Can reporting foreign stocks as per calendar year create discrepancy while claiming TCS, TDS return?

Delhi-based Akhil (who declined to give his second name) did just that. He declared all his foreign stocks bought until 31 December 2022 and left out those bought in February this year. But, when he claimed a refund on the ₹20,000 TCS (tax collection at source) that was deducted on the stocks that he bought in February, it led to a discrepancy. “I got an intimation from the I-T department that said the gross receipt/income against which tax has been deducted at source has to be entered in the relevant schedule. My CA (chartered accountant) did not find any such irregularity except the foreign stocks bought after 31 December 2022 that I did not disclose. The CA has revised the ITR and disclosed those stocks too,” he said.

Mayank Mohanka, founder of TaxAaram India and a partner at SM Mohanka & Associates, said this discrepancy could have risen as reporting is being done as per calendar year whereas TCS is reflected in Form 26AS as per the financial year. “Though you’re required to report foreign stocks bought from January onwards in the next assessment year, you will have to claim refund for transactions done till 31 March this year itself otherwise the credit will get lapsed,” he said. Currently, investing in foreign stocks attracts 5% TCS. The TCS rate will be hiked to 20% on transactions done after 1 October (subject to exemption limit of ₹7 lakh).

However, Mohanka added that this shouldn’t have happened as TCS on foreign remittance has to be claimed in the same year and is not related to income from foreign assets.

Prakash Hegde, chartered accountant, Acer Tax & Corporate Services LLP, concurred and added “TCS is not linked with income. When you have to claim a refund on the 1% TCS deducted on a car bought for personal use, you’re not required to declare the expenditure in the ITR,” he said. “This could play out with TDS that is deducted by the employer on ESOPs (employee stock options) received from the foreign parent company when they are exercised as that has to be declared as income.”

The current assessment year is the first time ITR forms categorically asked for foreign stocks disclosures until 31 December. Until last year, disclosures had to be done as per ‘accounting period’, but in the absence of clarity on what accounting period meant, most taxpayers declared foreign assets as per Indian financial year. Mohanka said though this is a genuine irregularity, taxpayers who have foreign investments shouldn’t revise their returns unless they get an intimation from the tax department.

Gautam Nayak, partner, CNK & Associates LLP, added “These could just be erroneous intimations, as we saw mistaken notices were sent to many taxpayers with respect to Section 80P deductions,” he said.

Updated: 11 Sep 2023, 10:56 PM IST