that the revenue department might be looking at restricting action to limited time periods under these Acts instead of keeping them open-ended. Currently, action under these two stringent Acts is not time-barred.

The government could consider making it 10 years as they have done in reopening matters of high-value transactions.

 

Who need to be more careful regarding these notices?

Assessee’s who are Resident and Ordinarily Resident (ROR) Indian holding any asset or bank account in foreign countries as income arising from these is taxable in India because in case of Resident Indian global income is taxable.

So if any Resident Indian accruing any income from asset outside India should be careful while filing His/her income tax return and do not forget to include such income in return, otherwise He/she might get a notice from income tax department requiring to furnish such details as mentioned in the notice.

Note: The above requirement does not apply to RNOR (Resident but not Ordinarily Residents) as income accruing outside India will not be taxable in RNOR’s case.

Note: Resident being ROR holding any asset outside India, must file return of income even if assesse did not earn any income in India during the financial year.

 

 

 

 

What to report in Income Tax Return by Resident?

  1. Any Asset in Foreign Country: by a resident being ROR, holding any Immovable property or any other asset.
  2. Holding of Bank Account outside India: by a resident (being ROR), in any foreign country.
  3. Financial Interest in any Entity: Details such as Name, Address and nature of entity in which resident holding any interest along with the details of total investment held at cost during the year in such Entity.
  4. Income Earned outside India: Any income Earned by Resident Indian Being ROR, Outside India from any asset or Bank account should be reported in the income tax return.

 

Highlights in budget 2021 

Reduction in Time for Income Tax Proceedings: Presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years.

 

Form April 2021 the time limit proposed to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years.

 

In serious tax evasion cases too, only where there is evidence of concealment of income of Rs 50 lakh or more in a year, can the assessment be re-opened up to 10 years.

 

Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.

 

 

Other relevant details regarding this topic:

In reopening tax cases, the department issues notices in a standard format and asks the taxpayer to reassess income/loss and send it within 30 days.

In black money notices, the department seeks detailed information such as copies of all documents in respect of investment in a particular property which is under suspect, along with its agreement, sale deed, possession letter, etc.

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