Although the scope of taxation has not increased substantially, mandatory disclosure by individual taxpayers in respect of number of days of stay in India, directors held during the relevant financial year (financial year), assets and liabilities etc. has increased manifold in the past . few years. Disclosures especially relating to foreign income and assets have been exhausted.
In this article we outline the disclosure requirements in tax returns on foreign assets and stock awards.
Foreign assets and financial interests
Persons who qualify as ordinary residents of India for the purpose of taxation are not only obliged to offer all their income to tax in India, including income earned outside India, but also in the Income Tax Return Form (Schedule) They are also obliged to disclose the details of property held outside India. TR-FA). Both immovable and movable property are covered under this schedule.
The categories of assets 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 individual is the trustee or beneficiary and any other asset during the calendar year 2021. Also the time was held outside India. It is important to note that bank accounts where the individual has the authority to sign (eg accounts of minor children) are also required to report.
The details to be provided in respect of foreign assets are quite extensive. For example, where a bank account is held outside India, a person needs to enter his/her account number, bank name, branch address, date of account opening, highest balance in the account during the financial year, earned income and closing The balance needs to be reported. , Similarly, for an immovable property, details such as cost, address, country zip code, date of acquisition, ownership (whether direct or beneficial) and income earned from such property are required to be reported in the schedule.
Given that the financial years of other countries do not exactly match the financial years of India, there is a need to provide the details of foreign assets (both movable and immovable) for the calendar year of a particular financial year. For example the calendar year 2021 was considered for the fiscal year 2021-22. The individual is required to provide the cost (investment in assets, investment in shares) rather than the market value. Also, there is a need to convert the amount in foreign currency to INR by using Telegraphic Transfer purchase rate of State Bank of India.
Any asset acquired during the period from January 1, 2022 to March 31, 2022 is not required to be disclosed in the Schedule of Foreign Assets in the tax return for FY 2021-22. However, any income earned from this property during the same period will still be taxable in India and must be mentioned in the appropriate schedule (such as income from house property or income from other sources) in the tax return form.
Virtual Digital Assets (VDA)
The Union Budget 2022 had announced the taxation of VDAs. When it comes to tax returns, VDA will be required to disclose under the head “Any other capital asset (including any beneficial interest) held at any time during the calendar year ending December 31, 2021”.
Since the taxation of VDA is effective from 1st April 2022, we can expect more disclosure requirements in the tax returns which will be notified for FY 2022-23.
stock award
The shares allotted by the employer to individuals as part of the ESOP are included as perquisite in the salary income. If the shares are held outside India then any shares acquired through this mode need to be disclosed in the Foreign Assets (FA) Schedule. This reporting is mandatory, irrespective of the taxable income of the individual.
If the shares are held in Indian companies and if the income of the individual exceeds 50 lakh for the FY 2021-22, as on 31 March 2022 (end of FY 2021-22) along with the cost of the shares is required to be disclosed in the Schedule of Assets and Liabilities (Schedule AL).
A distinctive feature is the ESOP schedule in the tax return forms for the financial year 2021-22, which is applicable for ESOPs issued by eligible start-up companies. This schedule requires an individual to report the entire movement of shares in his portfolio and applicable taxes. The ESOPs schedule will help individuals keep track of their unused options and deferred tax.
While the above requirements may sound daunting, one has to appreciate the fact that these days tax returns are filled with multiple data points, such as salary income, bank interest, taxes paid etc. In addition, these data requirements in tax returns have facilitated quick processing of tax returns. Refunds are issued much faster these days than before when forms were simpler.
Sudhakar Sethuraman is a partner with Deloitte Haskins and sells the LLP, and Vijayalakshmi Karthik is a manager with Deloitte Haskins and sells the LLP
catch all business News, market news, today’s fresh news events and breaking news Updates on Live Mint. download mint news app To get daily market updates.